Commission on International Trade and State Sovereignty
Minutes of the 11/13/2007 public hearing on
the effects of international trade agreements on Vermont’s environment.
Approved 12/18/2007.
Members Present Rep. Kathleen Keenan, commission co-chair; Sen. Virginia Lyons, commission co-chair; Lawrence Bruce; Dan Brush; Elliot Burg
Members Absent David Anger; John Boomhover; Dana Eidsness
Also Present Legislative counselors Al Boright and Michael O’Grady, staff Nedene Martin. Steve Giroux of CATV channel 8, at the Commission’s request, videotaping the public hearing. Witness sign-up sheet attached.
Recording CD 2007-23, 2007-24
Convene
Sen. Lyons called the public hearing to order at 1:15 p.m. in the Vermont Room of the Hotel Coolidge in White River Junction and welcomed those attending. All commissioners introduced themselves. Senator Lyons explained that the Commission has worked for about a year to try to understand the development and effects of free trade agreements. She explained that the Commission’s goal for this hearing is to continue to educate itself as well as the Vermont community on issues of free trade, state sovereignty, and the environment.
Presentation
Legislative Counselor Al Boright narrated a PowerPoint presentation (available at http://www.leg.state.vt.us/WorkGroups/Trade/IntlTrade-EnvImpact111307.ppt) on international trade issues related to Vermont’s environment. He explained the Commission’s charge: to gather and disseminate information and develop proposals to protect Vermont’s sovereignty from any threats.
Mr. Boright discussed the evolution of trade agreements among nations. He pinpointed enactment of the 1974 “Fast Track” legislation as a turning point because, to expedite trade agreements, it limited the time allowed for their consideration and restricted Congress to voting them up or down rather than being able to propose amendments; one result is much less public input. Mr. Boright said that states are having concerns about how they can provide adequate input before agreements are finalized in ways that work to the detriment of states’ sovereignty.
Members of the Intergovernmental Policy Advisory Committee on Trade (IGPAC) are restricted by their obligation to maintain confidentiality, which prevents public discussion of trade agreements as they are being negotiated, Mr. Boright said. He stated that international trade agreements are administered through the President’s appointed U.S. Trade Representative (USTR), and that each state has a designated single point of contact to the federal government for trade. Ms. Eidsness is Vermont’s point of contact, and IGPAC is supposed to notify her as trade agreements are being negotiated, he noted, so that Vermont’s concerns and interests can be represented.
With 149 World Trade Organization (WTO) members, agreements have become exponentially more complex than they were in the era of bilateral negotiations, Mr. Boright observed. Mr. Boright stated that agreements with Peru, Panama, and Colombia that were negotiated prior to the expiration of Fast Track authority are coming up for consideration by Congress.
Mr. Boright indicated that there are several areas in which it is not clear how or whether Vermont’s sovereign authority to protect its environment may be impinged upon by international agreements. He gave examples in several areas.
Under the General Agreement on Trade in Services (GATS), the ability to regulate land use under Act 250 and under Vermont’s chapter 117 zoning process may be subject to attack regarding regulation of certain aspects of the hotel, retail, and restaurant sectors.
Mr. Boright noted that Vermont’s utility regulation may be vulnerable to attack for various reasons, including its subjective review criteria (such as the requirement that there be a determination of public good), its portfolio requirements, and the limits it places on the number of suppliers operating in a territory. Services supplied in the exercise of government authority are exempt from GATS, he said, “if they are supplied neither on a commercial basis nor in competition with one or more service suppliers.” He indicated that it is unclear whether a municipal electric utility, if it charges its customers, is exempt; charging would appear to make the utility a commercial enterprise and thus not exempt. Mr. Boright said that the European Union has requested that the U.S. commit water services to inclusion under GATS, which might put local and state regulations in conflict with “market access” rules and might cause difficulties with Environmental Protection Agency (EPA) loans that favor municipalities. To date, he said, the USTR has said that municipal water services are exempt from GATS. However, Mr. Boright remarked, municipalities’ assessment of fees for water may defeat the exemption.
Natural resources issues may be seriously affected by investment clauses in trade agreements, Mr. Boright said. He said that foreign companies are given the ability to bring claims proceedings against governments; historically, only a foreign country could bring a claims proceeding against a government. It may be, he said, that a company would choose to establish a foreign subsidiary in order to be able to sue the U.S. government under international law. In this way, a company may be able to avoid state law and gain a competitive advantage. He noted that ambiguities in definitions regarding “expropriation,” “investment,” and other terms used in trade agreements can cause difficulties. He said that international arbitration can result in significantly different approaches to and decisions on issues than would occur under U.S. legal proceedings. He enumerated several investor-state disputes that cause concern regarding state sovereignty (Glamis Gold Ltd. v. United States of America, Metalclad Corp. v. United Mexican States, Methanex Corp. v. United States of America).
Sen. Lyons asked Mr. Boright whether any pending trade agreements might allow companies greater opportunities than now exist to file suit against the U.S. Mr. Boright prefaced his response by clarifying that Vermont’s legislative staff are new to the realm of international trade law and work on it only part-time, having other ongoing responsibilities. He said his understanding is that Panama is a tax haven, and that more than 300,000 U.S. companies have offices there. Mr. O’Grady stated that Panama is trying to become “an international Delaware,” and that multinational companies are establishing subsidiaries there to take advantage of tax and other benefits, including the possibility of making investment claims against the U.S. under international law.
Mr. Brush asked that Mr. Boright expand on how other countries can attempt to exact reciprocal concessions for violations of the terms of international trade agreements. Mr. Boright discussed a WTO gambling case (United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services) involving the U.S. and the island of Antigua and Barbuda. He said that under GATS the U.S. agreed to share “other recreational services” which were not enumerated. The U.S. had not intended that gambling be considered a “recreational service.” Antigua-Barbuda filed a complaint over U.S. laws that prohibit online gambling, and a WTO panel determined that gambling was indeed included among “other recreational services.” As a result, Mr. Boright said, the U.S. is trying to amend the agreement explicitly to exclude gambling. Other countries, which see this as the U.S. withdrawing something that had been committed, want concessions in return, he said. Mr. Boright and Mr. O’Grady explained that when a country withdraws an element from a trade agreement, other countries can seek damages, and that those damages may not be identical from country to country; possible concessions sought in this instance relate to relaxation of copyright, trademark, patent protection, or insurance laws. Mr. O’Grady clarified that the U.S. will have to pay damages to numerous countries as a result of the international tribunal’s ruling in the online gambling dispute; the payment will not take the form of cash, but rather the form of trade concessions. Mr. Boright remarked that the unpredictability of results in the arena of international trade agreements can be “shocking” to people at the state level.
Kurt Janson of the Vermont Public Service Board asked whether any information is available that could help the board understand how the “minimum treatment standard” is applied when cases are brought. Mr. Boright responded that some guidance is available, but that the issues are heavily litigated and results seem, to him, unpredictable, which is why he believes that terms used in international agreements need to be more clearly defined. He cited two instances in which final state court decisions were thrown out by international panels who asserted much broader jurisdiction than would have been expected had the cases been litigated under U.S. law.
Carlton Mayers II asked whether there is a written stipulation that when a trade agreement is breached, the violator must make concessions to all parties to the agreement. Mr. O’Grady said that when a multilateral agreement is breached, there is the ability for other signatory parties to negotiate compensation but that there is no set process for determining damages. It is not clear how things ultimately get resolved when countries cannot reach negotiated settlement, he said. For example, Mr. O’Grady said, under GATS, Brazil challenged U.S. cotton subsidies, won, and wants concessions related to copyright and patent laws, to which the U.S. has not agreed; Brazil is claiming that it will unilaterally enforce the desired concessions.
Judy Kaspar of the Vermont Public Service Board asked whether each party to a multilateral agreement is entitled to a separate arbitration process. Mr. O’Grady explained that when an arbitration panel decides that a treaty has been violated and that a country is entitled to damages, then all other countries that are party to the agreement can seek individualized or group damages. A party country does not need to seek new arbitration of the issue, but rather is able to ask for concessions that are advantageous to it, and these concessions may be different from those sought by the country that originated the dispute.
Sen. Lyons asked for other questions from the audience. There being none, Rep. Keenan called Jon Groveman to testify.
Mr. Groveman identified himself as general legal counsel for the Vermont Natural Resources Council (VNRC) and submitted written remarks for the record. He noted that his testimony about groundwater and water use is not intended to be “expert” in the realm of international trade law nor to indicate that groundwater would be VNRC’s only area of concern related to international law. In 2006, he said, VNRC, Vermonters for a Clean Environment, Trout Unlimited, and several other groups brought to the legislature’s attention a loophole in Vermont law concerning groundwater. Although groundwater is the source of drinking water for two-thirds of Vermont’s population, in 2006, he said, the state had no regulations governing large-scale commercial or agricultural groundwater withdrawals, minimal regulation governing withdrawal of groundwater for bottling and sale, and no statewide groundwater mapping. Mr. Groveman noted that Vermont may be the only state in the country without comprehensive groundwater mapping. He said that neighboring states have declared groundwater to be a “public trust resource” or have instituted programs that regulate its use and management for the public interest.
In Vermont, the previously-mentioned loophole in law was “screaming out” that Vermont is very vulnerable, he said; the state is not protecting the resource in its own right and has no regulatory scheme in place should a question of international trade arise. Act 144, enacted as a result of the legislative work on this issue in 2006, created an interim groundwater withdrawal program that, it was hoped, he said, would provide Vermont some measure of protection in the face of international trade challenges. He said that Act 144 also created a groundwater study committee charged with making policy recommendations for long-term, comprehensive groundwater protection.
Mr. Groveman stated that VNRC supports Vermont’s declaring that water is held in trust by the state as a resource that must be managed for the benefit of all Vermonters. A question of concern, he said, is whether under international trade agreements a state is precluded from enforcing its natural resource protections.
Mr. Groveman said that there is a worldwide water crisis, and that in many places, water has been privatized. Where foreign-owned multinational companies have privatized water, he said, the result has been difficulties for governments and citizens wanting to access fresh water with resultant income- or class-based differences in water access. He said that the both the WTO and the Worldwide Water Council have voted to pursue the privatization of water, and that the concept has fanned a “huge firestorm in the international activist community.” Mr. Groveman said that privatization of municipal water systems has occurred in the U.S. in Atlanta and parts of California. Atlanta faces a severe water shortage due to drought, and the states of North Carolina and South Carolina are suing each other over water. Water is a limited resource, he said, and the pressures exerted by population growth and weather extremes are pushing toward its commoditization. There may be an instance involving water withdrawals and international trade agreements arising in Vermont, about which he said Matt Levin would offer more detail today.
Mr. Groveman concluded his testimony on the subject of water policy issues and said he would like to speak briefly on the subject of international trade and sustainable communities. He noted that much of VNRC’s work in Vermont has been involved with protecting downtowns, village centers, and Vermont businesses from the threats posed by “big box” stores. People in Vermont want access to cheaper goods, he said, but the goods “shouldn’t be as cheap as they are” at Wal-Mart and other big box stores that draw shoppers away from downtowns and from small, locally owned businesses. The threat to Vermont’s downtowns is an indirect result of international trade agreements that allow companies to produce goods very cheaply, he said, which they could not do if they had to pay fair wages. The destruction of sustainable communities is a ripple effect of international trade agreements.
Mr. Brush asked whether, in addition to the foreign-owned multinationals referred to in Mr. Groveman’s testimony, American multinationals are involved in privatizing water. Mr. Groveman said that Nestlé, Coca-Cola, Pepsi, and other companies are involved in water in some way, but that Bechtel is the biggest international water company that he is aware of that is controlling water and access to water.
Mr. Burg offered observations on challenges that could be brought to how water resources are handled here. One possibility is an investor-state challenge similar to Methanex in which a company sues the U.S. government rather than suing a state, because the states are not parties, Mr. Burg said. State law may not trump because there is a “supremacy clause issue” [Article VI, Paragraph 2 of the U.S. Constitution establishes the Constitution, federal laws, and federal treaties as the supreme law of the land]. The implementation of a comprehensive regime for groundwater regulation will not be sufficient to guarantee that Vermont would prevail in an international trade dispute, he said. The disputes are difficult for states because the tribunals, composed of trade lawyers for the federal government and for the company or country bringing the case, meet in secret, and the states are not parties. The closest that the state of California could get to being involved in the Methanex case was to make its Attorney General’s staff available to the federal defending legal team, he said. Under a different political environment in Washington, it might be possible to alter the procedural and substantive rules under which these challenges occur, Mr. Burg said, so that states can participate as parties.
Mr. Burg said it is also important for Vermont to work to ensure that water resources “are not drawn into the GATS environment.” One way would be to keep water off the list of GATS commitments; if water gets onto the list, then the work is to keep it exempt, which would seem, according to Mr. Boright’s explication, to mean keeping it noncommercial, he said.
Mr. Groveman noted that it is “a scarey proposition” that Vermont may not have the authority, in the international arena, to protect its resources for the benefit its own people.
Rep. Keenan called on Kurt Janson and Carlton Mayers, both of whom indicated that their purpose in attending was to listen rather than to testify. She then called on Matt Levin.
Mr. Levin identified himself as Outreach and Development Director of Vermonters for a Clean Environment (VCE) and prefaced his testimony by stating that his purpose was to indicate that Vermont’s involvement in water use and international trade is not simply the topic of an interesting intellectual discussion but a real-life possibility. Mr. Levin stated that the privately held Canadian corporation Ice River Springs, which at present operates in North Carolina as well as in Canada and uses several different corporate names, is seeking to expand aggressively in the U.S., possibly in Indiana, Massachusetts, and New Hampshire. Mr. Levin indicated that this “private label” company bottles water for GNC, Wal-Mart, and other companies, and that “they want to use Vermont water.” Mr. Levin stated that the Vermont spring that his research indicates they want to use as a source has not been filing monthly reports on the volume of water withdrawn for sale as required under its permit. Mr. Levin said that Agency of Natural Resources staff told him that the spring has no plans to get into retroactive reporting compliance but will begin filing reports as required, in November 2007.
This type of proposal, Mr. Levin said, has economic development aspects for New Hampshire but water resources issues for Vermont and is made more complex by its international aspect. Mr. Levin said that it is VCE’s understanding that if regulations have been put in place “in a fair and even manner,” not directed at any one scenario but developed for purposes of broad public policy, then they do apply to “any company coming in,” regardless of its country of origin. He said that market share issues under trade agreements would not apply because the company, being a new development, has no market share. Mr. Levin said he believes it is not helpful to focus on “nightmare scenarios.” He said that regulatory agencies and advocacy groups are “confused” about the inherent possibilities, which range from Vermont’s involvement in an international trade dispute through the disappearance of the proposal due to lack of economic viability. Regardless, Mr. Levin said, his purpose is to point out that Vermont is in a real-life situation of possible international trade issues related to water.
Sen. Lyons asked what specific interest VCE is representing in the Ice River Springs question. Mr. Levin responded that VCE works with citizens who want to participate in project review of proposals involving community development, the environment, or resource use. VCE was approached by citizens living in New Hampshire, where the issue for VCE is economic development, and it is also working with people living in Vermont, where the issues are water extraction, groundwater protection, and the potential for decisions in any one instance to have applications in other communities. VEC is trying to determine at what stage in the process, and where, local citizens can have a voice in both specific project review and the setting of broad public policy, he said.
Mr. Levin stated that the spring in question is Pristine Mountain Springs in Stockbridge, Vermont, a town located on the road between Bethel and Rutland. He characterized the spring as “a gusher,” reportedly producing 200–900 gallons per minute. He said the spring is privately held by one individual who has contracts as a bulk water shipper and deliverer, filling tanker trucks by day and night operations.
Rep. Keenan asked what the result on an aquifer is, when water is transported away. Mr. Levin replied that this is a very important question that Act 250 review ought to be addressing but is not. He said he would be happy to address the issue in the appropriate forum.
Mr. Brush asked whether the water source is an artesian well. Mr. Levin said that he finds it is “stretching the bounds of credulity” that the source is labeled “a spring,” as a hole was dug more than 50 feet down to reach the source; once the source was reached, the water flowed on its own.
Mr. Levin reported that confusion was created when Ice River Springs representatives mistakenly told a New Hampshire development review panel that the source was located in Randolph, Vermont. What is actually located in Randolph, Mr. Levin said, is Vermont Pure or Clear Source, at the time the largest customer for the source.
Mr. Bruce asked whether Mr. Levin is aware of any efforts to privatize municipal water systems in Vermont. Mr. Levin replied that he is not aware of any. He cautioned that there have been privatized water systems in various areas of the world, where government entities have contracted with private companies to provide water services, that VCE would characterize as always being “massive, crushing failures.”
At the conclusion of Mr. Levin’s testimony, brief general discussion ensued about past and possible future proposals to divert water from one state or country, by pipeline or otherwise, to supply another geographic area.
With consent of the Commission, Mr. Boright asked Mr. Groveman whether the law requires ANR to inventory Vermont groundwater. Mr. Groveman replied that this requirement has been in law since the 1980s, but that the mapping never occurred. Mr. O’Grady interjected that this is the first year that ANR has received specific appropriations to map groundwater.
Rep. Keenan announced that the Commission’s next public hearing will take place on Tuesday, November 27 from 1 to 4 p.m. at Rutland Regional Medical Center and will focus on health, and the final public hearing will take place on Tuesday, December 18 at The Abbey Restaurant, on Route 105 in Sheldon, about 10 miles north of St. Albans.
Sen. Lyons and Rep. Keenan thanked all who attended and closed the public hearing.
Commission Meeting
The Commissioners agreed on an informal basis that there was no need to meet further at this time.
Respectfully submitted,
/s/ Nedene Martin
Committee Staff