In no regard has Biden differed more from his two Democratic predecessors than by rejecting their trade policies
By Herbert Rothschild
Some of us participated in the successful effort to stop the enlargement and extension of the Keystone XL Pipeline, which would have brought the world’s dirtiest fossil fuel — bitumen from the tar sands fields of Alberta, Canada — to Gulf Coast refineries for processing and shipment overseas. The Natural Resources Defense Council deemed that victory “one of this generation’s most monumental environmental victories.” President Barack Obama vetoed the project in 2015, Donald Trump reauthorized it, then Joe Biden vetoed it once more on his first day as president.
Pipeline owner TC Energy then gave up on the project, but not its effort to cash in. Using the Investor-State Dispute Settlement provision of the North American Free Trade Agreement, it sued the U.S. for $15 billion, money it claimed it was entitled to make.
On June 15, TC Energy lost once again because, when the United States-Mexico-Canada Agreement entered into force on July 1, 2020, it replaced NAFTA and included no dispute settlement provision. The USMCA did allow a three-year window for unresolved suits brought under NAFTA’s ISDS to go forward. However, the U.S. rightly claimed that TC Energy’s action failed to qualify as a “legacy” suit, having been brought after the USMCA replaced NAFTA.
In no regard has the Biden administration differed more from those of his two Democratic predecessors than in international trade policy. As they did in other ways, Clinton and Obama diligently served Wall Street banks and large multinational corporations by promoting trade agreements encoding neoliberal ideology. Negotiated in secret by representatives of these global agglomerations of economic power, pacts like NAFTA and the Trans-Pacific Partnership gave them almost everything they wanted with little regard to economic justice, worker rights and health, consumer and environmental protections.
Most egregious were their ISDS provisions. The trade pacts negotiated under the aegis of the World Trade Organization allowed states to sue other states if they alleged violations of the terms of the agreements. Not before NAFTA, however, could private investors sue states.
It was the holy grail for them. The only reliable check on corporate power is governmental regulation. ISDS promised to end that check. If, for example, a state refused to greenlight a proposed project such as an open-pit mine because of the environmental damage it would cause, the foreign corporation could sue for money it claimed it would have otherwise made. The dispute resolution panels were mainly composed of corporate attorneys who deliberated in secret.
By the end of 2023, there had been 830 decisions in cases brought under ISDS provisions in NAFTA and various bilateral trade agreements. Of these, 354 were decided in favor of the state, 268 in favor of the investor, 177 settled before arbitration, and 24 for neither party (liability was found but no damages were awarded). Another 354 cases were still pending. To date, ISDS tribunals have awarded investors $113.87 billion.
In fairness, some of the ISDS suits cited by justice and environmental groups like Public Citizen as particularly unjust had more merit than a summary of the cases seemed to indicate. So, for example, in Metalclad v. Mexico, a U.S. company sued over a refused permit for a hazardous waste facility in the village of La Pedrera in the State of San Luis Potosi. Metalclad asked for $90 million, which included profits it would have made had it completed and run the project. The dispute panel only awarded it $16.7 million, which was the cost plus subsequent interest Metalclad incurred after it began construction following assurances by Mexico’s federal government that a permit would be granted. When Mexico appealed the decision, the award was reduced because the interest was disallowed.
Nonetheless, the ISDS suits have sought to undermine laws in the public interest, and corporations often have succeeded just by threatening to sue. Tobacco companies lost their suits when nations like Uruguay stood firm in defense of their health regulations, but they intimidated others. Because of that history, tobacco companies were explicitly excluded from the narrowly tailored ISDS provision of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
That multinational trade agreement, which entered into force at the end of 2018, was negotiated by the 11 Pacific Rim nations that, along with the U.S., previously had been negotiating the Trans-Pacific Partnership. The TPP died because, three days after taking office, Trump signed an executive order ending U.S. participation. During his campaign, he had promised to reject it, declaring, “The Trans-Pacific Partnership is another disaster done and pushed by special interests who want to rape our country, just a continuing rape of our country.”
His opposition to the TPP aligned Trump with the entire progressive wing of the Democratic Party, which had tried to dissuade Obama from doing what Obama himself had promised he wouldn’t do when he was campaigning before his first election. By the end of Obama’s second term, it had become apparent that, like much of the global population, people in the U.S. were sick of neoliberalism. Even presidential candidate Hillary Clinton, who had supported the TPP when she was Obama’s secretary of State, said she opposed it.
U.S. Trade Representative Katherine Tai is on record saying that Biden doesn’t believe ISDS provisions should be included in future trade agreements. Unfortunately, the U.S. still participates in some 50 free trade agreements and bilateral investment treaties that contain them. The administration hasn’t yet agreed to remove them, although Tai didn’t defend ISDS when she has testified before the Senate Budget Committee in April. Last November, a group of 41 House and Senate Democrats sent a letter to Tai urging their removal, and last month 46 Democratic House members sent her a similar letter. Both letters suggested that the Americas Partnership for Economic Prosperity offers an excellent chance to do that.
Biden announced the initiation of the APEP at the opening ceremony of the Ninth Summit of the Americas on June 8, 2022. It’s intended to be a broad framework for agreements and programs intended to spur economic growth in the hemisphere. What emerges from APEP promises to be much more just than the Free Trade Area of the Americas treaty, a neoliberal agreement which the Clinton and George W. Bush administrations tried unsuccessfully to impose on a recalcitrant Latin America. They were stymied by South American nations, led by Venezuela’s then-president, Hugo Chavez. That’s one of the sins we’ve never forgiven the Bolivarian Republic for committing.
Herbert Rothschild’s columns appear on Friday in Ashland.news. Email Rothschild at [email protected].
