When Trade Treaties Pose a Sovereign Threat

October 2nd, 2014 at 8:18 am

I’m rushing out but allow me to refer you to this weedy but important piece from Harold Meyeson in this AMs WaPo (Harold has been on a real tear lately, writing with great depth and clarity about the nexus of policy and inequality).

Harold’s piece is about these “Investor-State Dispute Settlement (ISDS) provisions included in every significant trade deal the United States has signed since Ronald Reagan’s presidency. Under ISDS, foreign investors can sue a nation with which their own country has such treaty arrangements over any rules, regulations or changes in policy that they say harm their financial interests.”

Imagine a foreign firm from country B with a factory in country A. If the firm objects to one of country A’s environmental (or any other) regulations, and A and B are signatories to a trade treaty with ISDS provisions, then B can sue A for damages, i.e., the added costs of meeting the standard.

Moreover, and this is critical, the case in not heard in country A’s courts, where it would have a low chance of success. It is tried in an “extra-governmental tribunal of three extra-governmental judges engaged just for that case — and the judges’ ruling can’t be appealed to a higher court. Under ISDS, there are no higher courts.”

What’s that? Sounds hypothetical and unreal? Read the piece. Not only does Meyerson present cases exactly like the A/B one described above, but he has evidence of countries deciding not to regulate based on fears of ISDS actions.

A key point here–one Germany is finally pursuing, and we should follow their lead–is that you don’t need ISDS to have a trade treaty. Cheerleaders for the TPP, for example, may argue that such dispute settlement procedures are essential for closing deals, otherwise multinationals won’t support the treaty.

Well, as the German case suggests, if companies won’t support the treaty because it facilitates our sovereign, democratic rights to regulate as we see fit, then good riddance.

I’ve been in government and I know how these treaties take on a life of their own–the goal of the supporters is to just pass the thing, and any opposition is seen as protectionist and antithetical to globalization.

That’s unacceptable. Trade is a clear net plus for both our economy and that of other countries, but it can and must coexist with sovereign standards. If these ISDSs preclude that, as I believe they do, then they must either go or we must not sign on.

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2 comments in reply to "When Trade Treaties Pose a Sovereign Threat"

  1. Tiree says:

    When extremists like the Pauls talk about secession, they do it with things like this in mind. To think that the US would pass the sovereign rights of its people to large, multinational and foreign corporations is absolutely outrageous.

  2. EuropeanIW says:

    Exactly right, these are the same arguments we Europeans use to reject the TTIP and the TAFTA.
    Our rules (environmental, legal and others) MUST be accounted for or else GET LOST!