Democracy vs. Corporate Rule:

In just over one week, on Monday, June 7, a three-member panel will convene at the headquarters of the World Bank in Washington, DC to determine if California has the right to legislate on behalf of the health of its citizens and its environment if in so doing, it impinges on the rights of corporations to profit.

The plaintiff is the Methanex corporation of Canada, producer of the "M" in MTBE – a gasoline additive that has made the water of hundreds of communities across the state undrinkable in addition to being a known carcinogen. In response to intense public pressure, organizing and an Assembly bill requiring an environmental and health assessment of MTBE that reached the above conclusions; Grey Davis announced a phase-out of the additive in 1999.

The defendant in this case is the Bush Administration. For, while it is a California law being challenged, neither the Governor, the Attorney General nor any of our elected officials have standing in this court. If the Bush Administration loses, U.S. tax-payers will have to pay Methanex $9.7 million for the right to regulate its chemical, or, California will have to eliminate the ban just as the people of Canada did after their government chose to settle a nearly identical case with a U.S. chemical manufacturer (the Virginia-based Ethyl Corporation).

Methanex knew it had no chance to strike down our law in domestic courts. However, it has more than a shot under the investment provisions found in Chapter 11 of the North American Free Trade Agreement (NAFTA)–an agreement written to dramatically and in totally unprecedented ways, expand the rights of foreign corporations and investors over the rights of governments, citizens, the environment, public health, workers, and indigenous communities, among others. NAFTA will be the only source of reference the panel will use in deciding California’s fate on June 7, 2004.

Tomorrow, President Bush will expand the reach of Chapter 11 by signing the CAFTA — exposing six countries to investment rules that go even farther than those found in the NAFTA.

To understand the implications of this expansion on Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, the U.S. and California, we can look to the second NAFTA attack against California — the Glamis Gold Corporation case.

On December 10, 2003, Glamis of Canada brought a NAFTA suit against California laws protecting our environment and religious and cultural sites sacred to the Quechan Indians. This case is critically important to the potential impacts of CAFTA (and NAFTA) because Glamis also has mining operations in Guatemala and Honduras and has plans to begin mining in Mexico in 2005. In fact, its operation in Honduras has already been the target of recent community protests over the destruction of forests and contamination of the community’s water supply.

Since 1987, Glamis has been trying to operate an environmentally and socially devastating mine in the Imperial Valley of California. After being stopped by the implementation of democratic public interest laws, it now turns to NAFTA Chapter 11. According to Inside US Trade, Glamis CEO Kevin McArthur specifically said that the company resorted to a Chapter 11 claim because it would have a better chance of receiving compensation than would be the case under U.S. law.

Glamis plans to build a massive, open-pit, cyanide heap-leach gold mine, a mining process that has been banned by an increasing number of countries and the state of Montana. The operation would destroy largely pristine land adjacent to a designated desert wilderness area and consume up to 389 million gallons of water annually from the desert groundwater aquifer. In addition, the site is located in an area that is sacred to the Quechan Indian Nation and one of the richest archeological resource areas in the state including 55 known historic properties eligible for federal recognition.

In 2001, following an exhaustive six-year review process, including extensive public comment, the Clinton Administration denied Glamis’ permit to operate the Imperial Project mine. But, in November 2001, the Bush Administration reversed the permit denial. So, in April 2003, partly in response to the Imperial Project, the State of California took action to limit the impact of open-pit mining across the state by requiring that holes created by such mines be "back-filled" and that the landscape in the area be recontured once the mining is complete. It also passed legislation specifically requiring backfilling of mines on or near sacred sties or areas of special concern.

Three months later, Glamis submitted a letter of intent to file a NAFTA suit against the U.S. claiming that California’s laws make its mining operation too costly. It is demanding $50 million in compensation for the profits it would have made off of its operations. So, the case is now back in the hands of the Bush Administration. If they lose, Glamis either gets $50 million, or California over-turns its laws.

If CAFTA becomes law, Honduras and Guatemala can expect similar — if not harsher, treatment at the hands of Glamis.

I’ll give one more example of what CAFTA will mean for our six countries.

Harken Costa Rica Holdings — a firm with close corporate ties to Harken Energy of Texas, which just happens to be President Bush's former oil company, is already threatening Costa Rica with a CAFTA investment suit — even before the agreement is signed.

Harken obtained an agreement to drill for oil off of Costa Rica that was contingent on the outcome of an environmental assessment. The assessment determined that the project was incompatible with the country’s environmental law. The drilling was to take place in Costa Rica’s Talamanca region — one of the richest marine ecosystems on the planet which contains reserves for three indigenous communities, an UNESCO World Heritage Site, the Cahuita National Park, and a UN-designated wetlands site.

In response, Harken tried to bring an international suit against Costa Rican demanding more than $57 BILLION — almost 3 TIMES Costa Rica’s annual GDP — for profits Harken claims it would have made from the project. Under the terms of their contract, however, Costa Rica was able to exercise its right to keep the case in domestic courts. Under CAFTA, however, they would have had no such choice. Harken would have been able to circumvent national courts and take its case directly to ICSID.

According to local press and members of the Costa Rican government, both Harken and the Bush Administration have used the threat of the impending CAFTA as a lever to press Costa Rica to settle this case — either paying three times its GDP for the right to protect its environment and indigenous communities, or giving-in to Harken and allowing the drilling.

The situation is clear: the CAFTA will expand an agreement that is fundamentally at odds with democracy. In a democracy, there is a commitment to balance the many competing interests that exist in a society. Those doing the "balancing" are — most often — representatives of the people. One interest might be the ability of corporations to operate and make profits. Another interest might be the preservation of the lands and rights of indigenous communities, or the right of the citizens to clean and healthy drinking water.

Each of the laws in question here derived from a democratic process which began with affected communities who organized successfully to demand action by their elected officials, who then balanced the competing interests at hand to pass laws that served the overall public interest. That should be the end of the story.

Now, this is not to say that international courts are inherently flawed. Rather, it is to say that these rules and these courts are. They are thoroughly unbalanced, one sided and undemocratic. Therefore, for this reason alone, much less the hundreds of others will we reference today, the CAFTA must be rejected, the NAFTA must be rescinded and the real alternative policies that already exist must be applied in their stead.

Thank you.

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"(IFG is) one of the most serious and respected groups of experts dedicated to analyzing and generating alternative proposals to the prevailing economic model promoted by internaAtional financial agencies." — La Jornada, Mexico, September 10, 2003.

Formed in 1994, the San Francisco-based International Forum onGlobalization (IFG) is an alliance of leading activists, economists, scholars, and researchers formed to stimulate new thinking, joint activity and public education in response to economic globalization. Comprised of over 100 organizations in 24 countries, the IFG associates come together out of a shared commitment to educate activists, policy makers, the general public, and the media about the myriad negative effects of economic globalization and to advocate policies that are more equitable, democratic, and ecologically sustainable.