How has trade impacted labor and water resources?
Maine's paper industry and employment in manufacturing firms
Maine paper mills have been particularly hard hit by unfair Chinese trade practices--and by out-of-state managers that can be too quick to throw in the towel.
A typical story comes from Rumford Maine, a town of 6,472 people in Oxford County and the birthplace of Edmund Muskie, where the first paper mill began operation in 1882. On January 16, 2008, New Page Corporation, headquartered in Ohio, announced that they were shutting down paper machine #11 and laying off at least 60 workers at Rumford (as well as 440 paper workers in Wisconsin and 160 workers in Ohio who also worked in coated free sheet paper production units). State representative John Patrick and state Senator Bruce Bryant both work at the mill and are members of local 900 of the United Steel Workers of America. Bryant doesn't know whether he will be laid off. Patrick says his job is safe. Senator Bryant said 60 jobs is about 8 percent of the Rumford Mill's workforce.
John Geenen, a Steel Workers official, said the layoffs follow an unfavorable decision, on November 20, 2007, by the U.S. International Trade Commission (ITC) in a case brought by the New Page Corporation and the Steel Workers, alleging that China, Indonesia, and South Korea are illegally dumping and subsidizing coated free sheet paper imports into the United States.
"Unfortunately, when the ITC ignores the continuing damage to U.S. industry by bad trade deals, our members and our communities suffer," Geenen said. "It is impossible for the coated free sheet paper industry to be bullish about the future, when our government encourages illegal dumping and foreign government subsidy support."
James Tyrone, Vice-President of Sales for New Page, testified before Congress in 2007 that Chinese state planning officials targeted its coated paper industry for rapid development in the 1990s, providing low-cost loans through government banks, direct grants, and tax breaks based on export performance. The Peoples Republic in 2003 also forgave a $600 million loan to Asia Pulp and Paper, China's largest paper company. As a result, China's market share in the U.S. coated free sheet paper market has increased 75 percent annually over the period 2003-2007.
The layoffs at the Rumford mill illustrate how Maine's industrial base is eroding. Manufacturing News Inc. (MNI) reports that Maine lost 2,000 industrial jobs in 2007. MNI says that Maine has 2,582 manufacturing firms employing 77,370 workers. Maine suffered significant job losses of 7 percent in its largest industrial sector, transportation equipment, in 2007, much of it due to large layoffs at Bath Iron Works. Employment in 2007 in Maine's second largest industrial sector, lumber and wood, fell by 2.5 percent.
The loss of manufacturing jobs in Maine is related to U.S. trade policy, especially with respect to China. The Economic Policy Institute estimates that from 2001 to 2006 Maine suffered a net loss of 8,800 jobs (amounting to a 1.4 percent share of total state employment in 2001) due to growing trade deficits with China, alone.
Maine workers could not compete because China directly subsidizes export industries, pegs its currency artificially low (an effective subsidy of 40 percent according to EPI), and denies basic labor rights to its industrial workers, resulting according to EPI in a 47 percent to 85 percent suppression of Chinese wage levels.
Maine officials and the Governor of Maine, in particular, share the concerns expressed manufacturers and industrial workers. The problem is that the current system for state/federal consultation on trade policy is inadequate
How do international trade agreements impact water resources policy?
Water is essential to life and necessary for economic well-being. Maine and other states regulate and manage water resources in order to protect the public health and the health of the environment, as well as to ensure adequate and sustainable supplies of water at a reasonable and fair price for individual consumption and for industrial, commercial, and agricultural use. Maine is blessed with an abundance of water, but if its water resources are not managed carefully, the ecological system may be irreparably harmed and the private interests of commercial users, polluters, and distributors may trump the public interest of all the people of Maine.
Considerable attention has focused on the capacity of Maine and other states to manage water resources in light of potential conflicts with the General Agreement on Trade in Services (GATS) administered by the World Trade Organization (WTO). While GATS water issues should be monitored closely, recent developments such as the European Union's decision not to seek inclusion of "water for human use" as a sector of economic activity that should come under the scope of GATS regulation suggest that a conflict between GATS rules and Maine's authority to regulate drinking water services may be unlikely in the near term. Nonetheless, the resumption of WTO negotiations on GATS and domestic regulation and the already-existing U.S. commitments on distribution services and on sewage services and environmental services bear very close watching and in the long run may threaten Maine's authority over water policy more generally.
The possibility of a challenge under an international investment agreement to Maine's authority to regulate its water resources, however, cannot be discounted even in the short term. Two major NAFTA chapter 11 cases challenging the capacity of state and local government regulation to protect the safety of drinking water have already been adjudicated. The NAFTA tribunal in Methanex v. United States soundly rejected Vancouver-based Methanex corporation's claim for nearly a billion dollars in compensatory damages for California's phase-out of the gasoline additive MTBE because it was polluting lakes and groundwater and was endangering the public health. But, in an equally important case, Metalclad v. Mexico, an international tribunal found a violation of NAFTA's chapter 11 on investment when state and local governments took regulatory action to stop operation by U.S.-based Metalclad corporation of a hazardous waste disposal facility believed to be a threat to drinking water safety and the environment.
This litigation history suggests that there is a risk that international investment claims may be brought seeking compensation for regulation of water resources by Maine or other U.S. states or localities; again, two major cases have already been brought in North America. It also suggests that Maine may want to work with the U.S. Trade Representative's office and with the Maine congressional delegation to seek an official interpretation of NAFTA chapter 11 and clear language in future agreements that will codify parts of the Methanex decision and otherwise protect bona fide government regulations, including water regulations, from any Metalclad-type claim that might be based on the actions of the State of Maine or one of its subdivisions.
What are the options for improved federal consultation with states and reform of international investment agreements?
Again, advocacy by governors to protect state sovereignty and environmental regulatory authority and to ensure that the concerns of home-state industries are heard in Washington could be far more effective if 2009 trade promotion authority (TPA) legislation or some similar act of Congress mandated more extensive state-federal consultation on trade policy issues than are currently required.
Maine may want to seek reform of U.S. policy related to international investment litigation to preclude a challenge to state or local water policy and to bona fide state and local regulatory acts in the public interest generally.
The NAFTA litigation history, noted above, suggests that there is a risk that international investment claims may be brought seeking compensation for regulation of water resources by Maine or other U.S. states or localities; again, two major cases have already been brought in North America. It also suggests that Maine may want to work with the U.S. Trade Representative's office and with the Maine congressional delegation to seek an official interpretation of NAFTA chapter 11 and clear language in future agreements that will codify parts of the Methanex decision and otherwise protect bona fide government regulations, including water regulations, from any Metalclad-type claim that might be based on the actions of the State of Maine or one of its subdivisions.