How will the Trump administration approach ISDS in the coming months (or years)? This is an exchange from today's Senate Finance Committee hearing to confirm Michael Nemelka as Deputy USTR for Investment, Services, Labor, Environment, Africa, China, and the Western Hemisphere (starts at 1:21:15):
Grassley: If confirmed, you'll be overseeing our negotiations with Kenya. With respect to the USMCA, we've had folks express concerns that the approach to protecting American investment is insufficient. In particular, they are worried that Mexico may be moving in the wrong direction in giving a fair shake to Americans since the investor state dispute settlement has been scaled back. This affects more than just investments that could have been made -- could have been done -- in America or in any other country. It involves issues like licensing intellectual property or investments in geologic resourcing. We want Americans to be able to safely make those types of investments overseas because they benefit us here at home. If confirmed, will you commit that for Kenya that you will seek comprehensive protections for American investors that are more robust than the approach taken in USMCA?
Nemelka: The investment chapter with Kenya I agree is going to be a very important chapter for that agreement. And we have a goal of making it a high standard, comprehensive chapter. With respect to ISDS, I know that that is still under consideration and you have my commitment to work with Ambassador Lighthizer to carefully consider that issue and consult with you on it.
It's hard to know what people actually believe and what they are doing as political strategy, but clearly in the USMCA the Trump administration reined in ISDS quite a bit. It will be phased out for U.S.-Canada investment, and the traditional broad scope will only apply to U.S.-Mexico investment for a few sectors. But the USMCA was not a complete rejection of ISDS, and the precise contours were the result of lobbying and negotiation.
It sounds like those same factors may continue to guide the role of ISDS for the Trump administration. Lighthizer seemed to promise that ISDS won't be in a U.S.-UK FTA, but that was an agreement involving a developed country. Many supporters of ISDS focus more on investment protection in developing countries, so what approach will be taken in that context? Grassley wanted assurances that ISDS would be in a Kenya FTA, but Nemelka was unwilling to give that. Of course, it is possible that ISDS is, unofficially at least, off the table and Nemelka simply didn't want to have that fight publicly in this particular hearing. Regardless, for now, based on Nemelka's remarks, ISDS is still a possibility in a Kenya FTA.
