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Fast track off track on trade disputes

By Peter Bradley | June 23, 2015 | 10:25 AM | Categories: Supply Chain, Trade

With its vote to end a Democratic-led filibuster, the US Senate will pass fast track authority this week for the Trans-Pacific Partnership(TPP), the most wide ranging trade deal since the North American Free Trade Agreement. The House will be under enormous pressure to go along.

Most of the details of the pact remain secret as negotiations continue, and that secrecy is one of the reasons that authorizing fast track authority has run into opposition. 

But a more contentious part of the deal is the Investor-State Dispute Resolution (ISDS) mechanism. That creates a binding arbitration process by which foreign investors can challenge a nation's laws or regulations that they contend unfairly cause those investors economic harm. 

ISDS has been a part of trade agreements for a long time. but as large international firms have used the process more and more often to go after laws and regulations they don't like, ISDS has become a central issue to opponents of TPP and similar agreements (notably the now stalled Transatlantic Trade and Investment Partnership.) 

When you look at some of the ISDS challenges, it's no wonder. As the Economist reports, "Among the cautionary examples often cited are the suit brought by Vattenfall, a Swedish energy firm, against the German government for phasing out nuclear power after the Fukushima disaster and that of Veolia, a French utility, against the Egyptian government for raising the minimum wage." And there others like that that create similar concerns. Philip Morris Asia, for example, has challenged Australia's rules aimed at reducing smoking by requiring health care warnings on tobacco packaging under the ISDS procedures. The results of that case are pending. Furthermore, ISDS cases have proliferated, jumping sharply over the past decade or so, 

It surprises me that the Obama administration has not seemed amenable to reforms in the ISDS process to allay at least some of the concerns of the TPP opponents. The Economist, in the same report, says European trade authorities, in an effort to restart the transatlantic talks,  have suggested changes that would make the process more like that found in courts of law, with public access, permanent arbitrators, and an appeals process.

The original idea behind ISDS processes was to protect investors from arbitrary and confiscatory rules in nations where they invested in order to encourage that very investment. But it seems to being used more often to challenge laws and regulations that are merely inconvenient--health and environmental rules, minimum wage laws and the like. Furthermore, with business investment flourishing around the world, even the need for ISDS might be questionable.

I'm no foreign trade expert, but a process that could let outside arbitrators rather than our own courts determine whether our rules and regulations are legitimate--a process, by the way not open to all-- makes me as a citizen pretty uncomfortable.

 

 

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