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Trading in Democracy: Why Rights Are Still For Real People

International trade deals allow businesses to sue elected governments when corporate interests are threatened abroad. Here's why you should care.

Vancouver el salvador protest by Brent Patterson

Protest against Pacific Rim Mining Company in Vancouver, BC.

Photo by Brent Patterson

One of us had just landed in Vancouver, Canada, for a huge “Shout Out Against Mining Injustice” when we got the news: A tribunal in Washington, D.C. that nobody elected recently issued a verdict that will potentially constrain the democratic rights of millions of people.

The International Center for the Settlement of Investment Disputes (ICSID), a tribunal located at the World Bank, ruled that Canadian mining company Pacific Rim may continue to sue El Salvador for not letting the company mine gold there. The impoverished Central American country could potentially be forced to pay the foreign company $77 million or more in damages. The anti-democratic ruling has ominous implications for all of us.

We visited El Salvador last year to learn more about this landmark case. A wide vein of gold lies alongside the northern portions of a large river that flows down the country's middle, providing water for more than half the population. The gold remained relatively untouched until about a decade ago when foreign companies began to apply for mining permits.

Farmers and others told us that they were initially open to gold mining, thinking it would bring jobs to ease the area's deep poverty. But, as they learned more about the toxic chemicals used to separate gold from the surrounding ore and about the massive amounts of water used in the process, they began to organize a movement that opposed mining. Their simple cry: "We can live without gold, but we can't live without water."

Laws and trade pacts like these grant corporations the right to sue governments over actions—including health, safety, and environmental measures and regulations—that reduce the value of the corporation's investment.

By 2007, polls showed close to two-thirds of Salvadorans opposed gold mining. In 2009, Salvadorans elected a president who promised he wouldn't issue any new mining permits during his five-year term. He has kept this pledge.

But Pacific Rim didn't sit idly by as democracy worked its way from El Salvador's northern communities to its national government. The company sought a mining license. When the government rejected its environmental impact assessment, the Canadian company resorted to lobbying Salvadoran officials. And, when its lobbying failed, Pacific Rim lodged a complaint against El Salvador at ICSID in Washington under a U.S-initiated trade agreement and a little-known investment law in El Salvador.

Vancouver el salvador protest sign by Brent Patterson

Protest signs slipped under the door of PacRim office in Vancouver, BC.

Photo by Brent Patterson

Laws and trade pacts like these grant corporations the right to sue governments over actions—including health, safety, and environmental measures and regulations—that reduce the value of the corporation's investment.

To the surprise of many observers, the tribunal ruled on June 1 that Pacific Rim can proceed with the lawsuit against El Salvador. Even if the cash-strapped Salvadoran government wins in the end, it will likely have to shell out millions on legal fees to defend an action taken after lengthy democratic deliberations. If it loses in the tribunal's next ruling, it will cost even more.

Laws and trade agreements that allow corporations to sue governments should worry us all. No international tribunal should have the right to punish countries for laws or measures approved through a democratic process, be it in the United States, El Salvador, or anywhere else. President Barack Obama said this himself in 2008 when he promised, while campaigning, to limit the ability of corporations to use trade agreements to sue over public interest regulations.

No international tribunal should have the right to punish countries for laws or measures approved through a democratic process, be it in the United States, El Salvador, or anywhere else. 

Yet the Obama administration is currently negotiating a Trans-Pacific Partnership with several countries. And it's pushing for provisions that would allow companies to sue governments under this trade pact.

But an expanding coalition of labor, environmental, religious, and other groups opposes giving Big Business this privilege. A similar coalition in Australia, another country negotiating this trade deal, has convinced its government to oppose such corporate "rights." The Trans-Pacific Partnership may well prove an opportunity for this outrageous assault on democracy to be defeated.

Democracy belongs to the people. Those of us standing up to defend democracy and counter corporate abuse should strongly oppose any new "rights" for corporations being written into new trade pacts as we try to overturn the existing ones.

Flag Balls photo by CapsicinaTreaty Like It's 1999
From Japan, Raj Patel on the expansion of the Trans-Pacific trade agreement and the homegrown battle to stop it.

In Vancouver, we did not sit by idly when we heard the tribunal’s decision. The day after the decision was announced, 200 of us marched to the headquarters of Pacific Rim where Salvadoran anti-mining activist Vidalina Morales vowed that the broad-based National Roundtable on Metallic Mining would continue to fight to keep Pacific Rim out of El Salvador and asked for international solidarity.

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John Cavanagh and Robin Broad

This blog was adapted from Broad and Cavanagh’s article distributed by the Institute for Policy Studies’ OtherWords op-ed service.

Robin is a Professor of International Development at American University in Washington, D.C. and has worked as an international economist in the U.S. Treasury Department and the U.S. Congress. John is director of the Institute for Policy Studies, and is co-chair (with David Korten) of the New Economy Working Group. They are co-authors of three books and numerous articles on the global economy, and have been traveling the country and the world for their project Local Dreams: Finding Rootedness in the Age of Vulnerability.

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