Panel probes impact of trade deals on N.H.

Do international trade agreements entered into by the United States undermine the ability to pass or enforce laws and regulations protecting the environment or health or working conditions within our own borders? The issue was not only been raised by candidates for president in New Hampshire’s primary campaign, but it also has been the ongoing concern of a commission established by the Legislature to examine the impact of trade agreements on state and local laws.

“There are people who are very concerned,” said state Sen. Jaclyn Cilley, D-Barrington, who chairs the 18-member Citizens Trade Policy Commission and was sponsor of the bill that created it.

Cilley points to an ongoing dispute over a proposal by USA Springs, which wants to build a large bottling plant in Nottingham. The company has a permit from the state Department of Environmental Services to extract up to 307,000 gallons of groundwater a day for bottling and sale to customers in the United States and overseas. The amount of water that may be drawn in any one day depends on a number of variables, including groundwater and precipitation levels and the impact on wetlands. The company is required to hire a licensed geologist to monitor conditions.

According to Cilley, since the company plans to sell its water to overseas customers, the environmental regulations could fall under the jurisdiction of trade tribunals established by the North American Free Trade Agreement and other regional trade pacts or by the World Trade Organization. The regulations could be judged as unlawful restrictions under the free trade agreements, she said.

Under one of the trade agreements covering recreational activities, she noted, the island nation of Antigua filed an unfair trade complaint against the United States for its ban on Internet gambling, a legal activity in Antigua and a service provided by Antiguan companies. The tribunal found the ban a violation of free trade, a ruling the U.S. has appealed.

Cilley also cited the case of Metalclad, a U.S. company that purchased a toxic waste dump in Guadalcazar, Mexico, that local authorities ordered closed. Metalclad filed an unfair trade practices claim with a NAFTA tribunal, arguing it had received permission from the Mexican government to reopen the plant. The court ruled in favor of the U.S. company.

“What is interesting about that finding is that the company was awarded a monetary settlement for the taking of future earnings,” said Cilley.

While the U.S. Constitution requires compensation for property taken for public use in the exercise of eminent domain, “the (U.S.) courts have never recognized future earnings as admissible under the taking laws,” Cilley said. “All of this operates outside of U.S. law and judicial procedures. We don’t know on what basis they make their findings.”

Behind closed doors

The commission, which met twice this fall, will hold a series of meetings and public hearings in 2008. Its mission under the statute is to “assess and monitor the legal and economic effects of trade agreements on state and local laws, working conditions and the business environment.” It also is charged with the task of making “policy recommendations designed to protect New Hampshire’s jobs, business environment and laws from any negative impact of trade agreements.”

The law requires the commission to file annual reports to the governor and Legislature as well as to the state’s labor commissioner, the New Hampshire congressional delegation, the congressional leadership, the U.S. trade representative and the state library. The first of those reports will be due on Nov. 1.

The commission is made up of representatives of the governor’s office, the speaker of the House and Senate president as well as representatives of various labor and business interests and nonprofit groups.

Arnie Alpert, the commission’s vice chairman and the New Hampshire program coordinator for the American Friends Service Committee, has been lobbying for the creation of such a commission for years. Recent expansion of international trade agreements and rulings by trade tribunals have underscored the need to examine what impact they may have on state and local laws, he said.

“Under the investor rights provisions of NAFTA, CAFTA (Central American Free Trade Agreement) and the Peru free trade agreement just passed, it’s possible for foreign investors to sue for monetary compensation for government actions that reduce the value of their investments,” said Alpert.

It’s not clear, he said, whether municipal zoning ordinances might be ruled an unfair restriction of trade if they have an adverse impact on a foreign-owned company.

“Suppose a city or town in New Hampshire changes zoning from commercial to conservation,” he said. “Now some foreign investors can’t sell the property for as much as they hoped or can’t develop it for commercial purposes. Can they turn around and file a claim for damages, not only for the change in the value of the property, but for anticipated loss of profits? The decision doesn’t go to a U.S. court, but goes into an arbitration behind closed doors, in which the interest of the New Hampshire community would be represented by the U.S. State Department.”

In the case of USA Springs, he said, the company is privately owned and, neither the public nor the legislators know if foreign investors are involved.

“Suppose they sell to Poland Springs,” Alpert said, suggesting yet another possibility. Poland Springs is owned by Nestle, which is a Swiss-owned company, he said. That also could bring the activities of the bottling plant in Nottingham under the purview of one or more of the international trade agreements to which the United States is a signatory, Alpert said.

The ‘fine print’

Though the commission is only a few months old, some of the questions it is examining have been raised before.

In 2002, the New Hampshire Department of Environmental Services sought an opinion from the state attorney general’s office as to whether its regulation of groundwater extractions by USA Springs might be judged an illegal trade restriction by a tribunal under NAFTA or the World Trade Organization. In a seven-page letter analyzing the various legal considerations involved, Assistant Attorney General Richard Head concluded: “I believe that if NHDES issues a permit to USA Springs, the WTO and NAFTA will not affect NHDES’s obligation to require USA Springs to mitigate any adverse impacts resulting from its activities.”

A “Trade Facts” sheet published by the office of the U.S. Trade Representative in 2005 addressed the issue of state sovereignty. “Nothing in the World Trade Organization or the Free Trade Agreements prevents the United States or any state or local government from enacting, modifying or fully enforcing domestic laws protecting consumers, health safety or the environment,” it said. “The agreements simply provide that the legitimate standards that governments impose must be non-discriminatory and not be used as disguised barriers to free trade.”

Despite such assurances, Alpert believes there is enough in the “fine print” in the thousands of pages of trade agreements at least to raise questions about the future of state and local regulations under the legal framework of free trade agreements.

He notes that a Nottingham resident asked then-Congressman John Sununu in 2002 if the state’s control over groundwater extractions by USA Springs might be compromised by the rules of the World Trade Organization. Sununu forwarded the letter to Robert Zoellick, then the U.S. trade representative. “In our view, nothing in the WTO Agreement would require local authorities to permit bulk extractions of water that would be contrary to sound resource management and conservation or that would create hazards to human health,” Zoellick said in a letter to Sununu. “Of course,” he went on, “once local authorities decide to permit bulk water to be extracted from an aquifer, bottled and sold as an article of commerce, WTO rules would likely apply to the sale of that article of commerce.”

From that statement, Alpert concluded, “the WTO can trump state laws, after all.”

He also noted that an agreement signed by Craig Benson during his term as governor committed the state to abide by CAFTA rules in its procurement policy. That could prevent the state from favoring New Hampshire products in its purchases, Alpert said.

“Suppose the state wants to require that only New Hampshire maple syrup will be sold on Cannon Mountain,” he suggested. That could give producers of Canadian maple syrup grounds for a claim against the state in a NAFTA tribunal.

Unlike past deals?

New Hampshire is not the only state pondering these questions. The commission recently met in Portsmouth with trade officials from Maine, Vermont, Massachusetts and New Jersey to discuss the possible conflict between state laws and the provisions of international trade agreements. In August, the National Conference of State Legislatures issued a statement expressing concern about a lack of state input on those agreements. Both Vermont and New Hampshire see potential conflicts arising from a Canadian company’s plan to create a bottling operation in Claremont, N.H., that will draw water from Stockbridge, Vt.

“These far-reaching trade agreements are quite different from past trade agreements,” said Barrington resident Denise Hart, a commission member who is also on the board of directors of a nonprofit group called Save Our Groundwater. “In the past, they used to set tariffs. Now trade agreements are reaching their fingers into every aspect of state economies. We’re just awakening to the impact they have on state and local laws.”