For a decade or so, nations of North America, Asia and the Pacific have been meeting with the intention of agreeing to a long-term multilateral trade deal called the Trans-Pacific Partnership (TPP). (I have posted a short, helpful and entertaining video from Robert Reich about the pending agreement.) The TPP would supersede the laws of its signatories with regard to such things as labor protections, intellectual property and environmental issues. Citizens have not been able to weigh in on the ongoing negotiations, however, and no draft of the agreement has been made publicly available. (Wikileaks has obtained and published some parts of the document.)
Senator Elizabeth Warren (D-MA) has been a consistent critic of the Trans-Pacific Partnership, arguing that its provisions could impede the ability of the U.S. to rein in corporate financial excesses, thereby preventing another round of Wall Street collapses and government bailouts. This morning, she published an op-ed on the subject in the Washington Post. Her primary concern is an aspect of the TPP known as the "Investor-State Dispute Settlement" (ISDS). This provision attempts to make whole those firms whose competitive positions are harmed through the actions of another country. ISDS would allow for businesses who feel that they have suffered in this way to bring their case before "an international panel of arbitrators" rather than the nation's own court system. From the U.S. perspective, this would mean that if our nation's laws on, say, product safety or environmental protection inconvenienced a foreign company, these arbitrators could order the United States to pay the aggrieved company in restitution. Moreover, these arbitrators, Warren argues, will come from the ranks of "high paid corporate lawyers." Taken together, these facts suggest not only that the arbitrators would have the power to nullify the laws of sovereign states, but that they will be likely to do so in order to serve corporate interests.
ISDS has been an increasingly prominent feature of trade agreements and Warren expresses some concern over the results they have generated to this point.
From 1959 to 2002, there were fewer than 100 ISDS claims worldwide. But in 2012 alone, there were 58 cases. Recent cases include a French company that sued Egypt because Egypt raised its minimum wage, a Swedish company that sued Germany because Germany decided to phase out nuclear power after Japan’s Fukushima disaster, and a Dutch company that sued the Czech Republic because the Czechs didn’t bail out a bank that the company partially owned. U.S. corporations have also gotten in on the action: Philip Morris is trying to use ISDS to stop Uruguay from implementing new tobacco regulations intended to cut smoking rates.
These results, she argues, undercut state sovereignty, and elevate the needs of corporations over those of citizens. Warren argues that conservatives, libertarians and progressives should all be concerned about this aspect of the TPP.
While I certainly concur with the senator's analysis, ISDS raises a troubling question that speaks to a problem with the entire process of free trade agreements. Why shouldn't firms have to suffer the economic consequences of a foreign country's laws? Certainly businesses have no similar right against their own countries. (They certainly try to keep onerous regulations of the books by hiring lobbyists, but if that doesn't succeed they have to obey the laws that result.) So why should they have such a right against some other nation? The answer, it would appear, is that having to follow different laws in each country is so complicated for multinational corporations that requiring them to do so would significantly impair global trade. If certain companies were to forego competing in certain markets because of that government's laws, the result would presumably be a decline in worldwide economic growth and, eventually, a lower standard of living for everyone. Governments, businesses and citizens all want to avoid this fate.
Assuming the cogency of this analysis, the patchwork of national laws might be a real problem. But is substituting for the legitimate legal processes and traditions of sovereign nations a secret panel of unelected corporate attorneys the best way to address it? I can't believe that it is.