Thursday, October 2, 2014

Why Do Nation States Promote Trade Agreements That Reduce National Authority?

The US and many European nations have insisted that international trade agreements include a clause that protects investor rights but undermines the rights of nation states to protect their citizens or the environment.  This article describes the investor rights clause that is loved by Wall Street, but which undermines national efforts to protect their own citizens.  The investor protection clause, which was born during the Reagan Administration, and supported by subsequent administrations, describes the misuse of this clause.  For example,  Swedish energy company is building a coal plant in Germany.  The German government demands that the plant disposes of its waste products so that it does not pollute the Elbe river.  The Swedish energy company is using the investor protection to protect its financial interests in the German plant.  The clause requires that a separate court of three judges  hears its case and decides whether Germany is violation of the investor protection clause.  The Swedish energy company is also taking advantage of the clause to dispute Germany's decision to limit the use of nuclear energy.  In other words, Germany's efforts to protect its environment can be subverted by an independent court that is not under its jurisdiction.  That has led Germany and the European Union to exclude the investor protection clause from the Transatlantic Treaty that is being negotiated.  The Obama Administration opposes that effort.

A similar case involves a tobacco company that opposes the rights of the Australian government to insist that it displays the harmful effects of smoking on its packages.  It is using the investor protection clause to limit the ability of Australia to protect the health of its citizens.  The New Zealand government, which is aware of the dispute in Australia, has been reluctant to protect its citizens by requiring a similar warning on cigarette packages produced by foreign firms.

It is clear why multinational corporations support the investor protection clause.  It increases their freedom to ignore the rights of nation states to impact their investment projects.  Wall Street also strongly supports the clause which enables globalization to proceed without interference from national governments.  Its not clear why democratic states support the clause.

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