The Bush Administration is using the military invasion and occupation of Iraq to advance a corporate globalization agenda that is illegal under international law, has not been chosen by the Iraqi people and may ultimately prove to be even more devastating than twelve years of economic sanctions, two U.S.-led wars and one occupation. The Administration's ultimate goal is to take the agenda to the entire region.

In direct conflict with its obligations under international law, the Bush Administration is fundamentally altering Iraq's economic laws to U.S. corporate advantage and is not adequately restoring and providing Iraqis with fundamental necessities such as water and electricity. Fortunately, clear alternatives exist to ensure that the U.S. adheres to its obligations and that Iraq's reconstruction is achieved. These policies are provided at the end of this testimony.

The goal of the Bush Administration, as stated in the economic orders already enacted in Iraq is to, "transition [Iraq] from a . centrally planned economy to a market economy."

This goal is explained even more clearly by BearingPoint, Inc. - the Virginia based corporation that has received the $250 million contract to facilitate this transition. The contract states:

"It should be clearly understood that the efforts undertaken will be designed to establish the basic legal framework for a functioning market economy; taking appropriate advantage of the unique opportunity for rapid progress in this area presented by the current configuration of political circumstances. Reforms are envisioned in the areas of fiscal reform, financial sector reform, trade, legal and regulatory, and privatization."

Transformation of an occupied country's fundamental laws is illegal under international law. It directly violates the international convention governing the behavior of occupying forces, the Hague regulations of 1907 (the companion to the 1949 Geneva conventions, both ratified by the United States), as well as the U.S. Army's own code of war - as stated in the Army field manual "The Law of Land Warfare." Article 43 of the Hague Regulations requires that an occupying power "re-establish and insure, as far as possible, public order and safety, while respecting, unless absolutely prevented, the laws in force in the country." Resolution 1483 of the UN Security Council issued in May 2003, specifically instructs the occupying powers to follow the Hague Regulations and the Geneva Convention in Iraq. Indeed, in a leaked memo written on March 26, 2003, the British attorney general, Lord Goldsmith, warned Tony Blair that "the imposition of major structural economic reforms would not be authorized by international law."

In other words, the occupying power is like a temporary guardian. It is supposed to restore order and protect the population but still apply the laws in place when it arrived. As Naomi Klein has written, "bombing something does not give you the right to sell it," yet this is precisely what the Bush Administration is doing.

Changing Iraq's Laws

In direct conflict with U.S. government obligations under international law, the Bush Administration has begun fundamentally altering the economic laws of Iraq. For example, the provision in Iraq's Constitution outlawing privatization of key state assets has been over-ridden, as has the law barring foreigners - other than citizens of Arab countries - from  owning property or investing in Iraqi businesses. Both the tax code and the banking laws have been changed.

Other changes outlined in the BearingPoint contract include the near elimination of the guaranteed food program and "reestablishing" property rights to agricultural land and housing. Iraqi law provides for subsidized housing, cheap energy and free food. The food program uses 300 government warehouses and more than 60,000 workers to deliver a billion pounds of groceries every month - a basket of rations guaranteed to every citizen, rich or poor. BearingPoint plans to phase out this program to all but the neediest Iraqis, while transitioning the agricultural sector to a market-based industrial model with an emphasis on export trade and luxury crops. BearingPoint explains that "now may be the time to look beyond traditional patterns and explore new market potential with new products such as high valued fruits and vegetables, flowers, seed export and other possibilities."

The exhaustively well-documented devastating impacts of export-led industrial agriculture  particularly based on luxury crops - on countries around the world as implemented by the International Monetary Fund (IMF), World Bank, World Trade Organization (WTO), North American Free Trade Agreement (NAFTA) and other institutions and agreements, demonstrates the danger that these proposed changes pose to Iraq. Those who have been made landless, jobless and impoverished by them are increasingly raising their voices in opposition. One of the most dramatic demonstrations of which occurred at the most recent WTO ministerial meeting in Cancun, Mexico with the protest-suicide of South Korean farmer Lee Kyung Hae. Thus, it should not come as a surprise that conflicts over these same policies have led to the collapse of talks at both the

WTO and the Free Trade Area of Americas in the last year alone. Clearly, there is no international

consensus that such policies will aid Iraq's reconstruction. The Bush Administration's proposed changes for Iraqi law go even further, with a special focus on Iraq's oil. BearingPoint describes how current Iraqi commercial law is "woefully deficient in terms of establishing a market-friendly legal and regulatory environment for business formation and operation." Changes to those laws will therefore be necessary "to assure an appropriate legal and regulatory framework for major utilities such as gas, oil, water, and

power." The contract includes every sector of the Iraqi economy, from public services, media, banking, investment, taxes, agriculture and the oil sector - implementing "private-sector involvement in strategic sectors, including privatization, asset sales, concessions, leases and management contracts, especially those in the oil and supporting industries."

The Bremer Orders

Iraq's laws are being replaced and the BearingPoint contract implemented by L. Paul Bremer, Administrator of the Coalition Provisional Authority (CPA) in Iraq. The Bremer Orders most relevant to this discussion are detailed below.

Bremer Order #39: Foreign Investment

Bremer Order #39, enacted on September 19, 2003, has five key elements: (1) Privatization of state-owned        enterprises; (2) 100% foreign ownership of businesses in all sectors except oil and mineral extraction, banks and insurance companies (the latter two are addressed in a separate order); (3) "national treatment" of foreign firms; (4) unrestricted, tax-free remittance of all funds associated with the investment, including, but not limited to, profits; and (5) 40 year ownership licenses which have the option of being renewed.

Privatization

The Order allows for privatization of all state-owned entities. It is difficult to overstate how fundamental a change this is to the Iraqi economy. As the preamble to the Order explains, it will move Iraq from a "centrally planned economy to a market economy" in one fell swoop by U.S. fiat. This will involve some 200 state-owned enterprises. Thus, everything from water services, electric utilities, schools, hospitals, television and newspapers, to prisons could be privatized under the Order.

The water sector is already being "reconstructed" by the Bechtel Corporation of San Francisco - one of the top ten water privatization companies in the world. Bechtel is the second largest recipient of reconstruction dollars in Iraq after Halliburton - totaling nearly $3 billion. Bechtel's contract includes the repair of Iraq's water, sewage and electricity systems, as well as many of its hospitals and schools.

Cliff Mumm, head of Bechtel's Iraq operation, told the San Francisco Chronicle that Iraq "has two rivers, it's fertile, it's sitting on an ocean of oil. Iraq ought to be a major player in the world. And we want to be working for them long term."

Bechtel's track record does not bode well for the Iraqi people-in fact, the citizens of Bolivia have written a letter to the people of Iraq warning them of what to expect from Bechtel. A subsidiary of Bechtel privatized the water systems of Cochabamba, Bolivia

and immediately sent prices sky-rocketing. Families earning a minimum wage of $60 per month faced water bills of $20 per month. The citizens rose in protest and at least one seventeen year-old boy lost his life to Bolivian troops sent into the streets to defend Bechtel's right to privatize with deadly force. Ultimately, the government relented and cancelled the contract. Bechtel has responded with a $25 million lawsuit against Bolivia for lost profits.

Not surprisingly, when Thomas Foley, former director of Private Sector Development for the CPA, announced a list of the first state enterprises to be sold off last fall which included cement and fertilizer plants, phosphate and sulfur mines, pharmaceutical factories, and the country's airline, there was immediate unrest. With anywhere from 50% - 70% of the Iraqi workforce already unemployed, additional layoffs - which always follow on the heels of privatization  were unacceptable. Furthermore, those remaining workers who still have jobs only receive "emergency pay" mandated by the CPA - about half of what they made before the war, while prices have skyrocketed and the social safety net has been virtually eliminated. The CPA promised that the U.S. corporations doing the reconstruction would solve the unemployment problem, promising 300,000 jobs in an August 13, 2003 letter. Only a handful of these jobs have materialized. One reason is that many firms are bringing in non-Iraqis to do the bulk of the work.

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