SECRET TRADE DEAL: Report Shows Bush/Dem Pact Designed to Let Big Business Evade U.S. Taxes

As Congress reconvenes this week, K Street and a handful of Democratic congressional leaders are gearing up to pass lobbyist-written trade pacts with Peru, Panama, South Korea and Columbia - the group of pacts known as The Secret Trade Deal of 2007, originally announced on May 10, 2007. Over the summer, the Bush White House led "campaign-style" events to pressure more Democrats to support the deals, despite Democrats' 2006 campaign promises to oppose these job-killing pacts. That lobbying campaign is now being backed up by the U.S. Chamber of Commerce - and the pressure seems to be working. Ways and Means Committee Chairman Charlie Rangel (D) announcing that his top priority will be ramming these deals through Congress over the objections of labor, environmental, human rights, anti-poverty and consumer protection groups - as well as many rank-and-file lawmakers in his own party. The opposition to The Secret Trade Deal of 2007 may, however, find renewed vigor following a new report showing how one of the least discussed pacts in the deal - the one with Panama - includes language designed to allow many of the largest corporations to hide income in tax havens and avoid paying U.S. taxes. Here is today's update.

BREAKING - PANAMA DEAL'S FINE PRINT DESIGNED TO HELP BIG BUSINESS EVADE U.S. TAXES: In a stunning report found here and/or here, Peter Riggs of the Forum on Democracy & Trade finds that the language of the proposed Panama Free Trade Agreement "includes provisions that would allow subsidiaries of U.S. corporations, incorporated in a tax haven destination with minimal disclosure requirements, to use an ad-hoc international legal process to challenge laws passed by elected officials in the United States." Panama is widely known to have manufactured an economic comparative advantage "in the area of tax and banking secrecy, and the ease with which U.S. companies can create subsidiaries in Panama for purposes of dodging taxes." Because of this, Panama is already home to "tens of thousands of U.S. corporations [that] have hung out a shingle-or should we say, set up an email box-in that country...subsidiaries whose sole purpose, in many cases, is to help transnational companies avoid taxes." In recent years, Panama has been implicated by both the OECD and the G7-created Financial Action Task Force as a country resisting international norms in combating tax evasion and money laundering. Unlike all other American free trade partners, Panama has also refused to sign a tax disclosure treaty with the United States. The text of the proposed Panama Free Trade Agreement allows corporations with subsidiaries in Panama to bring claims against U.S. laws using international investor tribunal. So, if U.S. federal, state, or local laws tried to close tax loopholes or prevent corporations from evading taxes through tax havens like Panama, those corporations could cite their subsidiaries in Panama and the Panama Free Trade Agreement as grounds to have an international tribunal strike those laws down. Such cases have already been brought under NAFTA by corporations seeking to strike down American environmental laws. But thanks to Panama's tax haven status, the Panama deal would take such abuse to a whole new level.

WHITE HOUSE SUMMER LOBBYING PUSH IN REVIEW: The summer has witnessed an intense lobbying effort for the Secret Trade Deal by the Bush administration. In July, Bloomberg News reports President Bush himself demanded passage of the deal, and his trade representative, Susan Schwab, publicly lashed out at Democrats, saying their efforts to strengthen labor laws in trade pacts would pose "unnecessary and provocative conditions" on trading partners. Schwab toured the country during the summer, attempting to pressure Democrats in their home districts. As just one example, the Oregonian reports Schwab "swept through town on a campaign-style swing" where "she addressed business leaders" at an event - and ignored the labor and environmental protests outside.

RANGEL SUCCUMBS TO LOBBYIST & WHITE HOUSE PRESSURE: Following the barrage of White House and K Street pressure, Ways and Means Committee Chairman Charlie Rangel (D-NY) announced that he will insist that Congress " give priority treatment to approval of a free trade pact between the U.S. and Peru," according to the Associated Press. Rangel made the announcement following a trip to Peru with Rep. Sander Levin (D-MI) and Rep. Allyson Schwartz (D-PA). Rangel "said he was bringing 'the total support' of the leaders of both parties in the U.S. House of Representatives and the U.S. Senate for moving this major piece of The Secret Trade Deal of 2007 forward.

RANGEL'S SUGARCOATING DEBUNKED BY LABOR LEADERS ABROAD: The Associated Press reports that Rangel justified his push for the Peru deal by saying he has been "favorably impressed" with Peru's "commitment to labor rights, including the right of Peruvian workers to belong to unions and to participate in strikes for better wages and benefits." But, as Inside U.S. Trade reports, Peruvian labor leaders are expressing concern that the supposed labor improvements to the Peru Free Trade Agreement are more mirage than reality. "[Labor union sources] said the commitment is limited because it does not change Peruvian labor laws through legislation, and because many of the problems regarding labor rights are related to a lack of capacity or political will for effective enforcement," the newsletter reports. "For these reasons, one source said the decrees would only be a 'gesture' to the United States." The Peruvian labor movement released a letter to the U.S. Congress expressing these concerns and explicitly asking members of Congress to vote "no" on the Peru FTA.

WHITE HOUSE SAYS IT IS SURE COLOMBIA PACT WILL PASS: Reuters reports that the White House says Congress is "likely to pass a trade agreement for Colombia despite concerns by some Democrats." The proposed Colombia deal is by far the most controversial of the four pacts in The Secret Trade Deal of 2007. That's because Colombia's government works with paramilitary gangs to execute union organizers. Facing growing Democratic opposition to the deal, the Colombian government has hired former Clinton administration officials as high-paid lobbyists to press for passage of the pact. That seems to have moved at least one Democratic lawmaker into publicly demanding the pact pass. Reuters notes that Senate Finance Committee Chairman Max Baucus (D-MT) "said last month he is seeking to overcome opposition in his own party to get the Colombian deal approved."

K STREET LAUNCHES CAMPAIGN TO PRESSURE DEMS: The Hill newspaper reports that the U.S. Chamber of Commerce "is launching a grassroots effort targeting 75 congressional districts, including those of 40 Democrats, with letters and phone calls" demanding lawmakers support The Secret Trade Deal of 2007. The effort is focused on freshman members, said Chamber trade lobbyist Christopher Wenk.

RANCHERS SAY SECRET DEAL WILL HARM FOOD SAFETY: R-CALF USA, one of America's leading ranching trade associations, said in August that the language of the four proposed trade pacts "reveals that these specific agreements, as written, will increase U.S. food imports, but limit the influence on food-safety requirements the United States should be able to require from these countries." In other words, "these FTAs undermine Congress' plans to counter any possible imported food-safety emergency."

'08 CANDIDATES ADDRESS TRADE: At a union-sponsored debate in Chicago in August, USA Today reports that most major Democratic presidential candidates said they supported much stronger labor and environmental provisions than are currently in the Secret Trade Deal. Bloomberg News reports that the candidates also "said they would revise the North American Free Trade Agreement if elected." New York Magazine ran a profile of Sen. Hillary Clinton (D) claiming "the gap is yawning" between her position on trade, and that of her husband, who rammed various lobbyist-written trade pacts through Congress. On CNN, John Edwards' (D) campaign manager David Bonior said the Clintons "had a very important choice to make back in '93: whether to do the North American Free Trade agreement or health care. They implemented the North American Free Trade Agreement that put literally millions of workers out of work in this country and destroyed, basically, our good trading relationships we had around the world."

DEM LEADERS PUSH EXPANDED AID FOR DISPLACED WORKERS: The AFL-CIO blog reports that Rep. Sander Levin (D-MI) and several House Democratic leaders held a congressional roundtable discussion with fair trade advocates in mid-July. Levin is working on legislation to overhaul and expand the trade adjustment assistance program, which compensates manufacturing workers whose jobs are displaced by foreign trade. The Wall Street Journal reports that Sens. Max Baucus (D-MT) and Olympia Snowe (R-ME) are working on a bill to expand trade adjustment assistance by $4 billion but "that's unlikely to sit well with the White House, which has agreed that TAA needs to be improved but is unlikely to back a costly expansion."

STATES TAKING ACTION ON TRADE: The AFL-CIO also notes that "several states have taken action this year on various trade bills, including resolutions calling for an end to Fast Track trade authority and resolutions that say states should have more input into trade decisions." The Colorado Legislature passed the Jobs and Democracy Act--versions of which have been introduced in 16 other states. The bill, which Gov. Bill Ritter (D) signed, would give state residents and lawmakers access to vital trade information on the impact of international trade on a state. The legislation also requires the approval of the state legislature before a state is bound to an international trade agreement. The Hawaii House and Senate, Illinois House, New Hampshire Senate and Nevada House have passed the legislation. Legislation also is pending in several states that would prohibit them from contracting with or providing economic development assistance to companies that ship work offshore. The legislation also would require a company that ships jobs overseas to repay the state for the work and ban the firm from state contracts for five years. The measure has been introduced in Connecticut, Hawaii, New Hampshire, New York and Oklahoma.

NEW POLL SHOWS GROWING BACKLASH TO TILTED TRADE POLICIES: The Financial Times reports that according to its latest Harris poll, "A popular backlash against globalisation and the leaders of the world's largest companies is sweeping all rich countries." Specifically, "Large majorities of people in the US and in Europe want higher taxation for the rich and even pay caps for corporate executives to counter what they believe are unjustified rewards and the negative effects of globalization."

Cross-posted from Working Assets