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Investor-State Proponents Need a Better Rebuttal to Senator Warren's Opposition

March 9, 2015 in Economics

By Daniel J. Ikenson

Daniel J. Ikenson

On nearly all matters of trade and investment, I am more likely to agree with Gary Hufbauer of the Peterson Institute for International Economics than with Massachusetts Senator Elizabeth Warren. But Hufbauer’s attempted takedown of the substance of Warren’s argument against the investor-state dispute settlement (ISDS) mechanism comes up short. Hufbauer’s a smart guy and a straight-shooter, so the porousness of his ISDS defense should be seen as further validation of the critics’ concerns.

In full disclosure, like Warren, I have argued that ISDS should be jettisoned, finding the institution to be a subsidy to business that comes at the expense of domestic investment and the rule of law. But I have been waiting — indeed, almost expecting — to hear the definitive argument to prove me wrong, considering how confident proponents seem to be about, not only the propriety, but the necessity of ISDS to global trade and investment. After reading Hufbauer’s analysis (and some from CSIS, the Chamber, and the NAM, and hearing the views of four prominent pro-ISDS conferees at an event we hosted at the Cato Institute last year), I remain unaware of a comprehensive pro-ISDS argument that acknowledges and extinguishes the legitimate concerns raised about ISDS. The White House gave it a shot, but Simon Lester was unconvinced.

Hufbauer, like most other ISDS proponents, bases his argument on three rickety assertions: that ISDS has been around for a long time, so it must be necessary; that ISDS has protected U.S. investments overseas, so it must be sound; and, that the United States has never lost a case brought against it by a foreign investor, so those concerned about domestic sovereignty and democratic accountability are tilting at windmills. But what passes for the central tenets of this argument are that, so far, ISDS has worked to protect U.S. companies that invest abroad and, so far, no U.S. law, regulation, or policy has been found to violate investor’s rights.

Concerns about the ISDS system are legitimate and should be taken more seriously. Doing so will not kill the TPP.”

Now, take a step back and ask whether these rationales answer the concerns of ISDS skeptics. Perhaps they help neutralize some of the sensationalism surrounding the issue, but they plainly do not answer the serious indictments against ISDS: that it encourages outsourcing to the disadvantage of U.S. workers and communities; that it …read more

Source: OP-EDS

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