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May 21, 2002

Defeat of Kerry Amendment Thwarts Trade Bill?s Prospects in House

Senate Rejection of Modest Reform of Investor Protections Reinforces House “Free Trade” Democrats? Fast Track Opposition

WASHINGTON, D.C. ? The Senate?s defeat today of an amendment to repair the failed investor protection model of the North American Free Trade Agreement (NAFTA) adds yet another obstacle to final passage of the trade package, Public Citizen?s Global Trade Watch said.

The House in December passed by a one-vote margin a dangerous measure giving the president Fast Track trade negotiating authority. Public Citizen opposes Fast Track because it strips Congress of its authority to set the terms of trade. After a contentious month-long debate, the Senate is expected to pass its own trade package, which must then be reconciled with the House bill in a conference committee. Both the House and Senate must then approve the conferenced bill for it to become law.

“Sen. John Kerry (D-Mass.) is a fast track supporter who sought a modest amendment to remove a pernicious provision that is causing a backlash to trade deals,” said Lori Wallach, director of Public Citizen?s Global Trade Watch. “Fast Track?s fate will be determined by the second House vote, and House ?free trade? Democrats were relying on the Kerry Amendment?s passage to justify reconsidering their Fast Track opposition from last year. Without the Kerry Amendment, House passage fortunately will be even more difficult.”

The amendment offered by Kerry was a modest reform that guaranteed much-needed changes in the NAFTA Chapter 11 investment model in future trade agreements. Under the current NAFTA Chapter 11 model, foreign investors may file a claim in secret NAFTA tribunals to seek compensation when government public interest regulations in any way diminish the value of their investment. To date, foreign businesses have cited Chapter 11 to claim $1.8 billion in compensation from U.S. taxpayers. A recent

Tufts University study released by Taxpayers for Common Sense has estimated that the NAFTA Chapter 11 model, if extended to the Free Trade Area of the Americas, which this Fast Track bill explicitly authorizes, would enable foreign businesses to claim up to $32 billion annually.

The Kerry Amendment would have restricted such investment protection actions to only those cases where government action causes a physical invasion of property or denies all economic or productive use of that property. In doing so, the amendment would have instructed U.S. trade negotiators to ensure that future investor provisions do not grant foreign investors rights beyond what the U.S. Constitution provides.

“It will be tough sledding in the House given that the Kerry fix for Chapter 11 failed and the White House says it will kill in conference the trade law amendments that passed,” said Wallach.

A group of House Democrats from the Pacific Northwest who have supported past trade bills wrote in a May 16 letter to Ranking Member Rep. Charles Rangel (D-N.Y.) that “the Kerry Amendment will safeguard the regulatory authority of state, local and federal governments” and is “imperative that any final trade negotiating authority legislation include the provisions” in the Kerry Amendment.

While the White House and business groups have lobbied hard against the Kerry Amendment, state and municipal groups endorsed it, including the U.S. Conference of Mayors, the National Conference of State Legislatures, the National Association of Counties, the National Conference of Towns and Townships, and the National League of Cities.