Tuesday, August 29, 2006

$450 million slush fund?

Alison alerts us to the flap going on at Daily Kos over this diary: Canada Forks Over $450 Million Donation to Repugs. The diary reports that the softwood deal "negotiated by Bush and his Canadian lackey, Harper will see $450 million funnelled straight past Congress and the US treasury, and will go instead, directly to the Bush Whitehouse".
Not surprisingly, some of the commenters were pretty skeptical about this.
So, I looked into it.
First, I found out that the accusation about the $450 million slush fund was made by Washington trade lawyer Elliot Feldman, who is one of the most highly respected trade lawyers in Washington -- "Elliot Feldman, of Baker & Hostetler. . . has a Ph.D from MIT, a J.D. from Harvard, has taught at four universities including Tufts and Brandeis, and knows NAFTA law thoroughly."
Not a nutcase, then.
Second, the claim was made in Feldman's testimony to the Standing Committee on International Trade last Monday (Aug 21).
Here's what he said (emphasis mine):
I want to talk for a few minutes about the genesis of this agreement, and one of its most important and least-discussed elements. There is a bit of Watergate in this story, and as in Watergate, it is essential to follow the money . . . First, on April 7, the United States Court of International Trade ruled that the U.S. industry was entitled legally to no money--none of it. It was not surprising, then, that 20 days later the U.S. coalition said it would take $500 million. . . Third, it was not quite as obvious in the two-and-a-half-page term sheet of April 27 that Canada would give away everything that the previous government had been defending in order to complete a deal, because political priorities had changed so radically. Fourth, the term sheet promised a major joint initiative to improve North American competitiveness. The "remainder” . . . would go to so-called "meritorious initiatives" in the United States.
Industry was troubled by this last development. It wondered why it was providing foreign aid to the United States, but it was also reassured that the sum would be small. More impressively, Minister Emerson told CEOs that as long as they were getting back 80% of their money, it was none of their business what would happen to the rest. He was, by all accounts, very blunt on this subject.
Meanwhile, we were advised by negotiators that the White House had taken a direct and active interest in this money but that Canadian industry ought to focus on other things; as the minister had said, it was not really their concern. The "remainder", then, became $450 million out of $500 million. That, honourable members, is a colossal sum of money. It's certainly got the U.S. government, as well as the coalition, getting the other $500 million committed to the deal. It's astonishing how little--nothing, really--the government got in exchange for it . . . So here we have the Government of Canada requiring that Canadian private parties sign over $450 million to an escrow fund slated to be conveyed to the White House. The agreement does not mention Congress, and the Bush administration says Congress will not be involved in any way with this agreement. The Government of Canada is thus making a gift of $450 million to be spent by the President. That was more than a belt buckle, even more than a stetson, on July 6.
There is only one date certain in the deal: the planned expenditure of the $450 million must be determined by September 1. . . . The entire Republican campaign war chest has less than $300 million. Canada will add to it by 150% in funds to be expended for meritorious initiatives. It does not require much imagination to foresee the strategic places where this money will be spent. . . .
Emphasis mine.
During question period, committee member Peter Julian (NDP Burnaby-New Westminster) returned to this issue:
Mr. Peter Julian: . . . I'd like to come back to what I think is quite a staggering revelation, that the funding—the $450 million—would, as I understand it, be under the control of the White House. Congress would have no say, and Canada would have no say as to the use of that money. In a sense, in a midterm election year we'd be giving $450 million to a massive political fund.
Dr. Elliot Feldman: . . . This is in my view an historic, unprecedented, astounding intrusion into American politics. We've researched all the way back to the revolution and found nothing like it in American history.
The question I came this morning to put was, will the Parliament of Canada accept responsibility for possibly tipping the balance in American politics, in preserving the control of Congress by the President's party? This softwood lumber agreement is an historic moment in part because of that proposition, and it's up to this Parliament to decide whether it'll accept the responsibility. That responsibility cannot be shifted, and indeed that money inevitably will go to shore up the electoral aspirations of the Republican Party through the President. It's not going to be touched by Congress; it's going through an escrow fund . . .
Mr. Peter Julian: So what you're saying is that we are not only providing money to the coalition to fight further legal battles--giving half a billion dollars to them--but we're also providing money that may go to political purposes, for the re-election of Republicans, many of whom have been most adamant against allowing free trade in lumber. It's ridiculous.
Dr. Elliot Feldman: The provision in article 13(A)(2) of the agreement, which lists the meritorious initiatives, contains language that could describe only a slush fund for the President.
Here is article 13(A)(2):
ARTICLE XIII Institutional Arrangements
A. Private Initiatives
. . . 2. By September 1, 2006 the United States, in consultation with Canada, shall identify meritorious initiatives to receive the funds that are to be set aside for that purpose under Annex 2C. The funds shall support meritorious initiatives in the United States related to:
(a) educational and charitable causes in timber-reliant communities;
(b) low-income housing and disaster relief; or
(c) educational and public-interest projects addressing:
(i) forest management issues that affect timber-reliant communities, or
(ii) the sustainability of forests as sources of building materials, wildlife habitat, bio-energy, recreation, and other values.
And here is Annex 2C:
4. At least 30 days before the Effective Date, the United States shall provide Canada or its agent with information identifying three separate escrow accounts whose beneficiaries are respectively:
(a) the members of the Coalition for Fair Lumber Imports;
(b) a binational industry council described in Annex 13; and
(c) meritorious initiatives in the United States identified by the United States in consultation with Canada as described in Article XIII(A).
5. Canada or its agent shall distribute $US 1 billion pursuant to the Irrevocable Directions to Pay to the escrow accounts referred to in paragraph 4 in the following amounts: $US 500 million to the members of the Coalition for Fair Lumber Imports, $US 50 million to the binational industry council, and $US 450 million for the meritorious initiatives account.
Sorta vague, isn't it, about who is going to come up with the list of projects and who will approve them. All it says is they will be "identified by the United States in consultation with Canada" -- so does this mean Karl Rove and David Frum will figure out how they want to spend the money?
So who is outraged?
Well, ThinkProgress noted the slush fund possibility back in June (this story spotted at the time by the eagle-eyed Accidental Deliberations) and Bob Rae talked about the "presidential slush fund" back in July. This week, Bruce Campbell from the Canadian Centre for Policy Alternatives writes about the fund as "an unprecedented campaign gift from the Harper government to the Republican re-election bid, paid for by the Canadian lumber industry."
And who is NOT outraged?
Well, I would suspect that any Republican political consultants who came north last winter to work for the Conservatives during the election campaign would be happy as clams about now.

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