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Article Summary

Gerbasi, Jennifer and Mildred Warner. 2004. "Is There a Democratic Deficit in the Free Trade Agreements? What Local Governments Should Know," Public Management 86:2 (16-21).

When state and local governments use market solutions for the provision of public goods they still play an active role in structuring the market in order to ensure efficiency gains and the preservation of public values. Government action defines clear property rights, a predictable adjudication process and open contracting to provide competitive market opportunities. However, the ability of state and local governments to play this role may be undermined by new restrictions on government action found in free trade agreements. These agreements undermine state and local government sovereignty by privileging foreign over domestic investors, replacing public courts with private arbitration, and supplanting traditional standards for legislation by requirements to be "least trade restrictive." Government regulations are being reinterpreted as barriers to trade, and a new definition of "takings" requires governmental compensation for lost potential profits from regulatory action. Ironically, the singular attention to market goals in the new trade agreements is undermining the potential for market solutions by altering the ability of government to serve the traditional role of balancing market growth with serving broader public values.