Below the jump, here are the Dissenting Views of the DR-CAFTA Committee Report, which Xavier Becerra signed on to. To me, this is a pretty good indication of where he stands in terms of making changes to the current trade agreement model.
DISSENTING VIEWS
The Dominican Republic-Central America-United States Free Trade Agreement Implementation Act, H.R. 3045, considered by the Committee on June 30, 2005, represents a missed opportunity. The Administration had an opportunity to negotiate and submit to Congress for approval an agreement that would have ensured that the benefits of trade flow broadly to working people, small farmers and society at large, as well as to larger businesses. The Administration had an opportunity to submit a world class, cutting edge agreement that would have helped to close the widening gap between the rich and poor, and lead to the development of a middle class in the Central American countries and the Dominican Republic, which can afford to purchase U.S. goods and services. The Administration had an opportunity to craft a lasting, bipartisan approach to U.S. trade policy. Instead, the Administration negotiated a free trade agreement with Central America and the Dominican Republic (CAFTA) and submitted a bill to Congress that does little to ensure that our trade policy raises living standards in the United States and abroad, and that exacerbates, rather than bridges, differences in views among the Members of this Committee.
The vote earlier this month on U.S. participation in the World Trade Organization (`WTO') demonstrates clearly that issues of international trade can be, and traditionally have been, in the main, broadly bipartisan. This conclusion is only buttressed by previous votes on free trade agreements with Jordan (2001), Chile (2003), Singapore (2003), Australia, (2004), and Morocco (2004); the enhanced Caribbean Basin Initiative and Africa Growth and Opportunity Act (2000); and, legislation granting Permanent Normal Trade Relations (PNTR) to China (2000). These votes demonstrate that the opposition to CAFTA of virtually every Democrat is not based on a rejection of the view that trade holds the potential for generating economic growth and increased standards of living.
To the contrary, most Democratic Members of the Committee continue to support that view, and strongly support a CAFTA--the right CAFTA. We believe in the power of trade as a tool for promoting economic growth and enhancing bilateral relationships between the United States and its trading partners. We believe that a trade agreement, drafted correctly, would benefit the United States on the one hand, and the countries of Central America and the Dominican Republic, on the other.
I. CAFTA LACKS BASIC, INTERNATIONALLY-RECOGNIZED LABOR STANDARDS
A. The Right CAFTA Would Include Basic Labor Standards
The right CAFTA would ensure that Central American workers have the ability to bargain for better working conditions and wages, so that they can raise themselves and their families out of poverty and so that they can earn enough to become consumers of U.S. goods. The right CAFTA would ensure that U.S. firms and workers are not asked to compete against companies in Central America that gain a competitive advantage by suppressing their workers. The right CAFTA would not promote a race to the bottom.
The changes that would be necessary to make the CAFTA an agreement that a broad majority of Democratic Committee Members could support are few, but significant. The amendment introduced by Ranking Member Rangel during the informal markup on June 15, 2005, set forth these changes. First, the right CAFTA would require each party to the agreement to commit to (1) bring its labor laws into compliance with the basic standards of the International Labor Organization (ILO) within 3 years; and (2) subject this commitment to meet ILO labor standards and other obligations set forth in the CAFTA Chapter on Labor to the regular dispute settlement mechanisms that apply to all other commercial provisions in the agreement.
In addition, Democrats have consistently called on the Administration to provide meaningful technical assistance to assist the CAFTA countries to meet these goals. In that regard, it is particularly disappointing that the Administration continues to cut foreign aid rather than increase it. For example, even as the Administration this week promised in a letter to Congress to provide additional technical assistance of $40 million for `labor and environmental' goals, the House of Representatives passed in the Labor-HHS Appropriations bill the Administration's proposal to cut the budget of the principal agency that supports foreign labor standards technical assistance by $82 billion.
B. CAFTA Represents a Step Backward From Current U.S. Law
These changes would ensure that U.S. trade policy moves forward--rather than backward--to build upon existing U.S. trade preference programs (e.g., the Generalized System of Preferences, Caribbean Basin Initiative (CBI), and Caribbean Basin Trade Partnership Act (CBPTA)). These preferential trade programs have for more than 20 years conditioned trade benefits to countries in Central America and the Caribbean on the countries' making steady progress toward achieving basic ILO standards. More recently, over the last five years, the CBTPA program has conditioned its more ambitious trade benefits on the countries actually achieving those standards.
Notably, U.S. law further authorizes the President to deny trade benefits to countries that are not in compliance with these basic labor standards. The United States has the programs to deny trade benefits. Since 1984, the United States has made effective use of the labor criteria in GSP/CBI/CBPTA programs to improve labor standards in CAFTA countries. The track record is as follows.
First, the United States U.S. has `suspended trade benefits' 19 times since 1984: 4 times for intellectual property issues, 1 time for drug trafficking issues, and 14 times for labor issues. Second, the United States has suspended benefits to CAFTA countries twice: (1) in 1987, President Reagan suspended benefits to Nicaragua, for failure to meet the labor rights eligibility criteria; and (2) in 1998, President Clinton suspended benefits to Honduras for failure to meet the intellectual property eligibility criteria.
Third, the United States has repeatedly used the potential for suspension of benefits as leverage to promote improvements in CAFTA countries' labor laws. Examples described below involve Costa Rica, El Salvador and Guatemala. Reliance on potential suspension of benefits is (1) good trade policy (achieve goal without disruption of trade), and (2) parallels use of GATT/WTO dispute settlement, in which vast majority of cases are resolved without need for formal adjudication and even higher percentage of such cases are resolved without the use of trade sanctions.
The CAFTA is a major step backwards from 20 years of U.S. law and enforcement efforts. As currently negotiated, the CAFTA does not require that CAFTA countries continue to improve their labor laws to conform with basic international labor standards--in fact, it does not require that the countries' laws meet any standard, or even that the countries have a law relating to the basic standards. The only enforceable provision in the CAFTA Chapter on Labor requires that member countries `enforce their own laws,' no matter how weak. This provision is substantially weaker than current U.S. law.
The CAFTA countries currently receive unilateral trade benefits under
three preference programs: (1) the Caribbean Basin Initiative (CBI) enacted in 1984; (2) the Generalized System of Preferences (GSP), enacted in 1976, and modified in 1984 to include a labor condition; and (3) the Caribbean Basin Trade Preferences Act (CBTPA) enacted in 2000. Approximately 50% of all imports from the CAFTA countries already enter duty-free under these three programs. (An additional 30% of products enter duty-free under regular U.S. tariff rates.)
The CBI, CBTPA and GSP programs each condition a country's eligibility for trade benefits (i.e., duty-free access to the U.S. market) on, among other things, whether the country is making progress toward implementing basic international labor standards. More specifically, when determining whether a country should be designated a beneficiary country or maintain its eligibility for benefits, the President must make the following determinations under each program. For CBI and GSP, the President must determine that the country is `taking steps to afford internationally recognized worker rights.' For CBTPA, the President must take into account `the extent to which the country provides internationally recognized worker rights.'
CAFTA would drop even these minimum requirements. Unlike current U.S. law, CAFTA does not contain any condition requiring a country to achieve--or even move towards achieving--a basic level of worker rights.
Although the GSP, CBI and CBTPA programs all condition the eligibility of countries for trade benefits on their progress on worker rights, the formalized process for the public to petition the Administration for withdrawal of benefits is contained in the umbrella program (GSP). Accordingly, the United States has utilized the labor rights condition under the GSP program more than the conditions in the Caribbean-specific programs.
The United States has suspended GSP benefits 19 times since 1984. Fourteen of those suspensions were tied to the failure of the beneficiary country to meet the program's eligibility criteria on worker rights. Four suspensions were due to a country's failure to comply with the program's eligibility requirements regarding intellectual property rights, and one suspension was due to a failure to comply with the eligibility criteria regarding drug trafficking.
Among the CAFTA countries, Nicaragua and Honduras have had their benefits curtailed for failure to meet eligibility criteria. In the case of Nicaragua, President Reagan terminated the country's eligibility for the program in 1987, due to worker rights issues, and the country remains ineligible for the program today. In the case of Honduras, President Clinton suspended benefits under both the GSP and CBI programs in 1998, due to the country's failure to meet the programs' eligibility criteria regarding the protection of intellectual property rights.
Typically, the United States has used the potential for suspension of GSP/CBI/CBTPA benefits to promote improvements in our trading partners' labor laws. In fact, most of the labor law reforms of the past twenty years in the CAFTA countries has been due to the leverage of the workers rights conditionality under GSP/CBI/CBPTA. The following examples illustrate this fact.
In June 1993, a GSP petition against Costa Rica led to reform of its Labor Code in October 1993, to provide protections for union organizers and prohibiting solidarity associations from engaging in collective bargaining. Similarly, in June 1992, a petition against Guatemala resulted in recognition of a maquila union for the first time in six years in August 1992. During the period 1993-1997 when Guatemala was under GSP review, the government raised the minimum wage, established new labor courts and streamlined the legal recognition process.
In 2000, Guatemala's status under GSP was reopened due to the firing of banana plantation workers at a Del Monte company. In April 2001, Guatemala passed a labor reform bill that granted new rights to farm workers. Finally, in 1992, EI Salvador was put on continuing GSP review for workers rights violations. In 1994, El Salvador changed its laws to make it easier for unions to be recognized without employer interference.
The changes proposed by Ranking Member Rangel would eliminate both the backsliding as compared with current U.S. law and the double standard created under the CAFTA with regard to the enforcement of the agreement's labor provisions versus other commercial provisions. As negotiated, the CAFTA provides that labor provisions are enforceable primarily through a weak system of fines, which the offending country effectively pays to itself. In comparison, the agreement's other commercial provisions are enforceable using trade sanctions. Mr. Rangel's amendment would correct this imbalance to ensure that the rights of workers receive the same protection as the rights of corporations under the agreement.
As stated, we consider that meaningful technical assistance must be an integral part of U.S. trade policy with the CAFTA countries, and others. In Central America, such assistance needs to be used to improve existing laws (so that they meet ILO standards) as well as to strengthen enforcement.
`Unfortunately, the technical assistance prosed by the Administration--whatever its other weaknesses--requires only that countries enforce the laws they have on their books--even if the law on the books is weak or there is no existing law. Even the best enforcement of inadequate laws can never yield acceptable results. Indeed, Congress would never approve an agreement that requires merely that our trading partners enforce their existing laws in other areas, such as intellectual property rights. Would any Administration ever provide technical assistance for countries to enforce laws that allow or promote piracy of American patents, copyrights or trademarks? Requiring only that countries `enforce their own laws' with regard to labor standards is equally inappropriate.
II. CAFTA COULD DEFEAT COUNTRIES' ABILITY TO RESPOND TO PUBLIC HEALTH EMERGENCIES
We also continue to have reservations about sections of the CAFTA (as well as other recently negotiated U.S. free trade agreements (FTAs)) that affect the availability of affordable drugs in developing countries. In particular, we are concerned about test data requirements in the CAFTA, which could prevent the CAFTA countries from addressing public health problems and delay the introduction of generic pharmaceuticals into the Central American market, thereby making pharmaceuticals less affordable in the region.
In particular, Article 15.10.1 of the CAFTA requires parties to protect certain test data submitted to obtain regulatory marketing approval of a drug. The provisions operate as follows: if a government requires submission of test data in order to obtain marketing approval for a drug (e.g., FDA approval), the government may not allow any other company to use these test data as the basis of obtaining marketing approval for a similar drug for a period of 5 years. The company first submitting the data has the right to prevent anyone else from using those data to enter the market for that period. Test data rights are separate and distinct from patent rights, and can exist for drugs not covered by a patent.
The key issue raised by the test data requirements in the CAFTA is
whether they can be waived if a CAFTA country wants to approve a producer other than the test data owner to produce and sell a drug in the CAFTA country during the test data protection period. The following example illustrates the issue:
Assume Guatemala decides that it needs to increase the supply of an HIV/AIDS drug in its market. Company A owns the patent on the HIV/AIDS drug, and also is the only producer to have obtained marketing approval for the drug in the Guatemalan market. If Guatemala is unable to convince Company A to produce more of the HIV/AIDS drug at a reasonable price, Guatemala could issue a compulsory license to another drug manufacturer, Company B. However, the compulsory license, which is allowed under the FTA, is an exception only for the patent rights related to the HIV/AIDS drug. The compulsory license does not affect Company A's right to prevent any other company from receiving marketing approval for the drug based on the data it submitted.
Obviously, if the United States invoked its right to test data protection as to the drug in question, the compulsory license would be useless--and Guatemala's right under specified circumstances pursuant to WTO rules to issue such a license would be defeated.
Notably, the above analysis applies even if the HIV/AIDS drug is not covered by a patent. The only difference is that Guatemala would not need to issue a compulsory license.
The Intellectual Property Chapter of the Agreement (Chapter 15) does not include any specific exception that would allow Guatemala or any other CAFTA countries to waive the test data requirements to address a public health need. As such, our concern is that the test data requirements could effectively undermine the CAFTA countries' ability to use compulsory licenses. As such, we believe that the CAFTA violates at a least the spirit of the November 2001 World Trade Organization Declaration on the TRIPS Agreement and Public Health (`Doha Declaration'), because the key flexibility identified in that Declaration was the ability of developing countries to use compulsory licensing to `protect public health' and `promote access to medicines for all.'
We were heartened by the comments of Ambassador Allgeier, the Deputy United States Trade Representative, at the mock markup held by the Committee on June 15. At the mock markup, Ambassador Allgeier stated that the `Understanding Regarding Certain Public Health Concerns,' which was adopted by the parties as a side agreement to the CAFTA, allows a country to waive test data requirements in order to market a drug produced under a compulsory license. The portion of the side agreement that Ambassador Allgeier apparently relied on for this interpretation states, in relevant part, that `[t]he obligations of [the Intellectual Property Chapter] do not affect a Party's ability to take necessary measures to protect public health by promoting access to medicines for all. * * *'
In our view, the side agreement is not sufficiently clear as to whether it provides an exception to the test data protection provisions. Accordingly, we urge USTR to ensure that Ambassador Allgeier's interpretation is given express legal effect in all future trade agreements, by making the exception explicit.
III. CAFTA AND THE ENVIRONMENT
We also have reservations about the CAFTA Chapter on Environment, which includes only minimal commitments. The agreement includes no benchmarks for countries to meet in improving their environmental laws and practices, and instead requires only that the countries enforce their existing laws. In addition, although the CAFTA includes commitments by the countries to engage in cooperative activities to improve and conserve the environment, these obligations are largely rhetorical, as the CAFTA also includes no commitments for funding such activities.
IV. INVESTOR-STATE PROVISIONS COULD ALLOW FOREIGN INVESTORS TO HAVE GREATER RIGHTS THAN U.S. INVESTORS IN THE UNITED STATES
Another area of concern is the so-called `investor-state' dispute settlement mechanism provided for in the CAFTA Chapter on Investment. The investor-state mechanism can be a useful tool to ensure that U.S. investors overseas are protected against unfair treatment.
However, if not properly crafted to reflect current U.S. laws, the investor-state mechanism can provide foreign investors greater rights than U.S. investors in the U.S. market. Congress recognized the potential for this problem during debate over the Trade Act of 2002 (P.L. 107-210), and included a mandate to USTR that U.S. trade agreements ensure that `foreign investors
in the United States are not accorded greater substantive rights with respect to investment protections than [U.S.] investors in the United States.'
Unfortunately, the CAFTA still leaves out key elements of U.S. law, notwithstanding that it arguably is an improvement over the standard contained at Chapter 11 of the NAFTA. The result is to empower CAFTA panels to issue decisions that could go well beyond U.S. law--allowing foreign investors to receive greater rights than U.S. investors in the U.S. market. Given the aggressive reasoning of some arbitration panels that have considered claims brought under the NAFTA, it is particularly important that the investor-state provisions included in free trade agreements closely track U.S. constitutional and Supreme Court jurisprudence in order to ensure that legitimate U.S. laws and regulations are not threatened--and there is no chilling effect on local, state or federal authorities.
V. U.S. TRADE PRIORITIES
Finally, we believe that, in general, bilateral free trade agreements have a legitimate place in U.S. trade policy. If the agreements are properly negotiated and free trade partners are properly selected in coordination with Congress, these agreements can contain significant benefits for the United States in helping to set the global trade agenda and in other ways.
Nonetheless, we urge the Administration to recognize that the most important U.S. trade priorities should be the ongoing negotiations in the World Trade Organization and opening markets that achieve the largest gains for Americans. We are concerned that the Administration has focused too heavily on FTAs. In the case of CAFTA, we are concerned that Congress as well has had to dedicate enormous resources and attention to this agreement at the expense of other important trade priorities, largely because the CAFTA negotiated by the Administration could not attract broad, bipartisan support.
CHARLES B. RANGEL.
PETE STARK.
JIM MCDERMOTT.
RICHARD E. NEAL.
XAVIER BECERRA.
BENJAMIN CARDIN.
SANDER LEVIN.
JOHN LEWIS.
MICHAEL R. MCNULTY.
JOHN B. LARSON.
