One of the most insidious provisions in the North American Free Trade Agreement is the one that creates private justice for the wealthy few.
You may be thinking to yourself, "What?!?! I thought NAFTA was only about tariffs." Well, in fact, NAFTA is hardly about tariffs at all. News stories that try to boil NAFTA down to a simplistic "protectionism" (high tariffs) versus "free trade" (low tariffs) are glossing over the most important issues in NAFTA, like private justice for investors, rules that chill important regulations, and a complete lack of effective protections for working people, the environment we live in or the prices we pay for important necessities like medicine.
In this post, I’m going to focus on private justice for investors. It comes in the form of something called "investor-state dispute settlement," or ISDS. It is called by this name because all other tools to settle disputes in NAFTA (and other trade deals) are settled between "states" (meaning countries, such as the United States, Canada and China), so they are called "state to state." In NAFTA, private investors—whether they are corporations or actual human beings—can sue that country directly before a panel of three private lawyers (rather than judges they would have to face in a public court).
Weirdly, investors take on no responsibilities in exchange for this privilege. They don’t have to promise to invest a certain amount, create a certain number of jobs or even to follow a country’s minimum wage or clean water laws. There is no maximum amount they can sue for—and it’s taxpayers who are on the hook if countries lose. Well, it’s not so weird when you think about the main reason that multinational corporations supported NAFTA in the first place. They specifically wanted to create a set of rules for the North American economies that empowered corporate interests, disempowered workers and their unions, and drove wages down.
But, back to ISDS. Just what are these privileged investors suing over anyway? The most frequent claim that investors make is that a foreign government violated the investor’s right to "fair and equitable treatment," a claim that is as vague as it sounds, and which doesn’t exist under U.S. law. That’s right, NAFTA gives Canadian and Mexican companies that invest in the United States rights that U.S. companies don’t even have!
Again, why would NAFTA include such a crazy provision? To lock in power for multinational corporations. There is really no way to sugar coat it: It is about making us less powerful in our democracy and making investors more so. Some who defend ISDS say it is necessary because some governments don’t treat foreign investors well. Hogwash! Countries are competing to attract investors and give them all kinds of privileges, including 20-year tax holidays. They are bending over backward to make investors happy, not to treat them badly.
At this point, I hope your blood is boiling—or that you’re at least shaking your head. But don’t just sit and smolder silently. Help us educate more people about how outrageous ISDS is by sharing this post. Sign our petition calling for the elimination of ISDS from NAFTA.
This post is the third in a series. Read the previous posts here and here.