Effect of Corporate Globalization on State and Local Governance

The current corporate globalization process is pushing an ever-increasing number of issues away from local or even national democratic decision-making and into inaccessible international venues where few citizens or even their elected representatives can follow.

State laws and municipal policies are coming under attack as “barriers to trade.” Yet, agreements such as the Central American Free Trade Agreement (CAFTA) and new negotiations currently underway at the World Trade Organization continue to expand the same failed approach. These negotiations aim to delve even deeper into areas traditionally under state and local control.
Three areas have particular relevance for state and local governance:

Government Procurement: When states sign up to government procurement provisions contained in agreements such as CAFTA or the Andean Free Trade Agreement (AFTA), common economic development and environmental policies, such as buy local laws, policies to prevent offshoring of state jobs, recycled content laws and others could be subject to challenge as barriers to trade.

Investment: Under NAFTA, the proposed CAFTA, and other agreements, corporations can use closed trade tribunals to privately enforce an extreme set of investor rights by directly suing the United States over the actions of state or local governments which restrict the profitability of their investments. NAFTA has already generated “regulatory takings” cases against land use decisions, environmental and public health policies, and adverse court rulings that would not have been possible in U.S. courts.

Services: The WTO services agreement could undermine state efforts to expand health care coverage and rein in health care costs, and places constraints on state and local land use planning. New negotiations in the services area could have additional implications for state regulation of water, energy, higher education, professional licensing and more.