Methanex Corp V. State of California

OPEN STATEMENT

Methanex Corp v. State of California

Methanex Corporation, a Vancouver-based company, is the world largest supplier of methanol. The company has argued to NAFTA trade tribunal that California ban on methanol gasoline additive is illegal under NAFTA rules. Therefore, Methanex is asking NAFTA tribunal to award the company $970 million in compensation for their potential lost market investment.

Metalclad v. San Luis Potos

In January 1997, Metalclad Corporation filed a law suit under NAFTA arguing that the Mexican state of San Luis Potos violated NAFTA rules when it refused to grant a permit to Metalclad to open its waste disposal plant. The company had acquired the facility, which had a history of contaminating local underground reservoir with the obligation that it would clean up the existing contamination. However, after the state of San Luis Potos completed a study of the area it concluded, "the site lie atop an ecologically sensitive underground stream, the Governor refused to allow Metalclad to reopen the facility. The company claims that this action was effectively an expropriation and won $16.7 million in damages." (www.Globalexchange.org)

When nations become members of an economy bloc, they are in reality giving up on their sovereignty, which is the right to protect their community and citizens. Therefore, it is extremely important that political leaders take in consideration the need to balance economical decisions with environmental and citizens' rights.

I. INTRODUCTION

The fast pace of globalization is creating serious issues and questions for many developing countries to deal with, such as should they join a free trade bloc or not? What will they gain by being a member and what will they lose?

Since the creation of the European Union, first formed by 15 Western European countries and most recently expanded to 10 additional European nations, have influenced many countries around the world to follow the European example and worked together in order to expand their marketplace and increase economical and political power. NAFTA, Mercosul, CAFTA, CARICOM, and CAN are good examples of such economic blocs. The North America Free Trade Agreement (NAFTA) is formed by United States, Canada, and Mexico. Argentina, Paraguay, Uruguay, and Brazil form Mercosul, the South America Common Market. The Central American Free Trade Agreement (CAFTA) is formed by El Salvador, Honduras, Nicaragua, Guatemala, Panama, and Costa Rica. The Caribbean Community (CARICOM) is formed by the 20 Caribbean nations. Finally the Andean Community (CAN) formed by Bolivia, Colombia, Ecuador, Venezuela, and Peru.

The latest of these economic blocs is the proposed implementation of the FTAA by December 31, 2005, which will be the world's largest economic bloc. The FTAA is planned to include all 34 countries on the North and South America continents, except for Cuba. In contrast to the European Union, in which the majority of its initial member countries had highly developed economies with the exception two or three countries, the majority of the FTAA country members are third world countries except for the United States and Canada. The main problem behind the FTAA is how secretively and quickly the whole process is being developed and scheduled to be implemented. It took a couple of decades for the European Union to become a reality. The FTAA timetable is supposed to be implemented in less than 10 years.

The implementation of the FTAA will have some benefits to those small economies in South American, Central America, and Caribbean nations, which are desperate to reach the NAFTA market. However, to countries like Brazil, which have a larger industrial park and compete directly with U.S., Canada, and Mexico, the implementation can cause serious problems to its country economy.

BACKGROUND

Globalization

Transnational Corporations

In the early 1900s, as corporations became larger and their home marketplaces and resources became saturated, companies started searching for new money-making strategies in new locations. Corporations such as Coca-Cola, Ford, McDonald's, Gillette, GM, Mitsubishi, and many others looked for different markets outside their country's borders in order to increase their profitability. These kinds of corporations are called transnational corporations, and they have tremendous power and influence on the world's economy. As pointed out by the nonprofit organization CorpWatch Holding Corporations Accountable (http://www.corpwatch.org/), the 300 largest transnational corporations in the world control one quarter of the whole world's productive assets, which is worth US $5 trillion. Also, of the 100 largest economies in the world, 51 are corporations; only 49 are countries (based on a comparison of corporate sales and country GDPs).

The influence of these corporations is driving a phenomenon called globalization.

What is Globalization?

Globalization is the creation of international rules by governments and corporations in order to facilitate and regulate trade between nations. The goal is to ease the international trade laws, which will clear the way for these transnational corporations to exchange goods and services between two or more countries, thereby increasing their profitability.

There are three major categories of globalization: Corporate Political, Economic, and Technological.

Political Globalization

Transnational Corporations are driving the globalization of the world's economy by influencing foreign governments to change their trade laws. Before the 1990s, governments in many countries had restrictive laws that imposed heavy tariffs on imports. As result, many corporations that wanted distribute products to those countries were forced to open factories there. One example of this was Argentina and Brazil, which until very recently had huge taxations on key imports such as automobiles. To Brazil this policy paid off because it transformed Brazil's industry into the fourth largest producer of automobiles and automobile parts in the world.

The Brazilian automobile industry employs hundreds of thousands of workers. This industry will be first to feel the serious impact if the FTAA is ratified by the Brazilian Congress. Like the U.S automobile