Stiglitz, fellow panelists decry dispute settlement process under TPP, other trade agreements

A panel of experts on trade agreements objected to the dispute settlement mechanism included in the Trans Pacific Partnership (TPP) and many other trade agreements at a Newsmaker event Feb. 11.

The enforcement mechanism is called the Investor-State Dispute Settlement (ISDS). TPP was signed by the United States and 11 other nations this month, but it must be agreed to by Congress, which congressional leaders say may not happen until after the election.

ISDS is included in 3,000 trade agreements worldwide and in 50 to which the U.S. is a party, according to the U.S. Special Trade Representative’s Office (USTR), a White House unit that coordinates the nation's trade agreements.

Nobel-winning economist Joseph Stiglitz of Columbia University, attorney Lisa Johnson of Columbia University and former IBM executive Ralph Gomory of New York University agreed that ISDS threatens the ability of U.S. governments at all levels to regulate in the public interest.

Under ISDS corporations can sue governments if regulations harm them and have cases arbitrated by three person panels, Stiglitz said.

Under TPP the arbitration panels would consist of rotating corporate attorneys, according to introductory comments by former Club President Mark Hamrick, who moderated the event.

All three panelists took issue with the USTR official statement that “Because of the safeguards in U.S. agreements and because of the high standards of our legal system, foreign investors rarely pursue arbitration against the United States and have never been successful when they have done so,” as a guide to the future.

Johnson noted that only 10 percent of foreign direct investment into the U.S., whose owners or representatives could sue under ISDS, is currently under ISDS agreements. The TPP would double the percentage and the proposed Transatlantic Trade and Investment Partnership would raise it to 70 percent, she said.

She added that the U.S. has lost on key issues in suits even if it hasn’t had to pay damages - yet. Johnson called the use of ISDS in trade agreements “a failed experiment.” They have been used extensively only since the late 1990's, she said.

Stiglitz deplored a shift of power to corporations in ISDS, saying, “It really precludes public interest.”

He objected to the lack of an appeal process under ISDS as well as an absence of precedents.

“It [TSP and its ISDS] would be overwhelmingly defeated in a referendum,” Stiglitz said.

He contrasted the use of ISDS in TPP with the World Trade Organization’s (WTO)dispute settlement process in which governments sue other governments, rather than corporations suing governments. WTO, which implements trade agreements negotiated over decades, currently lists 162 countries as members.

Stiglitz cited suits brought by tobacco producers under WTO against Uruquay and Australia. These were over increasing the size of health warnings on cigarette packages according to the Independent, a British newspaper. As a consequence, New Zealand dropped plans for a similar regulation, the paper reported.

Hamrick and Gomory mentioned that the U.S. is being sued for the cancellation of the Keystone Pipeline under the North American Free Trade Agreement among Canada, the U.S. and Mexico.

"What we have in ISDS is the greatest grab for corporations to wield influence over the government that I have ever seen or imagined," Gomory said.