Basic constitutional law will tell you that federal statutes reign supreme. When laws attempt to depart from these national judgments, they become unenforceable and just plain null. However, when the U.S. enters into international trade agreements, that sovereignty and precedence set by federal decisions is violated. The problem with agreements like these (including NAFTA and now the TPP) is that decisions are capable of determining many facets of our economy, specifically trade and manufacturing.
Take for example the North Atlantic Free Trade Agreement, a 20 some year old, Clinton-era pact that proposed trade benefits for North American countries. NAFTA was sold as a job creator, by outsourcing menial jobs and replacing them with higher manufacturing and service sector opportunities. While this hasn’t been the case, this isn’t the part of NAFTA that I find most damaging. Rather, the ability of fellow NAFTA nations and investors to make claims against governments egregiously limits a state’s autonomy and prevents them from establishing precedent.
The part of the NAFTA agreement that allows investors and nations to make these claims is known as chapter 11. Under chapter 11, companies can and have sued for decisions made by a nation that impacts their business. For example Canada was sued by the U.S. based Ethyl Corporation for making the highly toxic substance MMT illegal. What’s worse is Canada lost the case quickly, settling out of court for thirteen million. A statement by Barry Appleton to the Roosevelt Institute, Canadian Lawyer for Ethyl Corp, sums up the power of Chapter 11:
“It wouldn’t matter if a substance was liquid plutonium destined for a child’s breakfast cereal. If the government bans a product and a U.S.-based company loses profits, the company can claim damages under NAFTA.”
While the U.S. has never lost a NAFTA case, it is fast approaching a long and expensive battle against energy giant TransCanada. President Obama rejected a TransCanada pipeline late last year, citing the environmental impact of the pipeline and the minimal impact the pipeline would have on the economy. The Canadian company had a quick response, filing the suit and saying they “had every reason to expect its application would be granted.”
If the U.S. ends up losing the case led by a NAFTA tribunal, the impact goes well beyond financial costs. By allowing a set of international trade lawyers to determine the credibility of a U.S. president’s decision, we erode our government’s ability to make laws and protect public health, the economy, and the environment.
While the U.S. is currently well connected within the NAFTA framework and it is virtually impossible to remove ourselves, this debacle is able to at least teach current U.S. politicians and leaders about the problems with international trade agreements. The Trans Pacific Partnership is currently under review by lawmakers and would have the same problems that NAFTA presents our country. By allowing a corporation to override our laws, we present an image of our nation focused on profit rather than protection.
Note: The views expressed by this article are those of the author and do not necessarily reflect the views of the Northwestern Business Review.