Are Investment Protection and Trade Headed for a Divorce?
To follow up on Anthea's post from last week, there is another fundamental question about ISDS/investment protection: If it is going to exist, in one form or another, where exactly does it belong? Should it be part of the trade regime? Or should there be a separate system for investment protection that is unconnected to trade agreements? In this regard, Politico reports on a push to complete the EU - Japan trade negotiations without investment protection:
Japanese and European negotiators are redoubling efforts to seal a political agreement early next month on what would be the EU’s biggest free trade deal.
Sources from five EU countries said the goal of the latest whirlwind of diplomatic activity is for Japanese Prime Minister Shinzō Abe to jet into Brussels for a summit July 5 or 6, ahead of a G20 summit in Hamburg on July 7. The intention is to reach a political deal covering more than 90 percent of a trade agreement, leaving only a handful of issues to be resolved later.
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Two key parts of the trade deal would be excluded from the political accord — investment protection and data flows, according to four European diplomats.
“It is very, very unlikely that Japan will accept the Investment Court System [proposed by the EU to solve investor-state disputes] in the short term,” one diplomat said. He added that he expected the Commission to propose leaving investment protection out of the agreement, which would allow it to be ratified at the EU level, without running a gauntlet of approvals in around 40 national and regional parliaments across the Continent.
In the U.S., the investment protection/trade marriage happened before the implications of ISDS/investment protection were well understood. It took a while, but in recent years the backlash against investment protection grew strong enough that one could imagine it being taken out of trade agreements. We still haven't heard much from the Trump administration about their views on this, however.
In the EU, investment protection and trade were brought together much later. If the Politico article is accurate, a rethink is apparently underway right now (not surprising, given the experience of trying to merge the two).
If investment protection is taken out, it will be interesting to see what happens to it. Will governments continue to push for it in standalone treaties? And will it get more or less support when considered on its own?