Three moderate Republican lawmakers urged U.S. Trade Representative Robert Lighthizer to use the talks on the North American Free Trade Agreement to scrap its investor-state dispute settlement provision, saying that it undermines the U.S. legal system.
The Trump administration has reportedly pushed to make participation in the system voluntary but is facing opposition from NAFTA partners Canada and Mexico.
The system allows a business that thinks it has been harmed by a country's action to protest before an international tribunal. The business picks one arbiter, the country picks a second, and they jointly agree on a third. The tribunal then presides over the case and issues a binding ruling much like a regular court. The system has been highly controversial because it effectively puts all trade disputes outside the respective countries' domestic courts.
"We support expanding trade and elimination of unfair and discriminatory barriers to foreign products and investment. However, ISDS extends beyond disciplining such barriers. Rather, it deeply implicates the fundamental principles of our domestic legal system, undermining our sovereignty and threatening our system of federalism with a form of international preemption. And the very structure of ISDS provides foreign investors and corporations operating here greater rights to pursue claims against the U.S. government than are provided to U.S. citizens and firms under our domestic legal system," said Reps. Daniel Donovan of New York, David Joyce of Ohio, and Brian Fitzpatrick of Pennsylvania.
They argued that the system encourages offshoring of jobs by making it less risky and cheaper for U.S. companies to move jobs outside the U.S. Instead of companies having to factor in the cost of risk insurance when making offshoring decisions, they rely on ISDS to require governments in low-wage nations either to provide them with their special offshored investor protections or compensate them."
Business groups are lobbying hard to retain the current language, arguing it is crucial to international trade and attracting investment.
Comments by the three top negotiators at the conclusion of the third round of talks indicate the three countries are deeply divided over key provisions of the deal. The NAFTA renegotiations will resume in Mexico City on Nov. 17.