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us trade policy
Repairing the Harmful Legacy of Corporate-Dominated Trade in the Americas
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.
Jul 31, 2024
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.
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Rightwing vs. Leftwing Populists on Global Trade
Jul 01, 2016
It must have given the earnest wonks at the Economic Policy Institute a bit of a start when Donald Trump touted their research in a speech courting white, working-class voters by criticizing NAFTA and U.S. trade policy with China.
EPI president Lawrence Mishel was moved to respond in a blog post titled "Trump's Trade Scam."
"If he is so keen to help working people, why does he steer the discussion back toward the traditional corporate agenda of tax cuts for corporations and the rich?" Mishel wrote, hastening to distance himself from Trump.
Progressives who have long criticized trade deals that favor multinational corporations, suppress wages, accelerate outsourcing, and replace local democracy with unelected tribunals shrink from keeping company with the racist, isolationist right.
This is equally true in Trump's America and Britain, which is newly divorced from the rest of Europe. Guardian columnist Gary Younge concurs with Michel on the fraudulence of rightwing anti-globalism, and particularly the immigrant-bashing Brexit campaign:
"The very people who are slashing resources--the Tory right-- and diverting what's left to the wealthy are the ones rallying the poor by blaming migrants for the lack of resources," Younge wrote.
"Not content with urinating on our leg and telling us it's raining, they have found someone to blame for the weather."
Rightwing populists are making a lot of noise about the weather lately--that is, the lousy economic climate brought on by trade deals that favor corporations at the expense of labor. As a result, they are making inroads with an anxious working class.
"Progressives can't afford to cede economic populism to the man who could prove to be the most effective white nationalist campaigner of our generation," Tarso Luis Ramos, executive director of the rightwing watchdog group Political Research Associates, put it to me recently, when I interviewed him about Donald Trump.
I spoke with Melinda St. Louis, International Campaigns Director for Public Citizens' Global Trade Watch to get a progressive view on globalization. St. Louis has spent her career working on fair trade.
She is optimistic about a global movement for economic justice.
"I don't think we're ceding talking points on this," she says, pointing to the campaign to defeat the Trans-Pacific Partnership (TPP), which she calls "kind of exciting."
Both major parties pushed multinational corporations' agenda in big trade deals for years. But not this year. Growing public ire over NAFTA, especially in the Rust Belt, which has seen more than 57,000 factories offshored, has changed the political debate. St. Louis points out:
"Now the candidates are fighting over who hates the TPP more. That is a prudent response since all of the trade unions, environmental groups, LGBT organizations, women, retirees--the entire progressive base is opposing TPP.
It's not about trade or not trade, it's about who writes the rules and who benefits."
Human rights advocates see no reason for the TPP to make it easier for Malaysia, which has a problem with human trafficking, to access U.S. markets. LGBT activists don't want to roll out the red carpet for Brunei, which is bad on LGBT rights.
Overall, the trouble with the TPP is that it "doesn't learn the lessons of NAFTA," St. Louis says. "It expands incentives for offshoring and creates more opportunities to challenge environmental and health and safety laws through secret tribunals."
The public is increasingly unhappy with such deals.
St. Louis notes the TransCanada corporation's recent Keystone claim against the United States under NAFTA's rules. "Obama listened to activists, who pointed to the environmental and economic damage, and now we, the taxpayers, could be on the hook for $15 billion because of an unaccountable trade deal. Why on earth would we want to expand that through the TPP?"
Perhaps the biggest difference between left and right-wing views of global trade is that while right-wing populists blame immigrants and foreign workers, progressives see workers across borders making common causes.
"I worked in Central America during the Central America Free Trade Agreement negotiations, and the people in Central America said at the time, 'This is going to decimate us,'" says St. Louis. "Sure enough, we've seen an increase in inequality and instability in the region since CAFTA passed."
St. Louis speaks with feeling about "the brightest, most entrepreneurial people" leaving Southern Mexico and Central America to make the dangerous trek North, not because they think the streets in the United States are paved with gold, but because there are no other opportunities for them:
"To see these families in a place where family is so important being broken up for years--parents sending money to their children, but not seeing them for fifteen years--it's devastating."
Scapegoating these immigrants is particularly outrageous, she says, since economic and trade policies have been a major contributor to their plight.
Take the two million Mexican farmers who lost their livelihoods under NAFTA when U.S.-subsidized corn flooded the market at lower prices than the production cost.
Despite the bad economic news and the ominous rightwing backlash, St. Louis is optimistic about the global movement for economic justice:
"When there is this level of overreach of corporate greed people do mobilize and beat it back. A couple of years ago it was unthinkable that the TPP would be a major issue in the presidential campaign."
There have been other victories. Massive opposition to the Free Trade Area of the Americas--a proposed NAFTA expansion--killed that plan. Likewise, citizen organizing helped kill the Multilateral Agreement on Investments.
Liberal economists, including Paul Krugman, Larry Summers, and Robert Reich, have moved away from their pro-NAFTA positions and begun to support the call for fair trade. St. Louis sums it up:
"There is a populist response from the left and the right. Elites should pay attention."
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