Keep International Protections; Bilateral Treaties and Free Trade Agreements Are Key

Article excerpt


Cross-border investment, like trade, is vital to our economic prosperity. The United States has long sought to protect our investors abroad through bilateral investment treaties (BITs) and similar provisions in free trade agreements.(FTAs)

These agreements are today in the cross hairs of traditional opponents of trade liberalization. They wrongly charge that the treaty safeguards against arbitrary, discriminatory and confiscatory treatment, as well as their impartial arbitration mechanism, are threats to our sovereignty.

So it is worrisome that Rep. Sander M. Levin, Michigan Democrat, chairman of the House Ways and Means Trade subcommittee, has set a hearing today to consider changes to future bilateral investment treaties and free trade agreements. Concurrently, the State Department established an advisory committee, co-chaired by an AFL-CIO representative, to review investment protections.

According the hearing notice, the subcommittee will consider whether U.S. treaties should provide that foreign investors in the United States shall have no greater rights than do U.S. investors under U.S. law, and whether investors should be deprived of the right, in U.S. agreements since 1982, to seek compensation from governments for treaty breach.

This may sound innocuous, even academic. It is not. Were these changes to be made it would constitute a dramatic reversal of longstanding, bipartisan U.S. policy, jeopardize billions of dollars of U.S. investment abroad and place us in the company of those on the wrong side of history.

The no greater rights mantra is not new. It was historically invoked by the Soviet bloc, Iranian revolutionaries and various others who sought to expropriate U.S. property with impunity. They claimed that foreign investors had no international law rights and were entitled to no greater rights than domestic law provided their own citizens.

The modern standard-bearers of this view, Presidents Hugo Chavez of Venezuela and Evo Morales of Bolivia, recently renounced treaty commitments to resolve investment disputes under international law, claiming foreign investors should receive only local justice under local law.

By contrast, the United States maintained that U.S. investors abroad enjoy rights under international law that are independent of the domestic rights in the host country. The United States fought for decades to establish this view and succeeded: a network of treaties now numbering more than 2,600 worldwide (the United States is a party to some 50 such agreements) contains strong rules that protect investment against discrimination, arbitrary treatment, and expropriation without compensation - rules drawn from the U.S. Constitution.

And, importantly, these rights are enforceable by the investor through arbitration in a neutral forum, thus depoliticizing disputes. Without this recourse, U.S. investors would be left to the mercies of potentially biased local courts or to the discretion of the State Department to press their claims, which may be traded off for other foreign policy objectives.

But we can't expect other countries to subject their actions to treaty rules and international arbitration if we won't do the same. Reciprocity lies at the heart of all international agreements. In April, the Business Roundtable identified as a top priority concluding BITs with India and China. If U.S. policy moves in the wrong direction, those treaties will do no more than grant U.S. investors what Chinese or Indian law already provide and refer them to local courts in the event of disputes. …