Copyright 2002 The Washington Post

The Washington Post
February 18, 2002 Monday
Final Edition
SECTION: EDITORIAL; Pg. A23

LENGTH: 779 words

HEADLINE: A Slanted Take on Trade

BYLINE: Sebastian Mallaby

BODY:


Bill Moyers comes across on television as a genial guy: fair and public-spirited. But his recent documentary on the North American Free Trade Agreement (NAFTA) was the opposite: unfair and damaging to the public interest. Because Moyers is the grandfatherly icon of public broadcasting, what he says may matter quite a bit. U.S. Trade Representative Robert Zoellick already has been cross-examined about the program during a Senate hearing.

The Moyers documentary is, in his own words, "the story of how a trade agreement -- supported by two presidents and ratified by the Congress -- became an end-run around the Constitution." It contends that a section of the NAFTA known as Chapter 11 amounts to a deliberate assault by corporations (cue: ominous music) upon the American people (cue: pictures of sweet children). Chapter 11, says Moyers, has created "a system of private justice" that "can be used to hobble the authority of government." What's more, "That's exactly the way the authors of Chapter 11 designed it."

How does this "private justice" function? Well, Chapter 11 gives foreign investors the right to sue their host government for damages if they believe they have been treated unfairly by protectionist politicians. Then if an environmental regulation, for example, is actually a disguised attempt to favor local firms, the foreign investor can complain to a special master tribunal. The system, complains Moyers, allows foreign corporations to threaten billion-dollar suits and so "to undermine environmental decisions, the decisions of local communities, even the verdict of an American jury."

That's quite an indictment. But Moyers fails to notice that there are good reasons for allowing corporations the right to sue as part of trade agreements. Without legal cover, many companies won't invest in developing countries such as Mexico that have wobbly standards of justice. Chapter 11-style protections were invented to embolden them and so to create new jobs in poor nations. Far from being an attack on American democracy, they are an effort to spread the American idea of legal rights to other countries.

Moyers still is convinced that NAFTA is strangling American liberty, and he reviews a series of Chapter 11 cases to make his argument. Tellingly, only one of these cases so far has resulted in a victory for the corporation that brought suit -- and that victory involved a U.S. company pressing its rights against the Mexican government. In another case, Canada's government settled with a U.S. plaintiff out of court. But this was not because the NAFTA tribunal had punctured Canadian sovereignty. Instead, a related suit brought by the province of Alberta had undermined the federal government's position -- a nuance that Moyers fails to mention.

The cases Moyers really cares about -- the ones that purportedly threaten our Constitution -- involve Canadian companies suing the U.S. government. The most spectacular example stars a firm called Methanex, which is demanding $ 970 million in compensation for an environmental rule in California. If Methanex were to win this case, Moyers might have a point: A legitimate environmental rule would have been rendered hideously expensive. But Methanex is expected to lose, and if it wins, there may be a reason. The firm alleges that California's rule was the result of lobbying by Archer Daniels Midland, which stood to profit from increased sales of ethanol. Not once does Moyers acknowledge this.

The other suit against the United States involves Mississippi. A local business owner sued a Canadian competitor in a Mississippi court, and a local jury awarded $ 500 million in punitive damages against the foreigner after a trial filled with xenophobia. In theory, the Canadian company could have appealed, but Mississippi law required it to post an impossibly high bond. So the Canadians reasonably turned to the NAFTA tribunal, whose standards of fairness are arguably superior. Again, the Moyers documentary says nothing about that prohibitively high bond, preferring instead to hyperventilate about an end run around the jury system.

NAFTA's Chapter 11 mechanism is not perfect. Moyers is rightly angry that the tribunals operate in secret, and if Methanex wins its California case, it may be that foreign companies have been wrongly granted more legal rights in the United States than American companies. But if Methanex loses, Moyers and the public broadcasting system will face some awkward questions. Why produce a one-sided attack on a trade deal? Why say democracy is under threat when it is not? Surely the globalization debate is plagued with too many half-baked criticisms already.

LOAD-DATE: February 18, 2002