Trade Agreements

flag1fireworks“Trade-Agreement Troubles” by James Surowiecki

The Financial Page JUNE 22, 2015 ISSUE of “The New Yorker”

Opponents of TPP, Senator Elizabeth Warren for example, are concerned that I.S.D.S provisions in TPP and other trade agreements might supersede our laws. Surowiecki writes:

Known as Investor-State Dispute Settlement (or I.S.D.S.) provisions, they typically allow foreign investors to sue governments when they feel they have not received “fair or equitable treatment,” and to have their cases heard not by a domestic court but by an international arbitration tribunal made up of three lawyers.

Proponents of trade agreements claim that suits are rare, governments usually win, and the only penalties are financial–laws aren’t overturned. Surowiecki notes that even if such suits have been rare in the past, they may become much more common in the future.

Surowiecki has a solution; he writes:

And including them (I.S.D.S provisions) in trade agreements undermines the broader case for free trade, by making it look like exactly what people fear—a system designed to put corporate interests above public ones. If the Administration wants these deals to be seen as legitimate, it can start by excising the I.S.D.S. provisions. 

Yet a trade agreement without means for enforcement would be of little value in furthering fair play. Removing the controversial provisions seems like a reasonable proposal, but only if they were replaced with other effective provisions for resolving disputes.

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6 Responses to Trade Agreements

  1. philebersole says:

    It is reasonable to have a mechanism for resolving disputes between sovereign governments.

    It is not reasonable to have a mechanism by which a foreign corporation (but no other entity) can ask that a soveriegn government be penalized for enacting laws that benefit its citizens.


  2. whungerford says:

    That isn’t quite right–I.S.D.S allows a foreign corporation to ask that a sovereign government be penalized for enacting laws that are unfair.


  3. philebersole says:

    The arbitration panel that would rule on investor-state disputes, which does not consist of professional judges and is not elected by the public, is only concerned with whether a government “unfairly” deprived a foreign corporation of expected profits, regardless of how much the law benefits citizens.


  4. philebersole says:

    An example of a government being penalized for enacting a law that benefits its citizens is a recent decision by an ISDS panel under the North American Free Trade Agreement, similar to what would be set up under the TPP.

    Businesses in Canada and Mexico got a panel to rule that the United States government must pay a fine or repeal its requirement for Country of Origin labels on imported meat.

    Now, if there was an international agreement setting minimum standards for meat inspections, that might be worth considering.


  5. whungerford says:

    It is unreasonable to suggest that arbiters should be elected–they are supposed to be impartial, not represent either side’s view. Other examples of unelected panels are juries and the US Supreme Court.


  6. whungerford says:

    I believe the law needed to be changed to apply to domestic as well as foreign meat products. Instead, Congress repealed it. Congress might better have fixed it.


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