Reports from the Economic Front

a blog by Marty Hart-Landsberg

We Should Demand Withdrawal From, Not Reform Of, Existing Trade Agreements

Many unions and progressive organizations hope to press President Trump to rework NAFTA and other trade agreements, such as the US-Korea Free Trade Agreement,  in ways that will strengthen worker rights in the US.  However, this effort is too limited and unlikely to succeed.  These agreements were designed to strengthen corporate rights and there is no way that they can be rehabilitated.  Our demand should be that the US government withdraw from all existing free trade and investment agreements.  Significantly, that is exactly what a number of countries have begun to do.

For example, as SouthNews reports:

Ecuador has unilaterally withdrawn from its remaining 16 bilateral investment treaties (BITs). With this decision, Ecuador has concluded the termination of 26 BITs signed by the country since 1968.

The 16 BITS which Ecuador is withdrawing from had been signed with the Netherlands, Germany, Great Britain, France, Spain, Italy, Sweden, Switzerland, Canada, the United States, China, Argentina, Bolivia, Peru, Venezuela, and Chile.

The Ecuadorian move is part of similar measures taken in recent years by a growing number of developing countries to withdraw from their bilateral investment treaties. These include South Africa, Bolivia, Indonesia and India.

Ecuador’s decision to withdrawal from its remaining BITs was driven in large part by the work of a 12 person government-civil society audit commission.  The Commission’s charge was to “verify the legality, legitimacy and lawfulness of investment treaties and other investment agreements signed by Ecuador, as well as to audit the validity and appropriateness of the awards, procedures, actions and decisions issued by Investor-State dispute settlement (ISDS) bodies and arbitral tribunals.”

The Commission’s 668 page report found that:

  1. The country’s BITs have not delivered the promised foreign direct investment
  2. The terms of the country’s BITs contradicted and undermined the country’s development objectives laid out in the country’s constitution and National Plan for Well-Being (Buen Vivir)
  3. The costs of the country’s BITs have far outweighed the benefits.

The Commission therefore recommended that the Ecuadorian government terminate all existing BITs and proposed that it negotiate entirely new investment instruments.  These new instruments, as reported by SouthNews:

should restrict the definition of investments, and strengthen the right of the State to regulate for the common good and sustainable development, including by recognizing the right of the State to impose obligations to foreign investors, apply performance requirements, secure the fiscal competence of the State, secure technology transfer, and force investors to respect international standards and human rights and the environment, among others.

The Commission also recommended the State not to include investor-state dispute settlement (ISDS) mechanisms in new BITs, and to strengthen the domestic jurisdiction in order to provide judicial guarantees for investors in national courts. These efforts should include the development of a comprehensive national policy on and specific rules for foreign investment, and the creation of one central agency to be in charge of the institutional governance of foreign investment.

Moreover, as the president of the Commission stated, “Fortunately Ecuador is not alone in denouncing these unjust investment agreements. It is joining a wave of countries around the world calling for a new international legal framework for investment which prioritizes public interest over corporate profits.”

In particular, South Africa, Indonesia, Bolivia and India are all taking steps to terminate their own investment agreements.  As SouthNews described:

Many countries in almost all regions have started to review their investment treaty regimes. . . . For example, South Africa initiated the termination of its existing BITs (when they expire) in recent years, with the objective of safeguarding its right to regulate investments and the right to establish development policies while at the same time protecting investor rights.   Bolivia has also withdrawn from its BITs.  India recently announced it would withdraw from 57 investment treaties with the objective of re-negotiating them based on its new model BIT.

The point is that the governments of these countries did not seek modification of their existing agreements, hoping to make them somewhat more supportive of national development objectives. Rather, they correctly understood that each agreement was composed of a complex interconnected set of standards, objectives, and regulations designed to promote corporate profit-making and as such were not reformable in a meaningful way.

Clearly, the US government is not interested in terminating its existing agreements.  To the extent that the Trump administration speaks about reform it is largely to blunt a growing popular movement against corporate designed globalization while it works to expand their reach to cover the digital economy, services, and financial services.  And that is precisely why we should not get into the reform game.  That is why we should sharpen the debate and make our own position clear: we support those governments that have decided to withdraw from their respective trade agreements and investment treaties and we want the US government to do the same.

 

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One response to “We Should Demand Withdrawal From, Not Reform Of, Existing Trade Agreements

  1. Ariel Ky June 10, 2017 at 11:46 pm

    This is encouraging news, something that I was not aware of happening. It’s a feasible way to stop corporations from the kinds of depredations that we are all too familiar with. More power to Ecuador and these other countries in negotiating bilateral trade agreements that actually strengthen their economy, and don’t just enrich the few.

    Like

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