Making Hay on Trade, Making Hash of Our Laws : No on NAFTA: The treaty would supersede domestic codes and arbitration would be secret.

The Bush Administration declared that the North American Free Trade Agreement “Maintains existing U.S. health, safety and environmental standards by allowing the U.S. to continue to prohibit entry of goods that do not meet U.S. standards” and “Allows the parties, including states and cities, to enact even tougher standards.” Similarly, the Clinton Administration has said that “No existing federal or state regulation to protect health and safety will be jeopardized by NAFTA.”

Are these statements accurate as a matter of law? Or, as critics allege, will NAFTA jeopardize federal, state and local laws, forcing different, possibly lower standards, particularly in health, safety, the environment and labor matters?

The short answer is: Yes, NAFTA jeopardizes federal, state and local laws.

Analysis of the texts of the agreement and its supplemental accords and the operation of U.S. and international law necessarily lead to the conclusion that the Bush and Clinton administrations’ statements are legally inaccurate. Although the NAFTA document itself technically will not have independent effect on U.S. law, it will be incorporated into a federal implementing statute, which, like any other federal statute, has the power to prevail over other federal laws and to preempt conflicting state and local laws. While there is significant language in NAFTA that could shield domestic laws from attack if read alone, that language is modified by other provisions that could override domestic laws inconsistent with NAFTA norms. The Bush and Clinton administrations’ statements selectively rely on only the protective language and discount the overriding language.

The ability of both sides in the NAFTA debate to find supportive citations is explained by the simple fact that NAFTA contains two conflicting textual threads. Under political pressures from both sides, drafters wove both threads throughout. As the document was conceived as a trade agreement, however, the trade thread overrides the thread protecting U.S. laws in virtually every chapter. To ensure that trade trumps all laws, the drafters even inserted a general clause allowing challenges if one of the parties “considers that any benefit it could reasonably have expected to accrue to it” under most of NAFTA has been “nullified or impaired” by a domestic law.

What’s more, the conflict will not normally be resolved by American legislators or the judiciary but by arbitration panels composed of five lawyers and international trade specialists appointed by the United States, Canada and Mexico. The proceedings will not be open to the public or to the local or state officials whose laws are in dispute. The democratic openness requirements of the Freedom of Information Act and other “sunshine laws” will not apply.

If a panel rules that a domestic law is inconsistent with NAFTA, the U.S. government would be obliged, under international law, to accept trade sanctions or to pay compensation or to enforce the ruling by steps that could include legislation, litigation or financial measures imposed against recalcitrant state or local governments. It is in this way that NAFTA jeopardizes laws, traditional democratic processes and sovereignty at each level of government in the United States.

American elected officials and their legal advisers need to take this very seriously. NAFTA opponents such as the Sierra Club and Public Citizen have argued reasonably that NAFTA’s language threatens food, safety and pesticide laws, many wildlife and conservation statutes, state air and water pollution laws, labor laws, food, consumer, safety, energy, packaging and labeling laws (including California’s Proposition 65), as well as local recycling, energy, transportation and other laws.

Lawyers for the Natural Resources Defense Council, one of six environmental groups supporting NAFTA, have analyzed the issue. Even relying heavily on unofficial interpretations and non-binding private assurances from U.S. Trade Representative Mickey Kantor, they conceded that some laws are indeed threatened and limited themselves to a relatively weak claim that other threats from NAFTA are “highly unlikely.” Specialist, pro-NAFTA business attorneys with the law firm of Baker & McKenzie, addressing NAFTA, have written that “challenges to environmental or health and safety regulations as trade restrictions are not uncommon, and it is difficult to imagine an environmental standard that could not be challenged by the industrial sector it affects . . . . “

The most disturbing aspect of NAFTA for state and local elected officials and their legal advisers, however, may be that they will have no right to participate in secret proceedings that challenge their laws and no appeal. This may also be the most disturbing aspect for citizens and voters, constituting as it does perhaps the most radical shift of power from open, local government to closed, distant government that our nation has yet experienced.