Trading in Our Democracy?

As he signed the accounting fraud reform bill in June, George W. Bush declared that "No boardroom in America is above or beyond the law." It took Bush only weeks to contradict himself by signing into law legislation that ultimately could enable corporations to challenge not only the anti-fraud legislation, but almost any law in the land.

The fast-track bill passed by Congress last week would hand exclusive treaty negotiation power to the executive branch, while eliminating the role of Congress in crafting those treaties. The unambiguous purpose of the bill is greasing the wheels for passage of the "Free Trade" Agreement of the Americas (FTAA)-- legislation that ultimately could enable corporate lawyers to pre-empt democratically-enacted laws at every level of government.

While that may sound like the rant of anti-globalization protestors, the National League of Cities echoes the concern. An NLC resolution warns that the FTAA could "undermine the scope of local governmental authority under the Constitution."

The Conference of Chief Justices, consisting of the top judges from each state, concurs. In a letter to the U.S. Senate it states that the FTAA bill "does not protect adequately the traditional values of constitutional federalism" and "threatens the integrity of the courts of this country."

What has local and state officials worried is that the FTAA would extend further the privileges bestowed upon transnational corporations under the Chapter 11 provisions of the North American Free Trade Agreement to challenge as a "trade restriction" any local or state law that impedes profit maximization.

For example, when a Mississippi jury found the Loewen Group, a Canadian transnational, guilty of gross fraud and predatory anti-competitive acts in its takeover of a funeral home in Biloxi, it assessed punitive damages as part of a $500 million judgment. Under state law Loewen was required to post a $125 million bond to pursue an appeal. At least 20 states have such provisions to offer fair protection for small firms against being decimated by legal expenses.

But Loewen used NAFTA's secret tribunals to sue the United States, claiming that the decision was "discriminatory" and that the bond requirement "expropriated" its assets. Loewen gets to appoint one of the three arbiters who hear the case, but neither the small company nor the State of Mississippi are allowed any representation. Incredibly, they have no right to appeal or even to observe the proceedings.

In California, another Canadian corporation, Methanex, is using NAFTA to sue the state for $970 million in damages for outlawing MTBE, a carcinogenic gasoline additive that contaminates water supplies. It's no wonder that the California legislature overwhelmingly passed a resolution that trade agreements threaten the state's "strong and legitimate interest under the US Constitution to initiate and develop standards in matters affecting health, public safety, and the environment."

While giant Canadian corporations may benefit, their citizens lose out too. Using NAFTA, US-based transnationals already have forced Canada to withdraw its ban of another toxic gasoline additive, MMT.

Another American company, Metalclad, used NAFTA to trump a decision by San Luis Potosi, Mexico to prevent re-opening of a waste disposal facility that a geological survey demonstrated would contaminate the local water supply. A NAFTA tribunal decreed that the people of Mexico owed Metalclad US $15 million in damages.

NAFTA tribunals not only have granted corporations the "right to sue," but have thus far declined to establish any limits on what court decisions could be challenged by foreign corporations. As television journalist Bill Moyers noted, Chapter 11 could "conceivably open the U.S. civil justice system to challenge--including decisions of the Supreme Court."

The language in the FTAA further threatens the Constitution. FTAA authors recognized that, under NAFTA, foreign corporations have more privileges than domestic ones. Their solution? They stipulate all corporations may challenge the local, state and federal laws that govern the rest of us.

The discreet statements by state officials echo the chants from the streets: this isn't about trade, it's about undermining democracy. Pacts like NAFTA and the threatened FTAA give immense power over our health, safety and environment to the corporate crowd that has given us Enron and other financial scandals. Our local and state representatives and judges recognize the damage and the need to thwart the FTAA, but it will fall to citizens to create a movement to defend democracy.

Jeffrey Kaplan and Jeff Milchen write for ReclaimDemocracy.org. Will Toor is the Mayor of Boulder, Colorado.