Local Resolution on Services,
Investment and Procurement

GENERAL CONSIDERATIONS

Whereas, trade agreements pertaining to services, investment and government procurement constrain the exercise of local government authority to protect the health and welfare of its citizens, and

Whereas, the United States government through the Office of the U.S. Trade Representative (USTR) is presently negotiating multilateral, regional and bilateral trade agreements covering all these areas, including the Free Trade Agreement of the Americas (FTAA) extending NAFTA to 34 countries in the Western Hemisphere and the WTO General Agreement on Trade in Services (GATS), and

Whereas, the WTO's 3rd Ministerial Declaration establishes June 30, 2002 as the start of specific negotiations to expand GATS coverage and further deregulate additional service sectors, and

Whereas, formal WTO negotiations on investment and procurement could be launched after the 4th WTO Ministerial in 2003, and

Whereas, requirements for local governments to publish proposed regulations and consider comments from around the world which are being proposed by the USTR for both GATS and the FTAA are an unfunded mandate for local jurisdictions and could lead to undue influence by foreign interest on matters of local governance, and

Whereas, the USTR has repeatedly declined to hold local hearings to inform the public about the local implications of these negotiations, and

Whereas, the National League of Cities has resolved that "the Administration and Congress should consult with state and local officials prior to negotiating any provisions of the FTAA to ensure that trade negotiators do not undermine the scope of local governmental authority under the Constitution...", and

INVESTMENT

Whereas, the proposal for the FTAA investment agreement is based on current provisions of NAFTA Chapter 11 on investment which

*empowers foreign investors to sue nation-states for compensation before closed-door arbitration panels that follow NAFTA and international law, not domestic constitutional law.

*creates foreign investors rights that exceed the constitutional protections for domestic investors, and

Whereas, in such NAFTA claims against the United States, foreign investors have challenged core functions of state and local government, including regulatory power to protect groundwater (California), the power of civil juries to use punitive damages to deter corporate fraud (Mississippi), the right of states to regulate in the public interest and to claim sovereign immunity (Massachusetts), and state compliance with "buy-America" requirements for spending federal highway funds (Virginia), and

Whereas, foreign investor claims may create fiscal pressure on the United States to preempt or push for changes in state or local law as illustrated by the $970 million claim challenging California's decision to phase out a gasoline additive (MTBE) and the fact that the first four claims based on state action exceed $1,800,000, and

Whereas, the National Conference of State Legislatures and the National Association of Attorneys General have publicly communicated their opposition to any new trade agreement that would include private claims against nation-states, similar to NAFTA Chapter 11, and

SERVICES

Whereas, under GATS, WTO member countries will be making requests of other countries to modify their local and/or state and/or federal regulations as they relate to specific types of services in order to open up their domestic markets to competition by foreign corporations, and

Whereas, unless the USTR makes these requests public, state and local governments will not be able to voice concerns regarding any potential impacts on their authority and local services, and

Whereas, GATS and proposed FTAA rules modeled on GATS change the traditional scope of government authority under the U.S. Constitution. For example:

1. The standard of non-discriminatory treatment in the U.S. Constitution is violated by the GATS standard of "National treatment" which says foreign corporations must be treated at least as favorably as domestic companies. Further, GATS allows a U.S. law to be challenged by other countries even when the Constitutional standard of non-discrimination has been met.

2. The GATS "market access" rules forbid many traditional strategies for protecting the public interest, such as exclusive supplier contracts, certificates of need for hospitals and schools, or limits on the corporate form of ownership of assets used to deliver public services. Even the location of pipelines, the size of landfills, and certain zoning regulations can be challenged.

3. The GATS rule on "domestic regulation" would limit government regulation of services to the least "burdensome" approach, as opposed to the traditional standard that regulation must merely have a rational basis for protecting the public interest, and

Whereas, the risk of conflict between GATS, FTAA or bilateral trade rules pertaining to services and state or local law is relatively high because over 75 percent of the economy is now in the service sector and many services are regulated or provided by state and local government. For example: water treatment and distribution, waste disposal, zoning and other land use controls, health insurance, health facilities, schools, construction, alcoholic beverage sales, municipal and state energy authorities, procurement preferences, and

Whereas, the GATS rules apply to virtually all government services given that such services are exempted only if they are provided "neither on a commercial basis nor in competition with one or more service suppliers", and

PROCUREMENT

Whereas, the proposal for the FTAA procurement agreement incorporates most provisions of the WTO Government Procurement Agreement (GPA) that affect state and local government, and

Whereas, the GPA and proposed FTAA rules limit procurement to considerations of price and performance. These international limits would conflict with numerous purchasing preferences used by state and local governments to promote environmental resource conservation, small business development, and labor and human rights, and

Whereas, the risk of conflict between the GPA or FTAA procurement rules and state or local law is relatively high because over two-thirds of public procurement in the United States occurs at the state and local level, and

Whereas, the European Union has repeatedly cited state and local procurement policies as violations of the GPA.

Calls on the USTR to hold a hearing in order to address potential local implications of bilateral and multilateral trade agreements being negotiated. - or alternative language - Calls for broad consultation with local jurisdictions and civil society.

Resolves that the U.S. Trade Representative should conduct a formal, written assessment of the impact of a proposed agreement on state and local laws and future law-making authority before negotiating services, investment, procurement provisions in the FTAA and the WTO agreements.

Calls on the (State) Legislature and the Attorney General to actively oversee trade policy as it affects local sovereignty by the carrying out the following functions:

a. assessing the potential impact of trade and investment agreements on local sovereignty;

b. monitoring the status of implementation and negotiations to expand international agreements; and

c. advising federal trade negotiators with respect to preserving local sovereignty.

Joins with the National Conference of State Legislatures which has communicated to the USTR its opposition to any new trade agreement that would include private claims against nation-states, similar to NAFTA Chapter 11.

Resolves that Congress should bar the United States government, if it loses or settles a trade or investment dispute, from recovering economic losses from state or local government, either directly or indirectly by reducing federal funding based on compliance with trade or investment agreements.

Resolves that the U.S. government should shoulder the fiscal burden of compliance, disclosure, and economic adjustment costs that trade or investment agreements impose on state and local governments.

Calls on the U.S. Trade Representative to assure the exclusion of local jurisdictions from requirements of bilateral and multilateral trade agreements covering services, investment, procurement. --or, can use the following more specific resolve language as a substitute for "Calls on,..."

Resolves that the U.S. Trade representative should protect state and local authority within any investment, procurement or services agreement through the following measures:

(1) providing general exceptions or presumptions that a nondiscriminatory subnational measure complies with the agreement if the measure serves traditional public purposes such as public morals, public health, consumer protection, economic development, capacity to collect taxes, and conservation of natural resources; and

(2)to the extent that local jurisdictions have not been entirely excluded from the agreement, declaring country-specific exceptions or "carve-outs" for local government measures.

Resolves that the U.S. Trade Representative should protect state and local authority within any investment agreement through the following additional measures:

(1)defining investor rights in terms that are clear and no greater than investor protection under the U.S. Constitution;

(2)providing for national government approval of investor-to-state complaints by companies within their borders against foreign governments;

(3)preserving the right of local and state government to regulate in the public interest without requiring compensation.

Resolves that the U.S. Trade Representative should protect state and local authority within any procurement or services agreement through the following additional measures:

(1) excluding the U.S. proposed unfunded mandate to extend transparency to include the publication of proposed local regulations in order to receive and consider comments from around the world;

(2) making available to local jurisdictions all proposals to deregulate additional services in the GATS negotiations which could have potential impact on local jurisdictions.

Resolves that the U.S. Trade Representative should protect state and local authority within any services agreement through the following additional measures:

(1) opposing any further expansion of GATS rules constraining Domestic Regulation, including by distinguishing between necessary and unnecessary regulations, and any similar provisions in the FTAA services chapter or in bilateral agreements;

(2) excluding water from the classification of environmental services and from other classifications.

Texas Farmers Union, P.O. Box 738, Sweetwater, Tx 79556