WASHINGTON -- The Obama administration is pursuing a free trade agreement with the European Union that would grant corporations new political power to challenge an array of regulations both at home and abroad, according to an administration official involved in the negotiations.
While the plan is still in its early stages, the effort alarms consumer and environmental advocates who worry it will lead to a rollback of important rules and put multinational companies on the same political plane as sovereign nations.
If states are unable to pass and enforce laws within their borders, it could change the nature of their community and government, nonprofit groups emphasize. Exactly how broad these corporate political powers will be is undetermined, but one aspect of the agreement, known as "investor-state dispute resolution," would allow a company to appeal a regulatory rule or law to an international court, most likely the World Bank. The international body would be given authority to impose economic sanctions against any country that violated its verdict, including the United States.
A spokesperson for the Office of the United States Trade Representative confirmed to HuffPost that the agency "will seek the inclusion of procedures for expeditious, fair and transparent investor-state dispute resolution" under a new pact with the EU, but said that the new legal framework will be "subject to appropriate safeguards and the protection of legitimate government regulatory interests."
The investor-state resolution is opposed by many public interest groups.
"These provisions elevate corporations to the level of nation states and allow them to sue governments over nearly any law or policy which reduces their future profits," said Ilana Solomon, trade specialist for the Sierra Club, an environmental protection group.
She said investor-state resolution is "terribly risky for communities, the environment, and our climate."
The U.S. Chamber of Commerce has been advocating for a new trade deal between the U.S. and EU for more than a year, and President Barack Obama endorsed the project in his 2013 State of the Union address.
Since EU nations and the U.S. are already party to World Trade Organization treaties, there are relatively few tariffs that could be eliminated among the countries. In written reports, the Chamber, a lobbying group representing large corporations, has pushed for increased "regulatory compatibility" and "updated and comprehensive" investment terms to "prevent discrimination against investors" in the trade pact. The Chamber declined to discuss the deal for this article.
Investor-state resolution has been a common component of U.S.-negotiated pacts with individual nations since the North American Free Trade Agreement in 1994. But such resolution is not currently permitted in disputes with the U.S. and EU, which are governed by the WTO. All trade deals feature some kind of international resolution for disputes, but the direct empowerment of corporations to unilaterally bring trade cases against sovereign countries is not part of WTO treaties. Under WTO rules, a company must persuade a sovereign nation that it has been wronged, leaving the decision to bring a trade case before the WTO in the hands of elected governments.
Traditionally, this proposed political empowerment for corporations has been defended as a way to protect companies from arbitrary governments or weakened court systems in developing countries. But the expansion of the practice to first-world relations exposes that rationale as disingenuous. Rule of law in the U.S. and EU is considered strong; the court systems are among the most sophisticated and expert in the world. Most cases brought against the United States under NAFTA have been dismissed or abandoned before an international court issued a ruling.
But companies have grown increasingly ambitious in recent years, with major outfits including Exxon Mobil and Dow Chemical challenging Canadian rules that apply to offshore oil drilling, hydraulic fracturing ("fracking") and the use of pesticides. In December, drug giant Eli Lilly brought a NAFTA case against the Canadian government after it invalidated a patent for one of the company's medications.
"The Chapter 11 investor state arbitration mechanism provided for in NAFTA has been used more than 60 times since the treaty was signed," Eli Lilly spokesman Michael McDougall told HuffPost in a written statement. "Many trade treaties have dispute resolution and compensation mechanisms. We believe the current test for determining whether an invention is 'useful' under the patent statute in Canada has become deeply flawed, inconsistent with international norms and treaties, and needs correction."
Companies have won some of those rulings, but opponents of investor-state rules argue that the mere threat of an international case can be enough to dissuade governments from adopting or enforcing important rules.
"The dirty little secret about [the negotiation] is that it is not mainly about trade, but rather would target for elimination the strongest consumer, health, safety, privacy, environmental and other public interest policies on either side of the Atlantic," said Lori Wallach, director of Public Citizen's Global Trade Watch. "The starkest evidence ... is the plan for it to include the infamous investor-state system that empowers individual corporations and investors to skirt domestic courts and laws and drag signatory governments to foreign tribunals."
The Obama administration is also pursuing an aggressive investor-state resolution system under the Trans-Pacific Partnership, a trade deal with several Pacific nations.
Talks with the EU are at the earliest stages and will take several months to conclude. A USTR spokesperson told HuffPost that it will consult with public interest groups and Congress before pursuing any specific language for the treaty.