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"Outdated trade rules like ISDS can pose a real threat to states' sustainable energy initiatives and the good-paying jobs they create," said one lawmaker from Maine.
More than 300 state lawmakers signed a letter Monday calling on U.S. President Joe Biden to "eliminate the threat of Investor-State Dispute Settlement from all U.S. trade and investment agreements," joining hundreds of civil society groups and dozens of members of Congress in speaking out against rules that allow foreign corporations to challenge state laws.
The legislators—who include Democrats, Republicans, and Independents—expressed support for the official position of the National Conference of State Legislatures (NCSL) regarding ISDS, as the conference convened its annual summit in Louisville, Kentucky.
The NCSL opposes trade deals "with investment chapters that provide greater substantive or procedural rights to foreign companies than U.S. companies enjoy under the U.S. Constitution."
The Biden administration has agreed with the NCSL's call to exclude ISDS from any new trade agreements, but the U.S. is currently a party to more than 50 trade and investment deals that contain the rules.
"It's long overdue that we change course. Getting rid of ISDS, which embodies the runaway corporate power embedded in our trade deals, is a great place to start.
ISDS rules empower corporations to sue governments if they claim their profit margins are harmed by public programs, such as public health regulations, environmental rules, food safety guidelines, or climate laws aimed at reducing fossil fuel emissions.
"The outcomes of these cases, which can result in billions of U.S. tax dollars paid to foreign corporations in compensation, are
determined in unaccountable tribunals presided over by unelected corporate lawyers whose rulings are not subject to appeal," reads the Monday letter from state lawmakers, including North Carolina state Rep. Pricey Harrison (D-61), New York state Sen. Liz Krueger (D-28), and Florida Rep. Anna Eskamani (D-42).
According to the letter, "even cases that get dismissed can result in countries paying millions in tribunal costs."
Harrison said in a statement that "the era of corporate-dominated trade policy" has contributed to a loss of 40% of North Carolina's manufacturing jobs.
"It's long overdue that we change course," said Harrison. "Getting rid of ISDS, which embodies the runaway corporate power embedded in our trade deals, is a great place to start. These extreme corporate rights undermine democracy and critical public interest protections here at home and around the globe. I'm glad to see so many colleagues from across the political spectrum joining me in this effort."
Last November, 200 civil society groups demanded the elimination of ISDS within APEP, and three dozen members of Congress wrote to U.S. Trade Representative Katherine Tai and Secretary of State Antony Blinken last May saying the U.S. should end the system's use in its trade agreements.
Allowing corporations to sue over laws that cut into their profits, wrote the lawmakers on Monday, "threatens the policy space we need to maintain high-level public health standards, create clean energy jobs, protect the digital privacy and data-security of those we represent, and much more."
Maine state Sen. Craig Hickman (D-14) expressed concern about ISDS both as a lawmaker and "an organic farmer committed to curtailing the severe impacts of climate change and strengthening rural economies."
"Outdated trade rules like ISDS can pose a real threat to states' sustainable energy initiatives and the good-paying jobs they create,"
said Hickman. "I urge the administration to eliminate this antiquated mechanism that stands in the way of sustainable food systems and the clean energy economy we need to build for our children and grandchildren."
Note: This article has been edited to correct a reference to U.S. trade deals containing ISDS and the Americas Partnership for Economic Prosperity.
As a former ISDS defense attorney, I represented Latin American governments against corporations and witnessed firsthand the devastating impacts of this mechanism on local communities, economies, and environments.
For decades, U.S. trade policy across Latin America has prioritized the profit of U.S. mega-corporations over the well-being of communities, workers, democracy, and human rights. Now, as trade ministers from the U.S. and eleven countries in our hemisphere convene at the Americas Partnership for Economic Prosperity (APEP) Ministerial in Quito this week, they have an opportunity to address one of the worst manifestations of this shameful legacy.
Embedded within trade and investment agreements between the U.S. and many countries in Latin America is a relic of colonialism that empowers multinational corporations to challenge any public interest law and policy that may interfere with their profits in extrajudicial, closed-door arbitration tribunals. This insidious system is called Investor-State Dispute Settlement (ISDS), and it effectively erodes democracy while fleecing governments of taxpayer dollars and diverting public funds. Yet the secretive nature of the ISDS system ensures the public remains largely unaware.
As a former ISDS defense attorney, I represented Latin American governments against corporations and witnessed firsthand the devastating impacts of ISDS on local communities, economies, and environments.
Time and again, I saw how ISDS granted corporations unprecedented power beyond domestic laws to sue foreign governments for any action they argue violates their broad investor rights, even if governments attempt to protect human rights, workers, or the environment.
Only corporations can launch suits, meaning governments cannot hold corporations accountable. Therefore, if a corporation engages in harmful practices and a government tries to mitigate them, the company can launch an ISDS claim. This system has awarded corporations over $100 billion in taxpayer dollars in known cases, with fossil fuel companies being the primary beneficiaries. The actual sum is likely much higher since awards are often kept secret.
The impact of ISDS on Latin America and the Caribbean has been particularly severe. The region faces a disproportionate number of ISDS disputes (nearly a third of all cases) despite having less than 10% of the world’s population. Latin American governments have been forced to pay corporations $33.8 billion in known awards and settlements, diverting critical resources from social needs.
Following colonization, newly independent nations were pressured to adopt trade and investment deals with ISDS provisions supposedly to attract investment. Despite proponents’ claims, studies show no meaningful increase in foreign investment due to ISDS provisions. Brazil does not have any treaties with ISDS and yet receives the most foreign investment in the region. Instead, ISDS has entrenched an imbalanced system where multinational corporations wield disproportionate power and pillage resources unchecked, often at the expense of the environment and local communities, echoing the colonial paradigm.
I have also witnessed many times how ISDS undermines the will of the people and places Indigenous communities in danger, particularly when corporations want to extract resources from their lands.
The right to Free, Prior, and Informed Consent is a cornerstone of Indigenous rights, allowing them to agree to or reject proposals impacting their lands. However, governments may sideline these rights to avoid costly ISDS litigation, undermining Indigenous sovereignty and self-determination. While Indigenous rights are enshrined in international law, they are often inadequately enforced, whereas ISDS obligations are both binding and highly enforceable. Furthermore, ISDS tribunals frequently restrict the participation of local communities before issuing their awards, effectively silencing the voices of the most impacted and vulnerable.
Notably, the APEP ministerial is taking place in Ecuador, a country that has endured egregious ISDS cases highlighting the erosion of sovereignty and environmental injustice perpetuated by the system. For example, after being found guilty of severe pollution and environmental damage to the Amazon and ordered to clean up by Ecuadorian courts, U.S. oil giant Chevron launched an ISDS suit against Ecuador for $9.5 billion instead of complying. Another case involved Occidental Petroleum, which was awarded $1.4 billion after Ecuador terminated a contract due to the company’s violation of domestic laws.
In 2009, after undertaking an extensive audit of its investment treaties, Ecuador denounced ISDS, withdrew its membership from the World Bank’s venue where most ISDS cases are heard, and terminated 16 bilateral investment treaties. Subsequent Ecuadorian governments have unsuccessfully tried to reinstate ISDS. In response to a referendum this past April, Ecuadorian voters rejected ISDS in a landslide. This is a powerful, democratic statement against a system that prioritizes corporations.
Ecuador’s struggle with ISDS is emblematic of the broader issues countries face, and the global opposition to ISDS is growing. The European Union recently exited the Energy Charter Treaty, which granted ISDS powers to fossil fuel companies, citing concerns that it undermined the fight against climate change. Bolivia, Honduras, India, Indonesia, Pakistan, South Africa, and Venezuela have also taken steps to eliminate their ISDS liability. United Nations experts have called for the abolition of ISDS, citing its undermining of state sovereignty, democracy, and the rule of law.
Domestically, there is increasing bipartisan pressure to end ISDS. Both the previous and current administrations have taken steps away from ISDS. President Biden pledged to abstain from including ISDS provisions in new trade deals. Last year, over 200 U.S. labor unions, faith groups, and environmental organizations urged President Biden to eliminate ISDS from existing treaties, highlighting its detrimental impact on public health, climate protections, Indigenous land rights, and democratic sovereignty. Members of Congress have echoed these calls, emphasizing the need to address ISDS to tackle the root causes of migration, protect the environment, and uphold democratic values.
Achieving APEP’s stated goals of fostering inclusivity and sustainable economic development hinges on reconciling past policy mistakes. Members of Congress recently urged USTR to establish a working group within APEP to explore options for eliminating ISDS provisions in existing trade deals. Not only is this possible, but it is also essential to align trade policy with the values of democracy, human rights, and environmental protection.
APEP ministers should seize this opportunity and eliminate ISDS once and for all to give a sustainable future for people and the environment a fighting chance. The stakes are too high to do otherwise.
The U.S. government ignores the trade numbers and misconstrues Mexican policy when it comes to glyphosate and American corn destined for human consumption across the border.
An international battle over tortillas is taking place this week. For an ingredient in tacos, the United States gins up a trade dispute with Mexico. Last year, in a Decree Mexico outlawed genetically modified (GMO) corn for human consumption. The U.S.argues that this violates trade obligations. Worried about its GMO corn exports, it formed a trade panel under the United States Mexico Canada Agreement (USMCA). Hearings started Wednesday.
The controversy is overstuffed and a sloppy mess. So far, American and Mexican legal filings contain 586 pages, 758 exhibits, and nearly 2,000 footnotes. Arguments span over 20 separate USMCA provisions and multiple annexes. Extra submissions come from Canada and non-governmental organizations. It’s hard to follow, whether you’re a trade expert, scientist, or just care about food safety.
The U.S. position has two weaknesses: economic errors and misrepresentations about the Decree. These are basic mistakes, from a Trade 101 class, regarding injuries and policy. The fumbles stand out from the legalese and scientific jargon in the filings. And let's be clear: he U.S. should drop the case.
A good place to start making sense of the fight is the actual Decree. Article 6 outlaws GMO corn for human consumption, precisely defined as corn for tortillas or masa (dough). It stops approvals for GMO corn for these two items. That is it. The Decree is explicit in not touching GMOs in animal feed or industrial use—the kind U.S. corn farmers mostly export.
Decree motivations include protecting human health, biodiversity, and food security. The prohibition responds to risks from glyphosate, an herbicide needed to grow GMO corn. It has been found to be a likely cause of cancer by international health agencies and U.S. courts. Next, Mexico is corn’s center of origin and diversity, a scientific designation indicating extreme genetic vulnerability. In 2021, Mexico’s Supreme Court found that GMOs threaten to permanently damage this biodiversity. More immediate, corn provides half of the daily protein intake for Mexicans.
With Article 6, Mexico reduces these threats by outlawing GMOs in the tortillas and masa, eaten by millions every day. For thesescientifically establishedrisks, Mexico tailored the Decree to only impact two food staples.
The U.S. ignores this. Recent economic figures explain. Mexican corn imports from the U.S. have increased since the Decree. Last week, the U.S. Department of Agriculture reported a “record-high” for corn exports to Mexico for 2023 and 2024 and forecasts similar trends next year. This confirms earlier reports citing increases by 20 percent.
Put simply, the Decree has no real impact on trade in corn. Why? Because American farmers overwhelmingly export corn for animal feed and not for human consumption. Mexicohas explained this since enacting the Decree. Let’s be clear, the U.S. fights as exports increase. It makes no sense.
Furthermore, the U.S. mispresents the Decree. The U.S. says Mexico imposes a “Tortilla Corn Ban.” Wrong. It suspends approvals for human consumption. GMO corn can still be imported but cannot be destined for tortillas. Mexico describes this as an “End Use Limitation,” since it regulates how corn is used. This applies to GMO corn from anywhere including from Mexican farms.
Next, the U.S. exaggerates what the Decree does. It quibbles about non-issues. What it coins “Substitution Instructions” to force replacing GMO corn in animal feed. The complaint is that instructions are unclear.
Problem: the Decree does not mandate substitution. It does describe future actions and the prerequisites needed to replace GMO feed. Article 7 expressly says Mexico’s commission on sanitary risk will continue approving GMO corn in animal feed, so long as it is not for tortillas. It clarifies that federal agencies will conduct any possible substitution. By implication state governments in Mexico have no role.
Article 8 confirms this, explaining what is necessary before any replacement. It designates the parameters to eventually substitute GMO corn for animals. Pre-conditions include determining national food security and any impacts on human health. In two filings, Mexico explains that the prerequisites have not occurred. As such, it has not set any date for substitution, much less any guidance.
Nowhere does the Decree demand alternatives for GMOs. American complaints miss the mark. There is no there there. The Decree does not touch corn for livestock.
The dispute just started warming up the comal (skillet used to heat tortillas). A final panel report comes in November. Until then, expect a mess with more scientific and legal arguments piled on. In the simplest terms, the U.S. ignores commercial reality and misrepresents the Decree. Basic blunders compounding obstacles in the USMCA’s food safety rules.
All this should inspire resolution versus repeating trade defeats. American farmers and Mexican eaters deserve better. Ending the dispute secures a corn buyer in a neighbor. It promotes public health in Mexico. The current course only produces uncertainty.