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Starting with the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO) in the mid-90s, “trade” deals began imposing one-size-fits-all policies on states and cities. By invading policy space previously reserved for sub-federal governments, today’s “trade” agreements impose a form of international preemption. That means shifting an ever-increasing number of issues away from local decision-making bodies and into inaccessible foreign venues where few citizens or elected officials can follow.

International trade is no longer simply a federal matter. Today’s international trade agreements delve deeply into matters of state law. Pacts like the North American Free Trade Agreement (NAFTA) and the World Trade Organization’s (WTO) General Agreement on Trade in Services (GATS) contain numerous policy obligations and constraints to which U.S. federal, state and local governments are bound to conform their domestic policies. These types of “trade” agreements — which were passed in the United States using an extremely trade negotiating process called Fast Track Trade Authority — undermine state regulatory authority in three major areas:

Government Procurement

The procurement rules contained in trade pacts such as the WTO Government Procurement Agreement (GPA) and the Central America Free Trade Agreement (CAFTA) and other FTAs threaten a variety of common state purchasing policies, including:

  • Measures to prevent offshoring of state jobs;
  • “Buy Local” or “Buy American” policies;
  • Preferences for recycled content, renewable energy, fuel efficient vehicles and more. Investment Under NAFTA, not only can countries challenge state laws as barriers to trade, but corporations can also launch trade suits against state policies in trade tribunals.

Investment, Zoning and Land Use

Corporate investors have used NAFTA’ s Chapter 11 investor-state enforcement system to challenge domestic state court rulings, state environmental laws, local land use policies, public health measures and even the provision of public postal services.

Services – Energy, Financial, Education and Other Policies

The United States has committed over 100 service sectors to the WTO’s GATS without consulting states including financial services, transportation, telecommunication services, health insurance, services related to mining, fishing, gambling, energy and information services. The GATS covers every conceivable way that a service might be delivered and contains rules that make it difficult to regulate the committed service sectors. The rules of the GATS threaten innovative state programs, such as efforts to expand low-cost health care coverage to the uninsured.

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