March 28, 2003

Bush Administration Poised to Trade Away Michigan Laws at WTO Negotiating Table in Geneva

Bush Administration Plans March 31 Response to EU Demands to Open U.S. Water and Energy Systems, Postal Services and More to Foreign Ownership and Limit State Regulations

 

WASHINGTON, D.C. – Without approval by Michigan’s legislature or Gov. Jennifer Granholm, the Bush administration plans to submit offers next week at the World Trade Organization (WTO) that could require the state to open public services to foreign, for-profit ownership and strictly curtail state regulation of banking, insurance, electricity, water systems, transportation, alcohol distribution and professional services including those provided by doctors, lawyers and accountants.

States would be required to conform their policies to global rules established as part of negotiations occurring under the WTO’s General Agreement on Trade in Services (GATS). The threat to numerous state laws and policies was revealed only weeks ago when the European Union’s (EU) demands of the U.S. were leaked from the secretive talks being held at the WTO’s Geneva headquarters.

"With the public, press and elected officials all focused on the war, the Bush administration is poised to effect a silent, slow-motion coup d’etat on democratic governance in the United States," said Lori Wallach, director of Public Citizen’s Global Trade Watch. "These so-called trade negotiations could rewrite wide swaths of local law without the vote of state legislatures or the knowledge of state attorneys general or governors."

The leaked documents showed that a stunning scope of domestic policies that citizens expect to be set by their federal, state and local officials are poised to be eliminated in global negotiations pushed by giant, multinational service sector corporations such as Andersen, Halliburton and RWE/Thames Water. The policies include the privatization and deregulation of public energy and water utilities, postal services, higher education and alcohol distribution systems; the right of foreign firms to obtain U.S. government small business loans; and deregulation of private-sector industries such as insurance, banking, mutual funds and securities.

 

The EU also requested the elimination of Michigan’s alcohol control distribution system, a $712 million business in 2001. State liquor control generated more than $100 million for the state with nearly $30 million earmarked for Michigan public schools. Seventeen other states with alcohol control systems generate combined annual revenue of more than $1 billion from their state-owned wholesale and retail outlets.

"The 21st Amendment not only provided for the repeal of national prohibition, but it also provided each state the right to choose how alcohol would be regulated within the state," said Jim Sgueo, executive director of the National Alcohol Beverage Control Association (NABCA). "Should the United States agree to the EU’s request that the control state systems be dissolved, it would undermine the Constitution of the United States and the states’ rights provided by it."

 

In addition, the EU specifically requests the elimination of Michigan laws related to legal services (in-state residency requirements); architectural services (local licensing of two-thirds of the officers, partners or directors of firms); energy services related to exploration and production (in-state requirement); construction and related engineering services (in-state requirement); installation and assembly work (in-state requirement); and mining and manufacturing (in-state requirement).

In a letter sent last month to Michigan Attorney General Mike Cox, Public Citizen wrote, "State and local regulatory authority could be curtailed profoundly and the Constitutional balances of federalism irreversibly biased if states do not act now to protect their interests during these ongoing negotiations."

In the past, including when the WTO was formed, U.S. trade negotiators made binding commitments regarding state and local regulatory authority without formally consulting state legislatures and other local officials. The national consumer group Public Citizen and civil society groups worldwide have called for a moratorium on the GATS talks and a public process involving state and local officials.

Areas in which the EU’s demands would impact laws in all U.S. states include:

  • Professional services, including legal, accounting, auditing and bookkeeping, as well as architectural services, urban planning, integrated engineering and engineering;
  • Business services, including research and development, as well as real estate, rental and leasing, security services, printing and publishing;
  • Distribution services, including alcohol, tobacco and food;
  • Private higher education services;
  • Environmental services, including drinking water, wastewater and waste management;
  • Energy services, and electricity wholesale and retail;
  • Financial services, including insurance, banking and mutual funds;
  • Tourism and travel-related services, including concessions in national and state parks;
  • Transportation services;
  • Telecommunications; and
  • Construction.

In these sectors, the EU is asking the United States to remove existing regulation of services by eliminating state insurance chartering, lifting rules regulating legal practice, or removing certain banking regulations – and/or requesting "market access" in one or more of the four "modes" of GATS. These include the right to set-up an operation or commercial presence in the United States, the right to provide cross-border services (for instance, online mutual funds), the right to send service workers into the United States to perform a service contract made with a foreign company, and the right to sell services to U.S. citizens abroad. Once market access is granted, all levels of government – city, county, state and federal – are forbidden from limiting the number of service providers in these areas and also must provide certain treatment to foreign service providers.

For a background memo on the GATS and how it operates, and to see the EU GATS demands, click here.

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