I recall an argument from WTO in 1999
Thirteen years ago, when the World Trade Organization met in Seattle, the “fair trade” people made a number of serious arguments against the WTO and the North American Free Trade Agreement. The one I remember most, maybe because it bothered me most, was that NAFTA’s protection of foreign investors trumped a state's power to protect the public health. They cited the Methanex case against the state of California.
Methanex was a Canadian producer of methanol, a feedstock of MTBE, which was a compound added to gasoline. California welcomed MTBE as a replacement for lead. The state changed its mind after the stuff was discovered in the groundwater. It’s a carcinogen, and California banned it. Methanex then sued the state in the NAFTA investor court, demanding $970 million in compensation for loss of shareholder value.
If you're producing something that's dangerous to the public health, and the government shuts you down because of that, are you due compensation? Generally not. Anyway, Methanex demanded it.
This case, which was brand-new in 1999, was repeatedly cited to me by the fair trade people as as an example of how trade law allowed a polluter to hit up the government for imagined future profits, even when those profits were to be made by poisoning the public. More such cases were coming, the advocates told me, and there would be terrible consequences for the public health.
I brought that up today in a meeting with Demetrios Marantis, deputy U.S. trade representative in the Obama administration. Of the Methanex case, he said, “We won.” The State of California didn’t have to pay Methanex anything. Further, he said, in the nearly 20 years since NAFTA went into effect, “The United States has never had to pay a penny of compensation” for expropriating foreign investors.
When the Obama administration came into office in 2009, he said, its attorneys reviewed the Clinton and Bush-era trade treaties carefully, because of worries such as this. The treaties were O.K. “We have protected ourselves so that we can regulate in the public interest,” Marantis said.
So much for one political argument.
[This is a corrected version, July 24, 2010.]
Achenblog by Joel Achenbach
Postman On Politics