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What “Free Trade” Has Done to Central America

By , November 21, 2014 10:40 am
dr-cafta-central-america-free-trade-agreement-effects

(Photo: Danny.C.Jackson / Flickr)

With Republicans winning big in the midterm elections, the debate over so-called “free-trade” agreements could again take center stage in Washington.

President Barack Obama has been angling for “fast-track” authority that would enable him to push the proposed Trans-Pacific Partnership, or TPP—a massive free-trade agreement between the United States and a host of Pacific Rim countries—through Congress with limited debate and no opportunity for amendments.

From the outset, the politicians who support the agreement have overplayed its benefits and underplayed its costs. They seldom note, for example, that the pact would allow corporations to sue governments whose regulations threaten their profits in cases brought before secretive and unaccountable foreign tribunals.

So let’s look closely at the real impact trade agreements have on people and the environment.

A prime example is the Dominican Republic-Central America Free Trade Agreement, or DR-CAFTA. Brokered by the George W. Bush administration and a handful of hemispheric allies, the pact has had a devastating effect on poverty, dislocation, and environmental contamination in the region.

And perhaps even worse, it’s diminished the ability of Central American countries to protect their citizens from corporate abuse.

A Premonition

In 2004 and 2005, hundreds of thousands of protesters filled Central America’s streets.

They warned of the unemployment, poverty, hunger, pollution, diminished national sovereignty, and other problems that could result if DR-CAFTA were approved. But despite popular pressure, the agreement was ratified in seven countries—including Guatemala, Nicaragua, El Salvador, Honduras, Costa Rica, the Dominican Republic, and the United States.

Ten years after the approval of DR-CAFTA, we are seeing many of the effects they cautioned about.

Overall economic indicators in the region have been poor, with some governments unable to provide basic services to the population. Farmers have been displaced when they can’t compete with grain importedfrom the United States. Amid significant levels of unemployment, labor abuses continue. Workers in export assembly plants often suffer poor working conditions and low wages. And natural resource extraction has proceeded with few protections for the environment.

Contrary to the promises of U.S. officials—who claimed the agreement would improve Central American economies and thereby reduce undocumented immigration—large numbers of Central Americans have migrated to the United States, as dramatized most recently by the influx of children from Guatemala, El Salvador, and Honduras crossing the U.S.-Mexican border last summer. Although most are urgently fleeing violence in their countries, there are important economic roots to the migration—many of which are related to DR-CAFTA.

One of the most pernicious features of the agreement is a provision called the Investor-State Dispute Settlement mechanism. This allows private corporations to sue governments over alleged violations of a long list of so-called “investor protections.”

The most controversial cases have involved public interest laws and regulations that corporations claim reduce the value of their investments. That means corporations can sue those countries for profits they say they would have made had those regulations not been put into effect.

Such lawsuits can be financially devastating to poor countries that already struggle to provide basic services to their people, much less engage in costly court battles with multinational firms. They can also prevent governments from making democratically accountable decisions in the first place, pushing them to prioritize the interests of transnational corporations over the needs of their citizens.

The Mining Industry Strikes Gold

These perverse incentives have led to environmental deregulation and increased protections for companies, which have contributed to a boon in the toxic mining industry—with gold at the forefront. A stunning 14 percent of Central American territory is now authorized for mining. According to the Center of Research on Trade and Investment, a Salvadoran NGO, that number approaches 30 percent in Honduras and Nicaragua—and rises to a whopping 35 percent in Honduras.

In contrast to their Central American neighbors, El Salvador and Costa Rica have imposed regulations to defend their environments from destructive mining practices. Community pressure to protect the scarce watersheds of El Salvador—which are deeply vulnerable to toxic mining runoff—has so far prevented companies from successfully extracting minerals like gold on a large scale, and the Salvadoran government has put a moratorium on mining. In Costa Rica, after a long campaign of awareness and national mobilization, the legislature voted unanimously in 2010 to prohibit open-pit mining and ban the use of cyanide and mercury in mining activities.

Yet both countries are being punished for heeding their citizens’ demands. Several U.S. and Canadian companies have been using DR-CAFTA’s investor-state provisions to sue these governments directly. Such disputes are arbitrated by secret tribunals like the International Center for the Settlement of Investment Disputes, which is hosted by the World Bank and is not accountable to any democratic body.

In 2009, the U.S.-based Commerce Group sued El Salvador for closing a highly polluting mine. The case was dismissed in 2011for lack of jurisdiction, but El Salvador still had to pay several million dollars in fees for its defense. In a case still in process, the gold-mining conglomerate Pacific Rim has also sued El Salvadorunder DR-CAFTA for its anti-mining regulations. To get around the fact that the Canadian company wasn’t from a signatory country to DR-CAFTA, it moved its subsidiary from the Cayman Islands to Reno, Nevada in a bid to use the agreement’s provisions. Although that trick failed, the suit has moved forward under an outdated investment law of El Salvador.

Elsewhere, Infinito Gold has used DR-CAFTA to sue Costa Ricafor nearly $ 100 million over disputes related to gold mining. And the U.S.-based Corona Materials has filed a notice of intent to sue the Dominican Republic, also claiming violations of DR-CAFTA. These costly legal cases can have devastating effects on the national economies of these small countries.

Of course, investor-state disputes under DR-CAFTA are not only related to mining.

For example, TECO Guatemala Holdings, a U.S. corporation, alleged in 2009 that Guatemala had wrongfully interfered with its indirect subsidiary’s investment in an electricity distribution company. Specifically, TECO charged that the government had not protected its right to a “minimum standard of treatment”— an exceptionally vague standard that is open to wide interpretation by the international tribunals that rule on such cases — concerning the setting of rates by government regulators. In other words, TECO wanted to charge higher electricity rates to Guatemalan users than those the state deemed fair. Guatemala had to pay $ 21.1 million in compensatory damages and $ 7.5 million in legal fees, above and beyond what it spent on its own defense.

The U.S.-based Railroad Development Corporation also sued Guatemala, leading to the country paying out an additional $ 11.3 million, as well as covering both its own legal fees and the company’s. Elsewhere, Spence International Investments and other companies sued Costa Rica for its decision to expropriate land for a public ecological park.

A Chilling Effect

What’s at stake here is not only the cost of lawsuits or the impact of environmental destruction, but also the ability of a country to make sovereign decisions and advance the public good.

Investment rules that allow companies to circumvent national judicial systems and challenge responsible public policies can create an effect that’s been dubbed “regulatory chill.” This means that countries that might otherwise have curtailed corporate activity won’t—because they’re afraid of being sued.

Guatemala is a prime case. It’s had to pay companies tens of millions of dollars in investor-state lawsuits, especially in the utility and transportation industries. But it hasn’t yet been sued by a mining company. That’s because the Guatemalan government hasn’t limited the companies’ operations or tampered with their profit-making.

Take the Marlin Mine in western Guatemala, for example. In 2010, the Inter-American Commission on Human Rights advised the Guatemalan government to close the mine on account of its social and environmental impacts on the surrounding region and its indigenous population. Nonetheless, after briefly agreeing to suspend operations, the Guatemalan government reopened the mine a short time later.

In internal documents obtained by activists, the Guatemalan government cited potential investment arbitration as a reason to avoid suspending the mine, writing that closing the project could provoke the mine’s owners “to activate the World Bank’s [investment court] or to invocate the clauses of the free trade agreement to have access to international arbitration and subsequent claim of damages to the state.” As this example demonstrates, just knowing that a company could sue can prevent a country from standing up for human rights and environmental protection.

More recently in Guatemala, the communities around San Jose del Golfo— about 45,000 people — have engaged in two years of peaceful resistance to prevent the U.S.-based Kappes, Cassiday, and Associates from constructing a new mine. Protesters estimate that 95 percent of families in the region depend on agriculture, an industry that would be virtually destroyed if the water were to be further contaminated. But the company threatened to sue Guatemala if the mine was not opened. “They can’t afford this lawsuit,” a company representative said. “We had a big law group out of [Washington,] DC fire off a letter to the mines minister, copied to the president, explaining what we were doing.”

On May 23, the people of San Jose del Golfo were violently evicted from their lands by military force, pitting the government in league with the company against its own people—potentially all to avoid a costly lawsuit.

A Prelude to the TPP

Warnings about the crises that “free trade” would bring to Central Americans were, unfortunately, correct. Central America is facing a humanitarian crisis that has incited millions to migrate as refugees from violence and poverty, thousands of them children. One push factor is the environmental degradation provoked by ruthless mining corporations that are displacing people from their rural livelihoods.

And it’s not just DR-CAFTA. The many investor-state cases brought under the North American Free Trade Agreement (NAFTA), and in countries all over the world, have exposed the perniciousness of investor protection rules shoehorned into so-called “free-trade” pacts. Many governments are realizing that these agreements have tied their hands when it comes to protecting their own environments and citizens.

We must use these egregious investor-state cases to highlight extreme corporate power in the region. We must work to help Central American people regain their livelihoods lost to ruthless extractive projects like mining. And we must change trade and investment agreements to stop these excessive lawsuits that devastate communities, the environment, and democracy itself.

Like DR-CAFTA, the proposed Trans-Pacific Partnership includes investor-state provisions that are likely to hurt poor communities and undermine environmental protections. Instead of being “fast tracked” through Congress, future trade agreements like the TPP—and the Transatlantic Trade and Investment Partnership being negotiated between the European Union and the United States—must be subject to a full debate with public input.

And such agreements must not, at any cost, include investor-state mechanisms. Because trading away democracy to transnational corporations is not such a “free trade” after all.

Foreign Policy In Focus

85 Percent of Syrian Refugees in Turkey Living Outside Government Camps

By , November 21, 2014 10:38 am

ISTANBUL (AP) — With Turkey’s government-run refugee camps operating at full capacity, more than 1 million Syrian refugees who have flocked to Turkey to escape fighting at home are struggling to survive on their own, according to an Amnesty International report released Thursday.

Turkey, which hosts half of the 3.2 million refugees who have fled Syria, is shouldering the heaviest burden of what the report calls the world’s worst refugee crisis in a generation.

“In three days in September 2014, Turkey received some 130,000 refugees from Syria — more than the entire European Union had in the past three years,” the report said.

It also detailed cases where Turkish border guards have abused — even killed — refugees trying to enter the country.

An estimated 1.6 million Syrian refugees have entered Turkey since the Syrian war began in March 2011. About 220,000 are living in 22 government-run camps that offer food and essential services, the report said. The remaining 1.38 million — more than 85 percent — are living outside the camps, mostly in communities along the Turkey-Syrian border. An estimated 330,000 live in Istanbul, the Turkish capital.

So far, Turkey has spent about $ 4 billion on Syrian refugees and granted free health care to all Syrian refugees in the country.

The report said while Turkey has an open-border policy for Syrian refugees, there are just two fully open crossings along its 900-kilometer (560-mile) border. Even at those crossings, the report said, people without passports are being denied entrance unless they have urgent needs. Other refugees trek into Turkey through often dangerous crossing points.

According to Amnesty, at least 17 people were shot and killed by border guards at unofficial crossing points between December 2013 and August. The report cited 10 other incidents in which 31 people were allegedly beaten by Turkish border guards. The organization has shared the information with Turkish authorities.

“Turkey is clearly struggling to meet even the most basic needs of hundreds of thousands of Syrian refugees. The result is that many of those who have made it across the border have been abandoned to a life of destitution,” said Andrew Gardner, Amnesty International’s researcher on Turkey.

The report urged Turkey to “radically revise its border practices, ending the necessity for refugees to use dangerous irregular crossings.”

Jordan is hosting 619,000 Syrian refugees and as of Oct. 14, Lebanon had registered 1.13 million, although the number in the country is believed to be far higher. Last month, Lebanon announced that it won’t accept any more Syrian refugees except in special cases. Refugees already make up nearly a quarter of Lebanon’s population of 5 million, stretching the tiny Mediterranean nation’s already fragile infrastructure.

Of the United Nation’s funding appeal for $ 3.74 billion to aid Syrians, only 51 percent has been received, the report said.

Assyrian International News Agency

Baiji Refinery to Reopen in 3 Months

By , November 21, 2014 10:28 am

Baiji Refinery to Reopen in 3 Months

By John Lee.

It will take an estimated three months to restart the giant Baiji refinery, after government troops re-took the facility from Islamic State fighters earlier this week.

Bloomberg quotes an engineer at the plant as saying that workers have fled to other provinces, refinery units need maintenance, and militants still control part of the pipeline network.

Colonel Khalaf al-Jabouri, a member of Iraq’s anti-terror forces, told the news agency:

“We will secure the pipeline network that feeds oil to the refinery … The Iraqi forces are now seeking to clear the path where the pipelines pass through to pump the oil to Baiji and also to export the crude to Turkey.”

The Baiji plant represents about 40 percent of Iraq’s refining capacity.

(Source: Bloomberg)

(Picture: Iraqi Oil Minister Adil Abdul Mahdi visiting the Baiji plant this week.)

Iraq Business News

Yen Rebounds on Finance Minister’s Comments

By , November 21, 2014 8:23 am

A fan of 10,000-yen billsThe Japanese yen rallied today after Japan’s Finance Minister Taro Aso commented on the recent slump of the currency, saying it was too quick.

Aso said today that “the pace of the decline in the past week has been too fast.” It is rare that Japanese officials complain about weakness of the yen, though economists believe that Aso had problem with the pace of the movement, not its direction. Signs of additional monetary stimulus from the European Central Bank and profit-taking were also possible reasons for the rally of the Japanese currency.

USD/JPY was down from 118.19 to 117.77 as of 11:16 GMT today, reaching the low of 117.35 intraday. EUR/JPY sank from 148.19 to 146.39 — as much as 1.2 percent.

If you have any questions, comments or opinions regarding the Japanese Yen, feel free to post them using the commentary form below.

Earlier News About the Japanese Yen:

Forex News

Euro Plunges Following Draghi’s Comments

By , November 21, 2014 5:42 am

Mixed euro billsEuro is heading much lower today, plunging following the latest comments by ECB President Mario Draghi. His insistence that the ECB will do whatever it takes to stimulate the eurozone economy is driving the 18-nation currency lower today.

Euro continues to trade near session lows today, losing ground across the board following the latest remarks from Mario Draghi, the President of the European Central Bank. Draghi indicated that asset purchases are ready to ramp up in an effort to help stimulate the eurozone economy. In remarks made early on Friday, Draghi insisted that the ECB is prepared to do whatever it takes to boost inflation in the 18-nation currency region.

The remarks had an immediate impact on the euro, sending it lower against its major counterparts. Quantitative easing is designed to weaken a currency, and the rise of more asset purchases by the ECB will mean more weakness for the euro. In fact, many expect that the euro will experience aggressive weakness. Draghi’s comments came after the latest PMI data was released about the eurozone, as well as numbers indicating that annual inflation in the 18-nation region was at 0.4 per cent.

At 11:43 GMT EUR/USD is down to 1.2422 from the open at 1.2545. EUR/GBP is down to 0.7931 form the open at 0.7992. EUR/JPY is down to 146.5540 from the open at 148.0410.

If you have any questions, comments or opinions regarding the Euro, feel free to post them using the commentary form below.

Forex News

Swiss Franc Joins Euro in Decline

By , November 21, 2014 5:40 am

Swiss coins on franc notesThe Swiss franc sank today as Governing Board Member Fritz Zurbruegg said that the Swiss National Bank will take any steps required to keep the ceiling on the currency in place. The Swissie declined together with euro.

Zurbruegg said in a speech yesterday:

The SNB will continue to enforce the minimum exchange rate with the utmost determination. To this end, it is prepared to purchase foreign exchange in unlimited quantities and to take further measures immediately if required.

The franc was moving in tandem with the euro since the SNB has introduced the cap back in 2011. The shared 18-nation currency also fell today after European Central Bank President Mario Draghi said that the ECB would expand asset purchases in case the inflation outlook deteriorates.

USD/CHF jumped from 0.9582 to 0.9677 as of 11:59 GMT today. EUR/CHF was up from 1.2017 to 1.2022 though it retreated from the daily high of 1.2032.

If you have any questions, comments or opinions regarding the Swiss Franc, feel free to post them using the commentary form below.

Earlier News About the Swiss Franc:

Forex News

U.S. Has Almost as Much to Lose as Iran if Nuclear Deal Isn’t Reached

By , November 21, 2014 4:58 am
Iranian Foreign Minister Mohammad Javad Zarif, European Union High Representative Catherine Ashton, and US Secretary John Kerry during the E3/EU+3 talks with Iran on October 15. (Photo: Flickr Commons)

Iranian Foreign Minister Mohammad Javad Zarif, European Union High Representative Catherine Ashton, and US Secretary John Kerry during the E3/EU+3 talks with Iran on October 15. (Photo: Flickr Commons)

At Politico, Gary Sick writes that, if Iran’s Foreign Minister Mohammad Javad Zarif fails to capitulate to the demands of the United States and a nuclear deal isn’t reached, it would play into the hands of Iran’s hardliners. As well,

… the failure to reach a deal by Nov. 24 would in all likelihood have a second effect that would compound the problem: weakening the external leverage that the United States could bring to bear on Iran. The primary leverage that the U.S.-led side has brought to the table is the international sanctions regime that has limited Iran’s energy exports and choked off its access to international financial networks. But those are not U.N. sanctions; they rely primarily on Washington’s ability to persuade or pressure companies in countries whose governments do not endorse those sanctions to refrain from trade with or investment in Iran, under threat that noncompliance could result in their being shut out of the international banking system.

However

… if Iran is internationally perceived to have made a good-faith offer of compromise to no avail, the dynamic could change. Washington might no longer have that leverage.

Sick notes that

One of the great triumphs of President Obama’s diplomacy on Iran has been the ability to hold together the very disparate group of negotiating partners—the United Kingdom, France, China, Russia and Germany. … China and Russia, as well as the European powers, would welcome an agreement that removed the constant threat of a military confrontation over Iran’s nuclear program, and gave Iran a potent incentive to become a responsible international citizen. To that end, all parties have been willing to back what has increasingly become a bilateral U.S.-Iran negotiation, tacitly recognizing that no agreement on the issue is possible without full U.S. involvement.

But (emphasis added)

… deference to the United States, whose control over crucial international banking mechanisms gives sanctions their bite, is not unqualified. If the United States should reject what is perceived to be a reasonable Iranian offer, there are growing signs that the coalition might begin to fray.

Furthermore

Most foreign firms are unwilling to risk Washington’s wrath as long as negotiations are underway, but that reluctance is likely to evaporate if these corporations come to believe the United States rejected an Iranian offer acceptable to their own governments.

Worse, as Julian Borger writes at the Guardian:

Failure would be a heavy setback for both Obama and Rouhani. But there are worrying signs that Rouhani is making preparations for a Plan B, that would help him to survive collapse in Vienna or its aftermath. That involves rhetoric, repeated by Zarif on arrival in Vienna, blaming the West in advance for ‘excessive demands’. It also involves signing deals and memoranda of understanding with Russia and China, as an alternative to the full reintegration in the global economy Tehran was hoping for.

Foreign Policy In Focus

It’s Time to Speak Out on Global Christian Persecution

By , November 21, 2014 4:56 am

Do a computer search for “ISIS” and “Christians” and prepare to gasp in horror. ISIS (Islamic State in Iraq and Syria, or simply Islamic State) is slaughtering Christians in the Middle East in a war on Christianity that is more deadly than the one between Israel and Hamas in Gaza.

While most of the Western world focused on Gaza last summer, ISIS was murdering people mercilessly. And as shouts of outrage concerning the war in Gaza proliferated, the virtual silence on the war against Christians was deafening.

During the civil rights movement in America, Dr. Martin Luther King Jr. voiced concern that people refused to speak up when injustice reigned. “In the end, we will remember not the words of our enemies, but the silence of our friends,” he said. Today in the war on Christians, the silence of friends speaks volumes.

“Is anybody listening?” asked Kirsten Powers in her July USA Today article “Iraqi Christians’ nightmare.” “Thanks to ISIS persecution, Mosul is without Christians for the first time in 2,000 years,” she wrote. ISIS had swarmed into Mosul demanding Christians convert, pay a tax, leave or die. It robbed, pillaged, tortured and expelled all the Christians there.

Speaking on Breitbart.com in July, counterinsurgency and counterterrorism expert Dr. Sebastian Gorka called the situation “a Christian version of the Holocaust and nothing less.” He also said, “The mainstream media are warped in terms of their world view. … So when it comes to the idea of religious persecution, they say, ‘Well who really cares, because I don’t believe in God. If you are not sophisticated enough to be a postmodernist secularist … tough on you!’”

There are some voices trying to be heard. U.S. Congressman Frank Wolf (R-Va.), co-chairman of the Tom Lantos Human Rights Commission, tried to get an official White House response to the war. In June 2013, he called the U.S. government’s response to persecuted Christians in the Mideast “anemic and at times outright baffling.”

Just over a year later, this past July, on the House floor, Wolf referred to Dr. King’s statement, saying, “The silence of the president and the silence of this administration is unbelievable.” Later, in an interview, Wolf added, “This place doesn’t want to do anything.”

U.S. Senator Roy Blunt (R-Mo.) asked Congress to pass a bipartisan bill establishing a special envoy to the Middle East to promote religious freedom and protect minorities, condemning the deadly violence against Coptic Christians in Egypt.

The American Center for Law and Justice started a petition calling on U.S. President Barack Obama to demand that Christians be protected in Egypt in exchange for U.S. foreign aid. David Brog, executive director of Christians United For Israel, declared, “This is a modern pogrom. The silence must end. The United States must lead.” Raymond Ibrahim, with the David Horowitz Freedom Center, said, “The overwhelming majority of Christian persecution around the world today is being committed at the hands of Muslims of all races, languages, cultures and sociopolitical circumstances.”

According to Open Doors USA, which ministers to persecuted Christians worldwide, nine of the top 10 countries where Christians suffer the most are Islamic. The majority of anti-Christian persecution in the world in 2013 took place at the hands of Muslims. In 2009, President Obama delivered a major speech in Cairo, Egypt, declaring, “I’ve come here to Cairo to seek a new beginning between the United States and Muslims around the world, one based on mutual interest and mutual respect, and one based upon the truth that America and Islam are not exclusive and need not be in competition.” The Palestinian Authority hailed it as “the beginning of a new American policy.” Maybe that is why the White House so far has said so little.

Assyrian International News Agency

Baghdad Transfers $500m to Erbil

By , November 21, 2014 4:46 am

Baghdad Transfers $  500m to Erbil

From AFP. Any opinions expressed are those of the authors, and do not necessarily reflect the views of Iraq Business News.

The Iraqi government transferred $ 500 million to the autonomous Kurdish region on Wednesday as part of a deal aimed at ending long-running oil and budget disputes, the finance minister said:

Iraq Business News

Congress Weighs Arming Iraqi Kurds

By , November 20, 2014 11:14 pm

Congress Weighs Arming Iraqi Kurds

By Julian Pecquet

Posted 2014-11-21 02:23 GMT

Minister Falah Mustafa Bakir, Head of the Department of Foreign Relations (L) and presidential Chief of Staff Fuad Hussein (R) meet with Rep. Ros-Lehtinen, R-Fla in her office on Capitol Hill, Nov. 18, 2014 (photo: Twitter/karwanz).Top House lawmakers on Nov. 20 called on President Barack Obama to directly arm Iraqi Kurdish forces in the starkest sign yet that Congress has run out of patience with Baghdad.

Foreign Affairs Chairman Ed Royce, R-Calif., and ranking member Eliot Engel, D-N.Y., introduced temporary legislation to arm the Peshmerga forces in their fight against the Islamic State (IS). Doing so would mark a reversal of current US policy, which has sought to reinforce the central government in a bid to stop the country from splintering along ethnic and sectarian lines.

“We thought a long time ago that our appeals to Baghdad to do the right thing would be heard and [former Prime Minister Nouri al-] Maliki’s government turned a deaf ear month after month. We’ve reached the point where we have allies to our cause of defeating [IS] fighting in the field, without adequate equipment, and we are determined to see that they obtain it,” Royce told Al-Monitor. “We want the weapons in the hands of the Peshmerga that are on the front line, now.”

The bill comes in the wake of an international public relations push by the Kurdish Regional Government (KRG). Top Kurdish officials — including Minister Falah Mustafa Bakir, Head of the Department of Foreign Relations, and presidential Chief of Staff Fuad Hussein — were in Washington this week handing out a list of demands to lawmakers and administration officials, while President Massoud Barzani berated western powers for not providing his forces enough weapons during an interview on French television Nov. 19.

Read the full story here.

Assyrian International News Agency