|Time to Punish Ecuador’s Stock in Trade|
By Quin Hillyer
Wednesday, July 11 2012
For years, now, I have been arguing that Ecuador’s horrendous maltreatment of the California-based Chevron Corp. merited not just victories for Chevron in courts of law and the court of public opinion, but also a change in U.S. trade policy vis-à-vis that nation’s left-wing regime. As far back as 2008, members of Congress of both parties raised the same suggestion. Finally, at least some parts of the U.S. executive branch are considering these issues.
Good. It’s about time.
Before getting into the trade-related development, a brief recap is in order. In 1998, the government of Ecuador officially pronounced that the Texaco company had successfully completed environmental cleanup of all the drilling sites it had operated in tandem with Ecuador’s national oil company, Petroecuador, for 20 years, before the latter took over the leases in 1992. But when a leftist government assumed power in the South American nation early last decade, it resurrected some dubious lawsuits driven by American plaintiff attorneys, to the effect that Texaco, now owned by Chevron, had caused horrendous environmental damage despite the earlier total-release ruling from the previous Ecuadoran government. Eventually, an Ecuadoran court ordered Chevron to pay for the “damage,” with an assessment now standing at $18.2 billion – all for a total 20-year profit for Texaco of only $500 million.
Again and again, though, Chevron has shown that their accusers, or the Ecuadoran government or judges, behaved unethically throughout: Judges videotaped taking what looked and sounded like bribes. Bogus environmental “testing” of the site. Court decisions seemingly cribbed directly from plaintiffs’ lawyers memos. Apparent collusion. Findings by several American judges that behavior by one or more anti-Chevron parties looked “fraudulent.” Interim findings in favor of Chevron by international tribunals.
On and on went evidence of behavior that, almost incontrovertibly, were abusive of ordinary standards of law.
All along, the question demanded to be asked: Why, in the face of all this evidence of scurrilous conduct, on behalf of a radically anti-American government with a notoriously corrupt judicial system, would American administrations continue allowing that awful government to enjoy trade preferences? The outgoing Bush administration was asleep at the switch, but at least it hadn’t yet seen the voluminous evidence of shenanigans that now has emerged. The evidence is powerful enough that it should long ago have moved the Obama administration to send a strong warning shot across Ecuador’s bow. Unfortunately, the administration has ties to the American lawyers pushing this suit; thus, no such warning shots, much less concrete actions, have been forthcoming.
Finally, though, the Office of the United States Trade Representative, in its latest report on the operations of the Andean Trade Preference program, has acknowledged that Ecuador’s compliance with the program’s terms is in doubt:
“The United States-Ecuador BIT provides for international arbitration of disputes at the investor's initiative. However, developments in the past few years give rise to concerns about the government’s long-term commitment to international arbitration for the settlement of investor disputes…. In August 2011, a U.S. company [referring to Chevron] obtained an arbitral award against Ecuador for violating the United States-Ecuador BIT by failing to provide effective means of resolving commercial disputes in Ecuadorian courts…. The Administration is monitoring developments in connection with these matters under the relevant ATPA eligibility criteria.”
The report lists other problems, too: “Despite the laws on the books, intellectual property rights protection and enforcement remain major problems in Ecuador…. Piracy in products with copyright and trademark protection is pervasive in Ecuador…. A number of U.S. companies operating in Ecuador, notably in regulated sectors such as petroleum and electricity, have filed for international arbitration resulting from investment disputes…. There are serious concerns that flaws in Ecuador’s Law of Migration, or its application, may allow criminals to avoid justice by filing refugee/asylum petitions in Ecuador, turning the country into a haven for drug traffickers…. Other issues of concern include Ecuador’s weak 35 financial controls, widespread document fraud, and its reputation as a strategic corridor for arms, ammunition, and explosives destined for Colombian illegally armed groups.”
American business groups have noticed all these problems. The National Association of Manufacturers released a statement “asking the Administration to give Ecuador three months to meet the requirements and standards or it should be removed from the [Andean Trade preference program], resulting in a loss of trade preferences.” The United States Council for International Business pronounced itself “disappointed” that Ecuador’s trade preferences haven’t already been removed. And the U.S. Chamber of Commerce said: “Unless Ecuador takes steps to fully honor its BIT commitments to the United States, ATPA preferences for Ecuador should come to an end.”
Forget the qualifiers. The preferences should be suspended now, and reinstated only if Ecuador stops violating international standards. The first step should be to stop its shake-down of Chevron.
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