Purported TPP Investment Text Confirms Pro-Rule of Law and Transparent Processes, but Raises Questions about Some TPP Countries’ Commitment to Fairness and the Rule of Law

By March 26, 2015Trade

Last night, WikiLeaks put out what it claims is the draft of the investment text being negotiated in the Trans-Pacific Partnership (TPP).

For manufacturers in the United States, many of whom use foreign investment to spur U.S. exports and make overseas sales, the text looks familiar because it is substantially based on the highly detailed U.S. model investment negotiating text that has been publicly available on both the websites of the Office of the United States Trade Representative (USTR) and the Department of States since the Obama Administration completed its multi-year review of the investment text in April 2012. That review, which was public and sought input from stakeholders throughout the United States, resulted in a strong investment negotiating document that seeks a more level playing field for our nation’s manufacturers and other job-creators in this country.

The leaked text, the authenticity of which has not been confirmed by the TPP governments, directly contradicts the fallacious claims of the opponents as the text would require:

  • A highly transparent investor-state-dispute settlement (ISDS) process, requiring all briefs and other documents to be made public, public hearings, and the ability of non-parties to file Amicus statements.
  • A limited ability to challenge government action only on very basic core principles that are familiar to all Americans, such as non-discrimination, fair and equitable treatment, and compensation for the government seizure or destruction of property.
  • Strong limits on foreign governments seeking to force the localization of U.S. manufacturing or technology transfers.
  • Highly developed procedural provisions to prevent frivolous claims and sham suits, while requiring arbitrations to be conducted based on widely-recognized international procedures that impose rigorous conflict of interest and related requirements on arbitrators.

The investment provisions of our trade agreements, which are backed up by the neutral and well-respected ISDS dispute settlement mechanism, are an important tool particularly for small and medium-size businesses that have been the most prevalent users of the ISDS dispute settlement mechanism. The investment provisions are a much more limited form of the basic rights and rules on which America was founded.  The U.S. Constitution and the Administrative Procedure Act require the U.S. government and all of its agencies involved in rulemaking to adhere to some basic tenets — nondiscrimination, fair treatment and compensation when the government seizes or destroys private property. No U.S. government agency is exempted from these rules, nor is any particular type of rulemaking, because these are basic rights to which all individuals, property owners and investors in the United States should be accorded. An excellent piece on this issue was just posted by by Stephen M. Schwebel, Former Judge and President of the International Court of Justice.

The purported TPP investment text, however, would seem to indicate that some governments want to shield themselves from these basic principles, while they simultaneously seeking our investors to put their property, employees and investments in their country. That type of outcome is not in the interest of America or our manufacturers. Allowing other countries to seize investors’ property without compensation or to discriminate or treat an investor unfairly does not just impact foreign operations, it negatively affects U.S. business activities and the ability of our companies to innovate and provide good jobs here in the United States.

The only thing outrageous about the TPP investment negotiations is the misstatements by the opponents. Just consider the facts:

  • The vast majority of U.S. investors that have brought ISDS cases are small and medium sized businesses.
  • Most of the world’s 3,000 treaties have never experienced an ISDS claim.
  • Claims of hundreds of cases against the United States after the Korea-U.S. Free Trade Agreement are false; not one case has been filed after three years.

ISDS is an important pro-enforcement and fairness tool that helps support manufacturers’ and other businesses’  investments that propel U.S. exports, support U.S. R&D and capital investment, along with millions of higher-paying U.S. jobs. Manufacturers urge U.S. negotiators to continue to seek strong outcomes across the board on this important pro-manufacturing tool.

Linda Dempsey

Linda Dempsey

Linda Dempsey is the vice president of international economic affairs at the National Association of Manufacturers (NAM). In this capacity, Ms. Dempsey leads the NAM’s efforts to improve the global competitiveness of manufacturers in the United States by advocating intellectual property protection, increased export financing and the elimination of trade barriers as well as pushing for agreements and treaties to open up new export markets to create jobs. Ms. Dempsey is noted for her experience on a wide range of international trade and investment policy issues.
Linda Dempsey

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