As National Action Stalls, Social Movements On a Deadline Are Winning Local Victories. That’s Why TiSA Must Be Stopped.
By: Simon Davis-Cohen
As we enter a time when progressive politics may be more locally-oriented than ever before, any threats to local sovereignty are of particular interest to the left.
The climate crisis is a global one. But pipeline construction and spills, or the impacts of droughts, floods, and wildfires, are not—they happen in the places we live. And so does resistance. From the plains of North Dakota to municipalities and provinces across the globe, struggles for local power and self-determination are where the rubber hits the road in this colossal struggle for survival.
As federal governments fail, locals pick up the slack. That’s one reason why millions have erupted in outrage over proposed international trade agreements like the Trans-Pacific Partnership (TPP), the Trans-Atlantic Trade and Investment Partnership (TTIP), and others that seek to consolidate ever more power in the hands of supra-national actors.
Many of these massive new deals are an attempt to expand the North American Free Trade Agreement (NAFTA) model, which has introduced many to the ways that national sovereignty can be undermined by such agreements. Earlier this year, for example, after Obama vetoed the Keystone XL pipeline, the US was sued by TransCanada under NAFTA for lost future profits.
Much of the opposition to NAFTA-style deals like the TPP has centered on this infamous “investor state dispute settlement” (ISDS) process, which gives multinational corporations the ability to directly challenge federal governments (in secretive tribunals) over laws that impact their profits.
But it’s not just national decision-making that is at stake.
The system also catches local governments in its dragnet, as the challenges often target local laws. Under NAFTA, the US firm Metalclad was able to sue Mexico when the municipality of Guadalcazar denied the company a permit to build a toxic waste dump site. In the end, a NAFTA arbitration decided that the Mexican national government had failed in its obligation to create a clear and predictable environment for investors. Mexico was forced to pay $15.6 million in damages.
These trade agreements are clear threats to democracy. Thanks to popular resistance however, the TPP is all but dead. And TTIP is on life support.
But another deal is still, technically, alive and kicking: the proposed Trade in Services Agreement (TiSA), currently being negotiated by the European Union, the US, and 22 other World Trade Organization (WTO) nations that collectively account for over two-thirds of planetary GDP.
Rather than ISDS, TiSA would be enforced by WTO-style trade sanctions. These penalties can still have a pernicious impact: when the US issued new regulations that would require meat products be labeled with their country of origin, for example, the WTO responded with sanctions—and the US tossed the rule.
It has been reported that TiSA negotiators hope to finalize negotiations in early January. Unlike conventional trade agreements, which facilitate the mutual lowering of tariffs on goods, TiSA deals in services—like banking, telecommunications, fossil fuel transport, health care, public transportation, and utilities. The difference is crucial.
“Whereas tariffs are a primary barrier to trade in goods,” as the South Centre and the Harrison Institute of Georgetown Law Center explain, “domestic laws and regulations are the primary barrier to trade in service sectors.”
If a government enacts a measure that violates TiSA, it could be sanctioned until it changed the offending law or regulation.
And whereas federal governments typically dominate the flow of goods, local jurisdictions typically have a greater role in service delivery. Services like the provision of drinking water and electricity are local. They happen at home. So TiSA is of particular interest to local communities and their governments.
At the moment, multinationals and states have significant soft powers over local governments—but legally limited ones. For example, when Mexico lost the NAFTA challenge over the Metalclad dump site, it tried to force Guadalcazar to foot the $15.6 million bill. But it failed, because Mexico’s constitution protects local governments.
Nevertheless, these sorts of lawsuits incentivize top-down power structures. If Mexico had had the authority to strike down the municipality’s decision, it could have avoided the $15.6 million judgment.
TiSA is seen as an end run around stalled negotiations to update the WTO’s General Agreement on Trade in Services (GATS), which was a priority of the Bush-Cheney administration. The US National Association of Counties has warned that proposed changes to GATS could “have a chilling effect on local decision making…and result in the ultimate preemption and nullification of local government laws and regulations.”
TiSA, which speaks of “new and enhanced disciplines,” would go further. Leaked drafts of the deal also propose new “transparency” rules that would help federal and supra-national actors standardize, catalogue, and monitor local governments.
The rules pressure national governments to force municipalities to publish all existing and proposed laws concerning service delivery. In addition, local communities would be forced to “provide interested persons and other Parties a reasonable opportunity to comment.”
But these requirements are only the tip of the iceberg. The leaked drafts also propose a “necessary and objective” test on all future local lawmaking, opening the door to new powers for international tribunals to rule on the substance of the local laws. This is similar to something the NAFTA tribunal tried to do in the Guadalcazar case: In a flagrant attempted power grab, the arbitrators took it upon themselves to interpret Mexico’s constitution and thus the validity of the local law. It declared that “exclusive authority for siting and permitting a hazardous waste landfill resides with the Mexican federal government.” This reading of the constitution was not only grossly presumptuous—it was incorrect. (Mexican municipalities enjoy constitutional protections, and in fact the Supreme Court of Mexico held that Guadalcazar’s actions were entirely consistent with Mexican law.)
Suppose, for example, that a US city passes a law to take public control of its water utility. Under TiSA, a multinational corporation that invests in water infrastructure, say Veolia, may lobby its national government—France—to file a challenge and impose trade sanctions on US water companies. France might argue that municipalizing the water utility is not “objective and necessary” under TiSA—or it could just point to the agreement’s “ratchet” clause, which says that if a service has been privatized, it cannot be un-privatized.
Though potentially alarming to European countries and Canada, where municipalization has proliferated in recent years, the repression of local government control over services is nothing new in the United States. Often, states and the courts in the US “preempt” proactive local lawmaking, including measures to tighten environmental standards, expand worker and tenant protections, or provide sanctuary for refugees. And private corporations’ standing as “persons” under US law already functions as a “ratchet” that makes it financially prohibitive for the vast majority of municipalities to un-privatize services.
New trade agreements could encourage state preemption. “It wouldn’t be a legal process,” says trade expert Bill Waren of Friends of the Earth—“it would be a political one.” If US companies were hurt by trade sanctions because Cleveland had violated TiSA, there would be enormous pressure on city government to overturn the law in question. But if the city council refused to do so, or if it couldn’t because the measure had been passed through the ballot initiative process, the focus would likely shift to asking the courts or Ohio’s state legislature to intervene. “And conceivably,” says Warren, “the federal government could also pass a law preempting the state or local measure in services regulation.”
All of this is happening at a time when we need unprecedented public intervention in the private energy service industry, from halting fossil fuel transportation to re-vamping the energy system.
Public Services International (PSI) sounds this alarm in their report “TiSA vs Climate Action: Trading Away Energy Democracy.” “Energy issues,” they explain, “have historically been ignored by world trade rule makers.” But they have long been on the wish list of the likes of Halliburton and other energy service providers. TiSA would compromise the power of nation-states to conserve oil, and would mandate “technological neutrality” in the energy sector, making it trade-illegal to nurture renewables. The deal’s energy chapter goes so far as to say that national sovereignty “must be exercised in accordance with, and subject to, the rules of international law.”
Yet, in a sinister twist of history, some of the first known negotiations over TiSA were conducted at the very time world leaders convened for the landmark climate conference in Paris in 2015. To top it off, six days after the Paris deal was concluded, the US lifted its decades-long ban on crude oil exports—a decision that future governments would be barred from reversing under TiSA. It was all the result of a highly coordinated lobbying campaign by the oil and gas industry, and a reality check for the climate movement.
Intentionally or not, local communities today find themselves at the nexus of a global confrontation with neoliberalism.
In its “transparency” chapter, TiSA proposes something strikingly similar to what took place in Greece after it accepted loans from the IMF, the European Commission, and the European Central Bank. Included in memorandums of understanding between Greece and the so-called Troika was a mandate to restructure the Greek system of local governance. Since going into effect in 2011, the “Kallikratis Program,” as it is known, has reduced the number of municipalities in the country from 1,034 to 325, and consolidated the previous system of 54 prefectures and provinces into 13 regions that mirror the EU’s statistical zones. The local governments left standing were subject to massive reforms, including heightened “transparency” and monitoring not unlike the standardization provisions in TiSA.
In Puerto Rico, which has been taken over by an appointed “control board,” similar reforms to dissolve a large swath of local governments are currently being aired.
And through fiscal emergency management, school board takeovers, and the proliferation of state preemption bills, local democracy has been under attack in the United States for decades.
But local communities are discovering their power.
The contentious Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU was momentarily derailed when one Belgian province refused to ratify. (Days later, the European Union and Canada inked the deal.)
Thousands of local governments in Europe have stood against TTIP. And hundreds of US cities and towns have passed laws that directly defy the undemocratic legal doctrines undergirding the power of state preemption and the right of corporations to sue communities. In North Dakota and beyond, local self-determination is becoming a defining issue of the twenty-first century.
As their national governments prove unwilling or unable to act, social movements pushing for new economic paradigms and to halt fossil fuel combustion are winning crucial victories at the local level. In going local, they confront the state, federal, and international legal structures that suppress local democracy today.
In many ways, we have no other choice. Minimum wage hikes, worker protection measures, health clinics, Indigenous sovereignty, fossil fuel bans, taking control of energy grids: these forms of local democracy (and many more) could be repressed by TiSA.
Under a Trump administration, we can’t allow that to happen.
Photograph by Vincent Kessler/Reuters.