U.S. automakers have broken with the rest of the business community over a key trade issue in the talks to renegotiate the North American Free Trade Agreement: whether the agreements' dispute settlement mechanism needs to be changed.
In a filing Monday with the U.S. Trade Representative's Office, the automakers' trade association said the existing system should be scrapped when the U.S. enters NAFTA renegotiations with Mexico and Canada later this year.
The system, called investor-state dispute settlement or ISDS, has been controversial because it prevents disputes from being settled in domestic courts, and instead lets companies challenge NAFTA governments in an arbitration system.
Proponents of the system, including most U.S. big business groups, argue the system is necessary to ensure neutrality. Critics, including labor and environmental groups, argue the system makes it too easy for bad actors to get away with breaking rules, and say there's no reason why domestic courts cannot handle these disputes.
The American Automotive Policy Council, whose members include General Motors, Ford and Fiat Chrysler, is member of the latter group.
"The vast majority of U.S. companies doing business in Mexico and Canada have not used or benefited from the ISDS provisions, while the inclusion of ISDS raises significant concerns for other stakeholders. Given the development levels of the countries involved (i.e., members of Organization for Economic Cooperation and Development), we believe including ISDS provisions in NAFTA is unnecessary," AAPC said in its filing with the trade office.
That puts the automakers directly at odds with with other trade associations, including other manufacturers. In its filing with the Trade Representative's Office, the National Association of Manufacturers called ISDS "critical" to trade because it "ensure[s] a neutral and fair forum to enforce commitments and resolve disputes that governments may seek to ignore."
The Chamber of Commerce agreed and argued that ISDS's investor protections should be expanded to include financial services as well.
Matt Blunt, president of AAPC, previously told the Washington Examiner that ISDS has become a distraction in the debate over NAFTA. "We would argue that you could improve the trade discussion without it. There have been concerns too that it undermines national sovereignty," he said. Asked if his group opposed ISDS to maintain labor peace with the United Auto Workers, which represents workers in all three AAPC companies, Blunt said no.