Alliance for Democracy

Korea-US trade agreement and gold mining in El Salvador‏

Posted in Investor Protection Clauses, Pacific Rim Mining, South Korea Free Trade Agreement by Alliance for Democracy Portland OR on August 31, 2010

As noted before, President Obama is set to introduce the Korea United States Free Trade Agreement into Congress after the November election.  A group of Oregon state senators and representatives signed onto a letter addressed to Oregon Senator Wyden as the chair of the Senator subcommittee to hold hearings on the agreement, asking that he be sure that the investor protection clauses be removed. 

In case you are not familiar with investor protection clauses in “free trade” agreements, I have also pasted another letter below from the Alliance for Responsible Trade (Alliance for Democracy is a member organization) addressed to President Obama regarding the situation in El Salvador.  Pacific Rim, a Canadian firm, is suing El Salvador because El Salvador is trying to protect their resources including their water supply by denying Pacific Rim a gold mining permit.  Pacific Rim is suing either to overturn the law or regulations allowing the denial or to be able to go ahead with their mining activities and to be compensated for their lost profit. And as the letter notes, Pacific Rim is not alone in doing this.

These investor protection clauses are included in all of the so-called free trade agreements except that with Australia (Australia found the provision to be outrageous).  And the United States has generally not been to object of some such suits in the past.  Primarily these suits have been directed at our trading “partners” by American companies.

With the Korea US agreement that could change.  Looking at US Census data, I learned that during the period 2001 – 2007, Korean firms made over $15 billion worth of investments in the United States.  Depending on the situation, the Korea US agreement, should it go into affect, could expose us to the overturning of our laws and regulations or to the paying of “lost profits” to foreign companies should some Korean company feel that our laws or regulations hindered their profit-making abilities.

The investor protection clauses are inherently undemocratic, undermining the people’s ability to governor and be a sovereign people.

Note that many political leaders will be attending labor day picnics etc during the coming weekend.  Ask them where they stand on this agreement and the investor protection clauses.

David e. Delk, Alliance for Democracy – Portland Chapter, 503.232.5495

For Immediate Release

Tuesday, August 31, 2010

Contact: Arthur Stamoulis, Oregon Fair Trade Campaign, (503) 736-9777

Bipartisan Group of Legislators Ask Sen. Wyden to Defend Oregon Laws from Attack in International Tribunals

The Korea Free Trade Agreement Poses Serious Threat to State Sovereignty

Salem, Ore. — A bipartisan group of Oregon State Legislators sent U.S. Senator Ron Wyden (D-OR) a letter today urging him to use his position as chair of the Senate Subcommittee on International Trade to strip provisions from a pending trade agreement that threaten to expose Oregon laws to attack in international tribunals.

According to the letter, the pending Korea Free Trade Agreement “includes investor-to-state enforcement mechanisms that enable foreign corporations to directly challenge American laws, regulations and even court decisions as trade violations through international tribunals that completely circumvent the U.S. judicial system.”

Similar provisions in past trade agreements have been used to attack environmental, food safety and other public interest laws.  As the letter points out, “provisions in the Korea FTA pose a much greater threat than similar language included in pacts with smaller, developing countries, in that South Korea is a capital-exporting nation with significant investments throughout the United States.”

Korean-owned businesses operating in Oregon in recent years have included a semiconductor plant, an animal feed processor and shipping companies.  If the trade agreement passes as written, these and other Korean-owned businesses would be granted special privileges to initiate “regulatory takings” challenges of federal, state and local laws — privileges that are not extended to U.S. businesses or citizens operating in Oregon.

The Bush-negotiated trade pact with South Korea poses a real threat to Oregon’s environmental and land use laws, as well as to basic principles of democracy,” said Arthur Stamoulis, director of the Oregon Fair Trade Campaign.  “Senator Wyden should use his influence to insist that these harmful and unnecessary provisions be removed from the Korea proposal and any future trade agreement.”

The Korea Free Trade Agreement was negotiated and signed by the Bush administration in 2007, but the Bush White House was never able to get it through Congress.  Despite speaking against it on the campaign trail, President Obama recently announced plans to press forward with the trade pact after the November election.

A complete copy of the letter and list of signers follows:

The Honorable Ron Wyden

United States Senate

223 Dirksen Senate Office Building

Washington, DC  20510-3703

August 31, 2010

Re: State Sovereignty and the Korea Free Trade Agreement

Dear Senator Wyden:

The pending Korea Free Trade Agreement includes extraordinary rights for foreign investors that, if enacted, threaten to expose Oregon laws to attack in international tribunals.  These provisions are unnecessary and unfair, and we ask that you use your position as Chair of the Senate Subcommittee on International Trade to help strip them from the agreement before it moves forward.

Like several trade pacts before it, the Korea FTA includes investor-to-state enforcement mechanisms that enable foreign corporations to directly challenge American laws, regulations and even court decisions as trade violations through international tribunals that completely circumvent the U.S. judicial system.  These tribunals routinely hear “regulatory takings” cases that would be thrown out of the U.S. courts — and are even used to attack laws that are applied equally to both foreign and domestic firms.

The investor-to-state provisions in the Korea FTA pose a much greater threat than similar language included in pacts with smaller, developing countries, in that South Korea is a capital-exporting nation with significant investments throughout the United States.  In recent years, this has included businesses such as a semiconductor plant, an animal feed processor and a shipping company here in Oregon.

The only other capital-exporting nation the United States has signed a similar agreement with is Canada.  It’s worth noting that Canadian firms have filed multiple cases challenging state and federal laws under the North American Free Trade Agreement, with billions of dollars in outstanding cases still awaiting final decisions.  Even cases the United States successfully defended against required significant expenditures of taxpayer dollars in order to fight them.

The argument often made in support of including investor-to-state provisions in pacts with developing countries — that their court systems are too corrupt for U.S. investors to receive a fair shake — does not hold water in the case of South Korea, which has a stable court system and firmly-established rule of law.  There is absolutely no reason to put Oregon’s laws at jeopardy under international tribunals, nor to grant foreign corporations greater rights than our own domestic businesses.

The U.S. Trade Representative should have heeded the National Conference of State Legislatures’ advice to “exclude an investor-state dispute provision from the U.S.-Korea investment chapter” back during the initial negotiations.  Now that the Korea FTA must be renegotiated, the precedent set by the Australia Free Trade Agreement, in which investor-to-state provisions were left out altogether, should be included as a solid requirement.

We look forward to your leadership on this issue, and thank you for your attention.


Rep. Michael Dembrow (D-45)

Rep. Brad Witt (D-31)

Rep. Kim Thatcher (R-25)

Rep. Brian Clem (D-21)

Rep. Peter Buckley (D-5)

Sen. Diane Rosenbaum (D-21)

Sen. Chip Shields (D-22)

Rep. Paul Holvey (D-8)

Sen. Jackie Dingfelder (D-23)

Sen. Brian J. Boquist (R-12)

Rep. Val Hoyle (D-14)

CC:  U.S. Senator Jeff Merkley

Congressman David Wu

Congressman Greg Walden

Congressman Earl Blumenauer

Congressman Peter DeFazio

Congressman Kurt Schrader

Ambassador Ron Kirk

Alliance for Responsible Trade

4000 Massachusetts Avenue, Suite 430

Washington, DC 20016

September 2, 2010

President Barack Obama

The White House

Washington, DC

Re: Pacific Rim and The Commerce Group Lawsuits Against the Nation of El Salvador

Dear President Obama,

The Alliance for Responsible Trade (ART) is made up of a group of 38 civil society and faith-based organizations and labor unions in the United States. We would like to draw your attention to an injustice being perpetrated on the people of El Salvador and ask for your support to help resolve this matter.

The Canadian mining company, Pacific Rim, is suing the government of El Salvador for $77 million dollars, claiming that by not awarding the company an exploitation permit for its proposed gold mine, the country is in breach of the Central American Free Trade Agreement (CAFTA-DR). Canada is not a signatory to CAFTA-DR, so the company is filing the suit through it’s US subsidiary, Pac Rim Cayman, which it moved from the Cayman Islands to Nevada in December 2007.

Shortly after Pacific Rim’s Notice of Intent to Seek CAFTA Arbitration, US-based Commerce Group Corporation (Commerce Group Corp. and San Sebastian Gold Mines, Inc.) filed a similar notice to sue the El Salvadoran government under the CAFTA-DR. Commerce Group is seeking $100 million in damages, as well as permission to resume mining activities with environmental permits that do not contain more restrictive conditions. This was prompted by the El Salvador Ministry of the Environment revoking the company’s environmental permits for numerous violations in September 2006.

Three months later the company filed two complaints with the El Salvadoran Court of Administrative Litigation of the Supreme Court of Justice. These legal proceedings are pending. Residents of the community of San Sebastián, in the eastern province of La Unión, sued the Commerce Group mining company in 2007 for polluting numerous local rivers with iron, copper and aluminum and the products of acid drainage.

El Salvador continues to deny these mining permits due to the intolerable environmental damage that would occur. These gold mining operations will damage large parts of El Salvador’s environment, and will irreparably pollute the main fresh water supplies for this small nation. Gold mining will destroy the health of El Salvador’s citizens for generations, will eliminate their ability to harvest wildlife from the rivers, lakes and streams for food, and will contaminate water used for irrigation of crops which will thus poisoning people and livestock. Due to El Salvador’s small size the population cannot escape environmental damage of this nature.

In order to set a precedent and protect El Salvador from this and similar future lawsuits, it is imperative that the cases filed by Pacific Rim and the Commerce Group are defeated.

As a senator and on the presidential campaign trail, you were critical of the existing trade and investment model, and opposed CAFTA-DR because it ”does little to address the enforcement of basic environmental standards in the Central American countries and the Dominican Republic.” Two successive El Salvadoran administrations and the majority of the people in El Salvador are opposed to the mining of gold in their country.

ART believes that companies should be able to make a profit. However, we do not believe that they have the right to

(1) Enter and impose a regulation against the wishes of the majority of its citizens

(2) Make a profit at the expense of the health of a nations people and destroy the environment

We simply ask that you treat the citizens of El Salvador with the same respect and dignity that you would our own. Please, come out forcefully against these unethical lawsuits before they open a floodgate of lawsuits that put the financial interest of a company’s shareholders ahead of the health, livelihood and right to self-determination of a countries people. Surely, you will not support such an unconscionable trade agreement and we hope you will intervene to stop these suits.


The Members of the Alliance for Responsible Trade


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