Trans-Pacific Partnership: Round 11: Investor-State Dispute Settlement

Feb 28, 2012

The eleventh round of Trans-Pacific Partnership (TPP) negotiations begins this week in Melbourne, Australia, and we expect that the rubber will meet the road for the negotiators. The current nine TPP partners have already agreed to the “broad outlines of an agreement,” and are now racing to finish the deal this year.

But… Australia, we have a problem.

Australia is an incredibly important trading partner and strategic ally to the United States. Indeed, at the request of our members, the Chamber recently launched a U.S.-Australia Working Group, which will focus on the positive agenda between our two countries.

But there continues to be one trade issue where we are not finding common ground, and it threatens to weaken the overall outcome of the TPP deal. The current Australian Government (which is going through an historic upheaval right now) opposes the inclusion of investor-state dispute settlement provisions in any future free trade agreements.

Investor-state dispute settlement provisions have been included in U.S. investment treaties and trade agreements with more than 50 countries. Worldwide, they have been included in more than 2,700 such accords. They mirror U.S. Constitutional protections against arbitrary government actions and against taking of property without compensation. In developing countries where local judiciaries are at times slow, ineffective, or corrupt, they serve as an important backstop to U.S. investors who risk their capital, property and talent in foreign countries.

This carve-out of a commitment sets a potentially damaging precedent in the talks that could prompt other countries to take similar exceptions to other core principles in the negotiation.

In a letter sent to President Obama today, the heads of 31 U.S. business associations requested that the U.S. remain firm to the commitment that all TPP partners negotiate a comprehensive agenda. The letter states:

  • While Australia has been a leader bilaterally, regionally and multilaterally in promoting an international economic system with binding and enforceable commitments, it continues to reject the application of this dispute-settlement tool to its own TPP commitments. Australia’s rejection of investor-state dispute settlement is not only thwarting the ability of the TPP negotiations to produce strong enforcement outcomes, it is also having a corrosive effect on the level of ambition and other key aspects of the TPP negotiations.  If Australia were able to extract such a major exemption, other countries would press forward to seek their own major exemptions from core commitments, which would ultimately unravel the ability to achieve a comprehensive, 21st-century TPP agreement.

An ambitious, comprehensive agreement is the U.S. business community’s top goal in the TPP negotiations. We hope Australia will agree that their commitment to investor-state dispute settlement protections is critical to ensuring that the TPP creates a new standard for trade in the Asia Pacific region -- one which insists that all countries commit to the highest standards of trade and investment.

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