Critics of Obama trade pact seize on Keystone dispute

Opponents of President Obama’s Pacific Rim trade pact are seizing on a new lawsuit over the Keystone XL oil pipeline in an attempt to galvanize opposition in Congress.

Environmental groups, trade groups and labor unions say TransCanada’s attempt to secure $15 billion in compensation for the rejection of Keystone under the North American Free Trade Agreement (NAFTA) is emblematic of how trade agreements favor corporate interests, harm workers and undermine U.S. law.

{mosads}They warn the case is just a preview of what’s to come if lawmakers approve the Trans-Pacific Partnership (TPP), a 12-nation deal that contains new investor-state dispute settlement (ISDS) rules.

Shane Larson, legislative director for the Communications Workers of America, said that “whether it’s TransCanada’s new NAFTA challenge or the recent [country-of-origin meat labels] ruling, we have an unfortunate volume of recent reminders of how trade pacts can be used by corporations to undercut U.S. domestic policy decisions, laws and regulations.” 

“And make no mistake, passing the TPP would allow dramatically more companies in more countries to challenge U.S. laws and regulations,” Larson added.

TransCanada Corp. on Wednesday filed a NAFTA case against the United States that says the administration violated the 20-year-old trade pact by preventing the construction of the Keystone oil sands pipeline across the Canadian border.

Separately, the company sued the administration directly over the Keystone decision, arguing the president does not have the authority to reject cross-border pipelines. Legal experts doubt that challenge will succeed.

But observers say TransCanada could have a shot at winning the NAFTA case, which is likely to hinge on whether the company received “fair and equitable” treatment from the United States — a vague term that will be up to a NAFTA tribunal to decide.

Critics of the TPP say the Keystone battle vindicates their long-standing opposition to investor-state dispute rules.

Sierra Club Executive Director Michael Brune said that the “destructive provisions that wrongly empower corporations to attack our safeguards show exactly why NAFTA was wrong and why the dangerous and far-reaching Trans-Pacific Partnership is worse and must be stopped in its tracks.”

Lori Wallach, director of Public Citizen’s Global Trade Watch, said that the TransCanada case is an example of the “attack on U.S. environmental policy that the president insisted could never happen under the controversial investor-state corporate tribunal regime that his Trans-Pacific Partnership trade deal under which U.S. investor-state liability would be doubled.”

The future of the TPP in Congress is uncertain. Most Democrats have come out against the pact, and the reaction from Republicans and the business community has been lukewarm.

That’s starting to change, however. Three powerful business groups — the National Association of Manufacturers, the Business Roundtable and the Chamber of Commerce — endorsed the deal last week, and Speaker Paul Ryan (R-Wis.) has talked of his desire to see it come up for a vote.

“Ultimately, the TPP is a significant improvement over the status quo — for manufacturers and for the broader economy,” the manufacturers said in a statement.

Whenever the trade pact does hit the House floor — which might not be until after the November elections — the margin is expected to be razor-thin. That has both sides girding for a long battle over every possible swing vote.

House Ways and Means Committee ranking member Sandy Levin (D-Mich.), who has said he wants to reach a point where he can back the TPP, said that the NAFTA challenge “further highlights why we must be certain that the Trans-Pacific Partnership trade agreement addresses serious concerns about the investor-state dispute settlement procedures.”

“A full and vigorous public debate is needed to identify problems like this one before the TPP agreement is signed,” he said. 

Supporters of the TPP downplay the impact of the Keystone case, with one Senate aide saying the case is unlikely to change many minds about the TPP.

But even then, TPP supporters say it makes huge improvements to the investor-state dispute process by providing greater protections for governments and making is easier to throw out frivolous cases.

Josh Earnest, the White House press secretary, last week said that “ISDS is this dispute resolution process that’s been in place for 50 years, and the United States has never lost a case.”

“But because we’ve never lost a case, it is an indication that we’ve been quite effective in taking other countries and raising concerns about other countries’ practices at the ISDS in a way that has benefited the ability of American businesses to do business overseas,” he said. 

“So our strong record in that venue actually, I think, is a strong argument for precisely why Congress should approve the Trans-Pacific Partnership.” 

Timothy Cama contributed.