Thursday, October 22, 2009

U.S. Reviewing Urgent Question: Link investor rights with duties?

“We feel this is a critical moment to take a fresh approach to bilateral investment treaties and the investment chapters of trade agreements….We look forward to working with the administration to [establish] a whole new framework for the governance of international investment that protects the public interest in the United States and abroad.”
So says a “collective statement” by representatives of labor, environmental, and economic development groups in a report prepared at the administration’s request for its review of U.S. policy on cross-border investment.

Among the concerns raised in the statement was that current investment rules “provide sweeping protections for U.S. investment abroad, without commensurate investor obligations,” thereby facilitating and accelerating the movement of U.S. jobs, production capacity, and technology.

“Strong labor provisions and a record of effective enforcement of those provisions should be a precondition for any negotiations, [but] they are not enough,” the statement adds. “A whole new framework is needed to reverse the devastating impacts of offshoring on U.S. workers and communities.”

Any such reversal will require detailed revisions of a 2004 document called the “Model BIT,” which serves as the official guide for negotiating bilateral investment treaties and the investment chapters of regular free trade agreements.

The present model is tilted too far in favor of investor rights. Among the recommended changes to restore balance, all opposed by business groups, are these:
-- Favoring cress-border investors with no rights more extensive than those granted investors under the U.S. constitution.
-- Clarifying the meaning of “indirect expropriation” (against which the investor is protected) so as to ensure, for example, that a government will not be restrained from, and penalized for, improving health, safety, environmental, and other legitimate public welfare objectives.
-- Changing the present arbitration system of dispute settlement to one involving only governments (state-to-state), among other reasons because outside arbitrators are not qualified to determine the public interest at stake.
China's Mercantilism a Major Threat

Another important change would try to create “a level playing field” globally between private enterprises and those “state-owned” – meaning particularly those owned by the People’s Republic of China.

That change is urgent for several reasons cited in the statement. For example:

-- “China engages in trade based on mercantilist principles, and has a strategic industrial policy meant to create and expand industrial sectors with the intent of becoming dominant within China and globally. In fact, China has targeted ten sectors or ‘pillars,’ including steel, telecommunications, and aerospace. To achieve dominance, the Chinese government subsidizes home-grown industries (commonly SOEs, or state-owned enterprises), manipulates its currency for export advantage, and insulates its domestic enterprises from foreign competitors in a host of ways.”

-- “As investment flows into the United States continue to grow [by over 70 percent since 2004], it can be anticipated that the U.S. market [for foreign investment in the U.S.] will expand substantially. Consequently, BITs can no longer be viewed solely as a package of rights and obligations to protect outward investment by U.S. investors in less developed nations. BIT obligations apply with equal force to investments within the United States by foreign companies and governments, including SOEs.”

The collective statement quoted above is signed by nine persons, including Linda Andros of the United Steelworkers, Matthew Porterfield of Georgetown University’s Institute of Public Law. and Martin Wagner of Earthjustice.

Their statement is part of a long document that also reflects the views of business interests as formulated by other eight persons. That document in turn is part of a much longer report submitted to the Secretary of State on September 30.

I have highlighted, mostly be direct quotation, those parts of the analysis that most clearly state the major issues impacting workers and their organizations. However important, it is a daunting chore, except to those who want to know what’s at stake behind many thousands of sentences in legalese.

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