On Monday, Commerce Secretary Penny Pritzker told a meeting before the Council on Foreign Relations that a controversial provision within the Trans-Pacific Partnership (TPP), which surrenders US sovereignty in favor of corporate interests, was a good deal because a US company has prevailed every time the process has been used. The process, known as investor-state dispute settlement (ISDS), allows corporations to sue governments outside of normal legal channels and have the dispute settled in a corporate-friendly tribunal.
Secretary Pritzker, a former Council on Foreign Relations board member and one of the richest women in the world, explained that opposition to TPP was misguided and that free trade was being unfairly scapegoated for larger forces hurting US workers, such as automation. Pritzker claimed that wealth shifting east to a rising middle class in Asia was inevitable, and the only real question was whether or not US companies would get in on the action. Pritzker warned that without US “leadership,” the rules for commerce in Asia may be set entirely by non-Americans. Perish the thought.
Pritkzer blamed the presidential campaigns – of both parties – as contributing to the unpopularity of TPP, by “not telling an accurate story,”and “blaming trade” for larger problems. Secretary Pritzker recommended business owners explain the value of TPP to their employees, who could then in-turn lobby members of Congress. Presumably, this would compliment lobbying efforts already underway by said business owners.
During the audience question and answer portion of the program, Secretary Pritkzer was pressed on ISDS and asked why it was good for America when transnational corporations could sue the country for having to comply with health, labor and environmental regulations.
Pritzker responded and said that ISDS was “as much a protection for American companies around the world, for any time investor-state dispute resolution has been used against the interests of the United States, they’ve lost. The United States has won. So I don’t see that it makes us more vulnerable, what it does is give our American companies greater rights in countries around the world that don’t have the judicial system we have.”
Secretary Pritzker continued to hit the rule of law justification for ISDS when asked by a representative of Citigroup how she and others could make ISDS more palatable given how new it was. Pritzker claimed that ISDS was a useful tool to resolve business disputes in places that – unlike the US and other developed countries – did not have a well-functioning judicial system that could force companies and governments to live up to contracts and not expropriate property. She even went so far as to claim ISDS was needed because those judicial systems “have biases built into them.” Apparently the corporate tribunals can provide better justice than many governments that are party to TPP, or so the commerce secretary would have you believe.
Of course, that characterization of the ISDS process is ridiculous. ISDS’ own track record reveals its actual purpose – to ensure corporations prevail over governments:
ISDS is a legal system that has been included in investment treaties and trade agreements over several decades, including under the North American Free Trade Agreement (NAFTA). Under these rules, foreign investors can legally challenge host state regulations outside that country’s courts. A wide range of policies can be challenged: Argentina has had its macroeconomic policies challenged, Australia its anti-smoking efforts, Costa Rica its environmental preservation laws. While the United States has never lost a case, U.S. corporations have won many of their complaints against foreign governments.
The system is unusual in international law. Most international courts only allow disputes between states. ISDS, in contrast, creates one-way rights: Corporations can sue governments, but not vice versa.
And as far as rule of law goes, the arbitrators who decide the ISDS cases are hired on a case-by-case basis by both the corporations and the governments. Needless to say, such arbitrators want to stay on the right side of the people doing the suing. Talk about a setup.
It would appear that, if anyone is “not telling an accurate story” about TPP, it is the deal’s proponents in the Obama Administration who are selling a loss of sovereignty and democratic accountability as a victory for the rule of law.