noimage
Statement of Senator Jon S. Corzine
On the Corzine Services Amendment

May 23, 2001

M. President, this amendment stands for the simple proposition that trade
agreements should not be used to privatize important public services.
Specifically, the amendment would establish as a principal negotiating
objective that trade agreements should not include a commitment by the
United States to privatize significant public services such as national
security, Social Security, public health and safety, and education.

M. President, before I discuss the substance of my amendment, let me say
that I agree with the sponsors of the underlying bill that we should seek
ways to expand trade in services. The American service sector is an
increasingly important part of our economy, and it already is an
increasingly important part of our involvement in the international economy.
In my view, we need to foster and promote that growth, which promises great
long-term benefits to American service businesses and the millions of
Americans they employ. That means we should be looking for ways to open up
foreign markets to American service providers, and we should make that an
important objective of American trade negotiators.

Having said that, M. President, while there are many potential benefits to
forging trade agreements designed to increase trade in services, there also
are risks. And one risk is that such agreements will be misused, either
directly or through their implementation.

My amendment is designed to reduce the risk that such trade agreements will
be misused in one particular way: the risk that they will commit the United
States to privatizing key public services.

M. President, some of my colleagues probably would be surprised that such a
risk even exists. After all, trade agreements are supposed to be about
promoting economic activity. They're not designed to overrule democratic
decisions about the provision of essential public services.

Yet trade agreements can do just that. And there's ample reason to be
concerned that the privatization of significant public services could well
be on the table in future negotiations.

In fact, right now, negotiators already are well underway in the process of
establishing new agreements with respect to trade in services. These
negotiations may well lead to agreements under which services traditionally
administered by federal, state and local governments would be on the
chopping block. Under such agreements, foreign investors might be able to
challenge public policies that provide certain services through government
entities. Such foreign interests could argue that these policies
discriminate against them, and represent an unlawful trade barrier. In
fact, some international agreements already are being interpreted that way,
and others are being designed for that purpose.

Consider what's happening now in bilateral negotiations between the United
States and Chile.

In 1981, Chile decided to privatize its public pension system – that is, its
equivalent of Social Security. Under the privatized system, Chilean workers
now are required to invest their pension dollars with private financial
institutions.

Unfortunately, M. President, Chile's experience with the privatization of
Social Security has, in many respects, proved problematic. Many Chilean
workers have seen the value of their investments collapse. And many Chilean
political leaders now believe that the only way to protect the retirement
security of Chilean families is to return to the earlier public system based
on guaranteed benefits.

Yet, M. President, US negotiators now are pressuring Chile to keep their
retirement system privatized. As a result, the financial security of
Chilean retirees may depend on international negotiations rather than the
needs and wishes of the Chilean people.

M. President, think about that for a moment. And consider how Americans
would feel if the roles of the two countries were reversed.

What if foreign interests were demanding that the US open up our Social
Security system to foreign financial firms? Imagine that Chilean, or
Russian, or German negotiators argued that it was a restraint of trade for
Social Security to limit its investments to government securities, rather
than opening up the system to privatized accounts administered by foreign
financial companies?

Now, M. President, I speak as one who strongly opposes privatizing Social
Security because it would lead to deep cuts in guaranteed benefits, and
reduce the financial security of America's seniors. But I think most
Americans --regardless of their view on privatization -- would be outraged at
the suggestion that foreigners could dictate the future of our Social
Security system. The future of Social Security is too important to be
decided by anyone other than Americans.

But, M. President, Social Security is not the only area that concerns me.
To take another, less dramatic example, the European Union has now proposed
that the U.S. make new commitments under the General Agreement on Trade in
Services to allow foreign firms to gain greater access to the US water
services market.

M. President, municipalities across the US have long felt that the provision
of water services is an important governmental responsibility. Although
some localities in New Jersey have handed over administration of water
services to private companies, others have maintained governmental control
in order to ensure high water quality and universal access.

M. President, should municipalities privatize their water supplies? I'm
not sure. But one thing I am sure about is that these decisions should be
made by local officials who understand local circumstances and local values.
They shouldn't be dictated by unelected, distant trade bureaucrats.

To understand the stakes involved in the privatization of water services,
consider what's happened in Bolivia. There, water prices rose substantially
after a local government handed over its water system to an international
company. The result was massive demonstrations and a huge conflict widely
known as "la guerra del agua" or the water war. Now, remember -- the
decision to privatize there was made by the local government. Imagine how
much worse it would have been if it had been dictated by a distant
international bureaucracy.

Let me give another example. This involves a company that has been in the
news lately -- a company called Enron.

The government of Argentina contracted with a division of Enron to provide
water and sewer services to Buenos Aires. But Enron did a bad job, to put
it mildly. For a while, the water it provided was contaminated by toxic
bacteria. As a result, some 500,000 people were told not to drink the
water for a period of 50 days. In the end, the Argentinean Government
cancelled its contract with the company. Yet, Enron is now using a trade
agreement as the basis for a $550 million lawsuit against Argentina.

M. President, my point is not that Enron, or any other private company,
should be blocked from running water systems. Rather, the point is that
there are some kinds of public policy choices that go well beyond economic
issues into areas of fundamental public concern, like public health. And
these matters should be decided by democratically elected governments, not
unelected, distant trade bureaucrats.

M. President, there's a long list of public services that could well be
privatized and put up for bid by foreign companies. These include
everything from health services for veterans, to state colleges and
universities, to immigration control, to after school programs, to police
services. Any and all of these could be threatened by a trade agreement.
And a lot of people are worried about that.

The American Public Health Association, for example, is concerned that trade
agreements could impede governments’ ability to protect public health. This
could happen through the privatization of some parts of the Medicare
program, medical services to the poor, or a variety of other public health
services.

Leading education groups, including the American Council on Education and
the Council for Higher Education Accreditation, also have voiced deep
concern about the GATS' negotiations. As they said in a statement, higher
education is supposed to serve the public interest and should not be
considered merely another 'commodity'.

Yet the threat posed to education by privatization through trade agreements
is very real. Under some prospective trade rules, states could be barred
from subsidizing state universities -- the theory is that such subsidies put
private providers at a competitive disadvantage. Yet if we undercut state
universities, the result is likely to be fewer opportunities and higher
costs for many Americans. Again, that's not a result that should be
dictated by unelected, distant trade bureaucrats.

M. President, let me turn now to an explanation of my amendment and how it
works.

The amendment actually is very simple. It states -- and I quote -- "A
principal negotiating objective of the United States is to ensure that trade
agreements do not include a commitment by the United States to privatize
significant public services, including services related to (i) national
security; (ii) Social Security; (iii) public health and safety; and (iv)
education."

It then defines the term "privatize" to mean, and again I quote, "the
transfer of responsibility for, or administration of, a government function
from a government entity to a private entity."

And that's it, M. President. That's the entire amendment.

As should be clear from its language, M. President, the premise of the
amendment is that there are some types of public service that are so
important that decisions about them should be made democratically, and
should not be delegated to any international body. Our amendment
highlights, in particular, four areas that most Americans would agree are
fundamental to our democracy: national security, Social Security, public
health and safety, and education.

Now, M. President, there may be some who would argue that we ought to
privatize some parts of our national security system, such as those who
objected when Congress recently federalized our airport security system.

Similarly, there are some people who want to privatize Social Security and
cut guaranteed benefits -- including the Bush Social Security Commission.

But, M. President, regardless of what you believe about privatizing Social
Security, or privatizing any aspect of our national security system, I hope
most, if not all, of my colleagues would agree that these decisions are for
Congress to make -- not unelected distant trade bureaucrats.

In my view, Congress shouldn't privatize Social Security. But the last
thing we should do is to allow the privatization of Social Security through
the back door.

This amendment, in other words, is less about privatization than it is about
democracy. It's one thing to enter into an international agreement to
promote private investment, even if that means limiting our congressional
prerogatives to some extent. But it's an entirely different matter to tie
our own hands in deciding about important public services -- which go to the
heart of why we have government in the first place.

I hope my colleagues will support this amendment. And I yield the floor.


views