Even when governments win, they waste scarce budgetary resources defending national policies against these corporate attacks.
The scope of our domestic policies exposed to such attacks before unaccountable kangaroo courts is vast, including consumer health and safety policies, environmental and land-use laws, government procurement decisions, regulatory permits, intellectual property, financial regulation, and more. These special privileges provide foreign investors new rights to own and control other countries' natural resources and land, establish or acquire local firms, and operate them under privileged terms relative to domestic enterprises. These extraordinary rights would also be provided to foreign firms investing here, including subsidiaries of, say, Chinese firms incorporated in another country. This raises concerns about our ability to determine what sorts of investment from what sorts of countries is best for our country and to regulate foreign firms operating here on an equal playing field with domestic firms.
Because the investor-state enforcement mechanism elevates private firms and investors to the same status as sovereign governments, it amounts to a privatization of the justice system. Inclusion of the investor-state system in past pacts is already establishing a worrying two-track system of justice privileging corporations. Chevron is now asking one of these kangaroo courts to invalidate 18 years of U.S. and Ecuadorian court judgments that resulted in the company being ordered to pay for clean-up of horrific Amazonian toxic contamination. In other tribunals, Philip Morris International is attacking Australian and Uruguayan cigarette plain packaging policy.
Given the damage this system is already causing, it is especially alarming that U.S. negotiators are looking to use the Trans-Pacific Partnership Free Trade Agreement (TPP) to expand these terms. These rules incentivize offshoring of U.S. jobs by eliminating risks typically associated with relocating to developing countries with rock bottom wages, and TPP includes Vietnam, the lower wage alternative to China for offshoring. Relocating firms are guaranteed a "minimum standard of treatment" that extends beyond being treated the same as local firms. They also are granted new rights to obtain compensation from host governments for loss of "expected future profits" due to health, environmental, zoning, labor, or other policies. Yes, compensation can be obtained for indirect or "regulatory" takings,.something generally not recognized under the robust property rights provided by U.S. law.
The investor rules also forbid host countries from limiting capital transfers. This removes a prospective complication for U.S. firms considering relocating, and also poses a risk for global financial stability. In an era when even the International Monetary Fund has reversed its position against capital controls, imposing such limits via "trade" pacts is especially outrageous.