Leaders from the American Petroleum Institute and six trade associations from other US industries strongly expressed a desire to see the Investor-State Dispute Settlement (ISDS) provision in the current North American Free Trade Agreement retained—and possibly enhanced—in any successor.
“For our industry, ISDS protects investments by allowing any international disputes to be brought into arbitration,” API Pres. Jack N. Gerard said Sept. 22 during a teleconference that included other associations’ presidents.
“Many in Congress, including several senior leaders, have weighed in on the importance of keeping ISDS as a part of the agreement,” Gerard said, adding, “We’re concerned that it hasn’t been brought forward as one of the priorities by the administration.”
The provision, outlined in NAFTA’s Chapter 11, aims to protect cross-border investors and facilitate the settlement of investment disputes, according to the US Department of State, the designated US government lead agency in handling such matters.
“For example, each NAFTA party must accord investors from the other NAFTA parties national (i.e. nondiscriminatory) treatment, and may not expropriate investments of those investors except in accordance with international law,” it said.
“ISDS is crucial,” said Linda Dempsey, vice-president for international affairs policy at the National Association of Manufacturers.
Noting that Canada and Mexico purchase more than one fifth of what US manufacturing produces—more than the next 10 markets combined—Dempsey said NAM’s members depend on ISDS and other baseline protections that the US also exports. “In order to ensure that American jobs are protected, we need to see an updated NAFTA with strong ISDS protections,” she said.
NAM and its members are looking for “a solid, predictable ISDS mechanism with a number of improvements, such as having it apply to all industries,” Dempsey said. “We’d like to see it strengthened so nothing falls by the wayside. Anything that would weaken ISDS creates more uncertainty, which comes back to US jobs such as exports of production or mining equipment, not only in the companies themselves but also in their communities.”
NAFTA can be improved
American Chemistry Council Pres. Cal Dooley said US chemical manufacturers have benefited from the trade agreement. “We recognize there are ways NAFTA could be improved, such as opportunities to capitalize on digital information to facilitate trade. Repealing ISDS or other important mechanisms would jeopardize the chemical industry’s growth,” he said.
“Like others here this morning, we need all available tools to improve our exports,” observed American Forest & Paper Association Pres. Donna Harman. “ISDS is a strong trade enforcement mechanism, and ensures that US forest product companies’ assets aren’t subject to unfair actions by host governments. We, along with others, have made the case that ISDS needs to be preserved in NAFTA.”
Harman noted that when an industry is capital-intensive like paper, assets are long-lived. “A lot of our companies supply products to global customers who like working with US companies, but our companies need assets which are close to their foreign markets,” she said.
Security Industries and Financial Markets Association Pres. Kenneth E. Bentsen Jr. said his organization’s members support the original agreement, but also see are opportunities to enhance it such as extending ISDS to the financial sector, which it doesn’t cover currently. “An important feature is that it can increase certainty for US companies, but it’s important to address proposals such as local content requirements which could push us backward,” he said.
“ISDS allows large and small investors to seek recourse in inequitable treatment of their foreign operations,” said Rob Mulligan, US Council for International Business senior vice-president for policy and government affairs. “Leaving these out would set an undesirable precedent in other foreign trade negotiations for the US—notably China.”
“We fully agree that after 23 years, NAFTA needs to renegotiated and updated to reflect today’s business environment as well as anything that might come in the future,” said Jonathan Gold, National Retail Federation vice-president for supply chain and customs policy. “A withdrawal from NAFTA should not be considered at all. We should ensure that proper investment protections remain as a key part of the agreement.”
Gerard said, “The sooner we get [NAFTA] settled, the better, but we need to take the time to get it right.”
Contact Nick Snow at [email protected].
