As most of us know, including Kim Jong Un (I hope by now!), Donald Trump is a guy who doesn't like to be threatened. But big business lobbies such as the US Chamber of Commerce are menacing the Administration with grave consequences if it goes ahead with a plan to change Investor-state dispute settlement in NAFTA.
The controversy around ISDS is well-known to readers of this blog, and I've weighed in on it many times here. As Simon Lester reported recently, the USTR has been developing a proposal that would allow individual NAFTA parties (member-states) to opt in or out of allowing suits against their governments by private corporations for violation of the investment provisions of the NAFTA. An alternative, though not inconsistent, approach to ISDS reform was outlined by Canadian foreign minister Chrystia Freeland on the eve of the launch of the negotiations; for Freeland, the key was to ensure that ISDS does not in any way interfere with the right for regulate in the public interest. As I have suggested, this could be achieved in various ways, including having public policy exceptions and limiting the jurisdiction of ISDS panels to cases where discrimination against foreign investors can be established.
But what of the threat that, if the USTR does not back off from the opt in/opt out concept, US big business won't support the Administration's plan for NAFTA renewal? When business lobbies have to resort to this kind of public threat it usually means that they have failed to exert influence in the ways that they are apt to do, through quiet persuasion and private pressure. In other words, the pro-ISDS faction has already lost hearts and minds.Think about where the expression lobbying comes from-working the lobbies in assemblies of power, i.e. Congress. Making threats with a megaphone through the media is virtually an admission of professional failure.
And what are the lobbies really saying? These are groups that didn't really want NAFTA to be touched in the first place. They were being reactive to the Trump Administration's agenda to mess with the agreement. Is there any credibility to saying they will pull their support for renegotiation if the US drops the idea of flexible ISDS?The first best outcome for the big business interest groups may be that the existing NAFTA stands in place. If so, the Trump Administration can't trust them from the get go support a new NAFTA in the face of opposition from some quarters in Congress.
On the other hand, there is a political myopia to the business groups' hard pro-ISDS stance-labor, and other interests with their own powerful support in Congress, are equally adamant against ISDS. Why set up a zero-sum scenario where the Administration, and Congress, are forced to choose sides between big business and organized labor? The stakes for American business are too high with respect to NAFTA to pursue that course, especially since if he doesn't get what he wants Trump threatens to withdraw from NAFTA-something that Congress will likely stop, but only after a period of considerable instability and worsening of relations with our NAFTA partners.
There isn't a lot of good sense in going to the wall over traditional ISDS. So one wonders whether corporate counsel and government relations folks in large firms have been sold a bill of goods by the lobby groups, who are often very connected to the top Washington DC law firms that make a killing out of ISDS arbitration claims.
