The White House recently responded
Elizabeth Warren’s Op-Ed piece in the Washington Post
that went after the obscure trade provision called the investor-state dispute settlement (ISDS), which is expected to be included in both the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP).
Essentially, the ISDS is an instrument that allows corporations or any foreign investors to sue a country for profit through international law, whenever a new domestic regulation might hurt the companies expected profit. This provision has been included in thousands of trade deals since it was first used in a 1959 trade agreement between Germany and Pakistan, and since the 1990’s its use has skyrocketed around the world, with about sixty cases filed annually.
Senator Warren has rightfully gone after this shady pro-corporate mechanism, and the White House’s response simply attempts to confuse the majority of people who are not well informed on the subject. Two major points that the White House makes is that “the ISDS does not and cannot require countries to change any law or regulation” and that the United States government has never lost an ISDS brought on against our government. These are both true statements of course, but they ignore important realities that create a less rosy picture.
The point that the ISDS cannot require countries to change regulations is true, but it leaves out the reality that the ISDS can and has been used before as a bargaining tool against governments, especially when hundreds of millions of dollars are at stake. An example comes with American company The Renco Group, owned by New York billionaire Ira Rennert, which brought the government of Peru to international arbitration for $800 million after they ordered a pollution clean up at a metal smelter in the town of La Oroya.
First a little background, this small peruvian town is one of the most polluted towns in the world, and 99 percent of the children have lead blood levels that exceed the acceptable limit. One of the children, that Bloomberg reported on is named Kenyi. He has headaches, memory loss, stomach ailments, difficulty concentrating, and in a 2007 test, the “lead in his blood measured 41 micrograms per deciliter,” which is eight times the level the U.S. government considers cause for action. Other children have been reported to have symptoms consistent with lead poisoning, such as anemia, convulsions, stunted growth, and mental retardation.
This forced the peruvian government to take action, as any good government would, and they shut down the metal smelter after Renco Group delayed environmental improvements. This lead to the suit for hundreds of millions, and in 2012, after pressure, the Peruvian government allowed the smelter to restart the zinc operations. The filing of the ISDS has also been used to delay a lawsuit filed in St.Louis Missouri, on behalf of more than 700 La Oroya children for compensation, and Renco wants arbitrators to force the Peruvian government to pay for any damages that arise from the suit.
Another example of bullying governments into compliance comes with the Canadian company Lone Pine, which incorporated itself in the United States to sue its own government through the NAFTA agreement after they had filed a moratorium on hydraulic fracturing. They are seeking $250 million and attempting to use the ISDS as a bargaining tool for lifting the moratorium.
So while the ISDS cannot force a government to legally change any law or regulation, it can certainly be used by corporations to bully governments who are trying to protect citizens.
The second major point the White House made is that the United States has virtually never lost an ISDS case filed against it, which is also true. In fact, the majority of cases are filed by American and European companies, much of the time against developing nations. Another case against a Latin American country comes with Houston based company Occidental Petroleum, who sued Ecuador and won $2.3 billion. This suit came about after the oil company violated its contract by selling a part of its oil exploration concession without the governments approval, which resulted in a termination of the concession. Even though the company violated the contract, they still won through international arbitration.
The fact that America has not lost any cases is a selfish and unethical way of looking at the ISDS. As moral human beings, tolerating children being polluted by an American company simply because they are not American children is not only hypocritical, but unethical. And what about countries who are passing regulations and laws to lessen pollution? Do we not all have a stake in this? The ISDS undermines the power of sovereign governments to properly regulate and protect their citizens from multi-national corporations, and the Obama administration reveals its true colors by promoting this instrument so diligently through this myopic and “Americentrist” perspective.
As I have previously written, the investor-state dispute settlement is a provision that violates the idea of the “free market,” which free trade advocates tend to preach. The ISDS is a free insurance policy for big corporations, paid for by taxpayers around the world. If free trade was truly about promoting a “free market” around the world, companies would be required to buy political-risk insurance, which insures foreign investors against any future political volatility that might hurt their investment. But free trade is not about promoting a free market, it is about providing corporations with unneeded welfare, and Obama is making this very clear with his unyielding support for the investor-state dispute settlement.
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