An active and growing movement has been seeking to sabotage new trade agreements — and now it has set its sights on Trade Promotion Authority. But the entire movement is based on a myth.
Since the mid-1990s, we have been warned that legal provisions called investor-state dispute settlement would overturn U.S. laws and rules in secret tribunals.
But that hasn’t happened. In fact, the little-used ISDS mechanism, which is widely respected and included in more than 3,000 international agreements, is merely a neutral dispute settlement system that requires other countries to treat our investors the way we treat everyone in the United States under the U.S. Constitution and laws. ISDS is all about fair play in the global economy.
With the facts and U.S. experience under ISDS against them, opponents are engaging in what is known in academic circles as the “fallacy of verbosity,” or what the rest of us might call “throwing mud against the wall to see what will stick.”
Scare stories turn out to be false, as unbiased research demonstrates that most cases are filed by individuals and small and medium-sized businesses, which, of course, are least likely to be able to protect their rights and property in a foreign country.
There have been only 17 ISDS cases ever filed against the U.S., compared to the 15,000 cases filed against the U.S. government in claims court every year. ISDS tribunals can order only monetary damages to be paid, so no regulation or law can or will ever be overturned. And since 2001, the U.S. has not only required transparency in its own ISDS agreements, it has pushed the rest of the world to do the same.
Most ISDS cases involve narrow issues and individual investors, such as contract breaches, permitting, and licensing. And no case has ever found that nondiscriminatory public health, environment, or other public welfare legislation violated fairness or anti-discrimination provisions. Most of the 3,000 instruments have never seen a case, and only 105 U.S. investors have used the system, because when governments agree to these basic international rules of fairness, they generally live by them.
The arbitration panels are well-regarded. Like many other international dispute panels, both former public officials and private-sector individuals with expertise in the field may serve. Robust international rules govern these panels to prevent conflicts of interest. And in fact, governments actually win most of the cases decided by these panels. When investors win a case, they are awarded far less than the loss they have suffered.
Opponents especially like telling scare stories about cases that have not been filed or might one day be filed, which any law student knows doesn’t tell us anything about how they might be decided. Back in the early 2000s, the cause célèbre scare story was a Canadian-brought ISDS case against California’s ban on a gasoline additive. What happened? The U.S. won, and the foreign claimant paid the U.S. government $4 million in legal fees.
For manufacturers and other businesses in the U.S., ISDS is an important last resort when a government blatantly discriminates, seizes private property without compensation, or treats investors unfairly. These rules promote the rule of law internationally and help manufacturers succeed in a tough global economy, helping to support jobs, research and development, and production here at home.
It’s easier to be against something than for it. And it’s easier to listen to a sound bite than wade into the facts. But now is a critical time for members of Congress, since opponents of trade are relying on anti-ISDS arguments to try to convince policymakers to oppose TPA, or fast-track negotiating authority.
Manufacturers urge every member of the House and Senate to sift through the disinformation campaign to get to the facts. The rule of law is important in the global system, both in its own right and to protect job creators across America. Let’s not reject it based on false claims and too much mud.
Linda Dempsey is the Vice President of International Economic Affairs with the National Association of Manufacturers Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.
