Last week we were treated to an unusual debate on a key provision of the Trans- Pacific Partnership (TPP), Investor State Dispute Settlement (ISDS). Senator Elizabeth Warren's Op-Ed in the Washington Post was followed by a rebuttal from Jeff Zients, Director of the National Economic Council, one of two bodies that advises the President on economic matters. Senator Warren charged that ISDS "would tilt the playing field" in favor of multinational corporations versus citizens in the US and globally. Zients counters that it is "an often repeated, but inaccurate, claim that ISDS gives companies the right to weaken labor or environmental standards...."
Sadly, Zients is parsing words. ISDS in fact allows multinationals to sue governments when they pass legislation after the enactment of the trade agreement that harms future corporate profits. The key word is "after," and all Zients is saying is that current regulations in the US, Vietnam or the other TPP nations would not be vulnerable.
In fact there now are more than 500 ISDS cases brought by multinationals that do exactly that! Many are focused on environmental regulations that nations adopted after making trade deals that included ISDS. Most of us would agree with Senator Warren that the right of the US or the other 11 nations to protect the welfare of its citizens in the future is just as important. Zients ignores that reality.
Just as important, Zients focuses solely on the ISDS record against the US. But for Americans the cases brought by US and other multinationals against other governments are equally damaging. When Philip Morris sues Australia or Uruguay because they increased warnings on cigarette packages, are we really on the side of Philip Morris? When Pacific Rim sues El Salvador for blocking gold mining because of water contamination, are we really on the side of Pacific Rim? Pacific Rim is seeking $300 million in damages and the costs of the trial to date have been more than $10 million, prohibitive sums for El Salvador.
As Senator Warren notes and Zients ignores, ISDS cases go in only one direction -- multinationals can sue governments for unlimited amounts but nations and citizens cannot sue multinationals under ISDS no matter what they do. Our claims must make their way through courts or, more typically, in government-to-government discussions that drag on for years. Complaints filed under the labor provisions of CAFTA against Honduras and Guatemala have languished for years. The final enforcement of those provisions or environmental standards rests with the US Trade Representative, the same office that negotiates these one way deals -- trade agreements that many of us believe favor multinationals -- in the first place.
President Obama argues that Fast Track and TPP are about "China or US." It is ironic that we insist on ISDS being included when the governments we are trying to woo would never include it. In fact opposition to ISDS is growing from Brazil and South Africa to Germany and France, and the TPP nations are no different.
Mr. Zients hints that this time ISDS may be limited. But of course we do not get to see the text, nor has Congress. This in itself is a good reason to reject Fast Track or Trade Promotion Authority which is expected to be introduced any day. No other nation in the TPP group has Fast Track. Many are not democracies so there will be no debate. But for Australia, New Zealand, Japan, Canada, Peru, Mexico, Chile there is no fast track. In those nations the Congress will be able to debate after reading the agreement. Only in the US are we told that the USTR needs Fast Track to get the deal, and that without it, the other governments will doubt our sincerity.
Mr. Zients is protecting a House of Cards. ISDS is in fact a one way street for the multinationals, and that's why it is supported actively by the US Chamber of Commerce and the Business Roundtable even while opposition to it grows around the world. It is obvious that if corporate profits with low labor costs are protected in Vietnam, US jobs are more likely to go there. It is obvious that if there continue to be no meaningful environmental protections in Vietnam, US production will move there. ISDS protects the status quo, and Americans are quite aware that the status quo in Vietnam -- a 75 cents an hour average wage and few environmental protections -- works against us all. Americans are harmed by ISDS as it relates to other nations, not just by claims against the US.
Most importantly, if the TPP is so different and improved, we should be able to read those provisions and debate them, not called on to write a blank check for this President and likely the next one by passing Fast Track. Even the President admits there is reason to be skeptical based on past trade agreements. This time let's read the 1,200 pages before we write a blank check based on wishful thinking.
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