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More Than 300 Republican and Democratic State Legislators From All 50 States Urge End of Investor-State Dispute Settlement System in NAFTA

In Letter to U.S. Trade Representative, Lawmakers Say ISDS Undermines State Sovereignty and Lawmaking

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WASHINGTON, D.C. – With all eyes on the fate of North American Free Trade Agreement (NAFTA) renegotiations, more than 300 state legislators from across the political spectrum and from all 50 states released a letter today urging that the controversial Investor-State Dispute Settlement (ISDS) system be eliminated from the deal.

Whether a NAFTA replacement agreement eliminates the expansive corporate privileges and parallel “justice” system now in NAFTA will be a decisive factor in a prospective new pact’s ability to obtain support from a majority in Congress. In their letter, the bipartisan group of state legislators reiterated the longstanding position of the National Conference of State Legislatures (NCSL), the bipartisan body that represents the nation’s state legislative bodies, in opposing trade pacts that include ISDS.

While the Republican and Democratic legislators hold divergent views on most issues, including NAFTA, the lawmakers agree that NAFTA’s ISDS provisions undermine state-level policymaking and have allowed multinational corporations to pocket $392 million from taxpayers and launch attacks on toxic bans, environmental and public health policies.

“NAFTA’s ISDS provisions are a shocking attack on U.S. sovereignty,” said Texas state Rep. James White, a Republican lawmaker who signed the letter. “ISDS grants foreign investors rights to skirt domestic courts and instead initiate proceedings against sovereign governments before tribunals of three private lawyers. ISDS is also a threat to our system of federalism – as even state and local laws can be subject to ISDS suits. If ISDS is removed from a renegotiated NAFTA, it will be a step in the right direction to protect our national and state sovereignty.”

The letter highlights the dangers that ISDS poses for state sovereignty and local lawmaking. ISDS has enabled transnational corporations to challenge state laws, local land use ordinances and even court decisions in an arbitration system, where corporations seek unlimited sums of taxpayer money, including for the loss of expected future profits. To prevail, the corporations need only convince a panel of three corporate lawyers that a state law violates the expansive rights granted to them under NAFTA. The panel decisions are not subject to appeal.

Added Washington state Sen. Maralyn Chase, who serves as the Democratic Chair of the state Senate Economic Development and International Trade Committee, “In the increasingly globalized economy, it is imperative that international trade agreements protect and promote national sovereignty. With the current dispute settlement system, multinational corporations circumvent the domestic legal system of the host country for an arbitral tribunal. By removing investor-state dispute settlements from trade deals, we encourage adherence to domestic laws and regulations implemented for public good, while curbing broad corporate power.

The state lawmakers join a formidably diverse consensus against ISDS that spans the political spectrum. During the past year of NAFTA renegotiations, GOP and Democratic members of Congress, 230 professors of law and economics, and more than 100 small businesses sent public letters to U.S. Trade Representative Robert Lighthizer urging ISDS to be removed from NAFTA. Stark criticism of ISDS has come from voices as disparate as U.S. Supreme Court Chief Justice John Roberts; pro-free trade think tanks such as the Cato Institute; U.S. Sen. Elizabeth Warren (D-Mass), and hundreds of labor, environmental, consumer and faith organizations.

In contrast, the corporate-backed proponents of ISDS have been unsuccessful in recruiting meaningful support for their cause. In May, the American Legislative Exchange Council (ALEC) orchestrated a pro-ISDS letter that garnered only 12 state legislators.

“The renegotiation of NAFTA is an opportunity to fix a flawed agreement,” said Maine state Rep. Stacey Guerin, who is the House Republican lead on the state Judiciary Committee and member of Maine’s Citizen Trade Policy Commission. “One of the biggest problems with the existing NAFTA is its failure to protect the sovereignty of U.S. states. Specifically, in Chapter 11, NAFTA provides special legal rights to foreign corporations to challenge policies they claim will reduce their profits. Over many years, state legislators on a bipartisan basis have objected to these ISDS provisions, which have been used to challenge legitimate state laws from tobacco policy to funeral home regulation to drinking water protections. The letter released today reaffirms our position and strongly supports the efforts of U.S. Trade Representative Robert Lighthizer to remove ISDS from the renegotiated agreement with Canada and Mexico.”

Added Ohio state Sen. Kenny Yuko, who serves as the leader of the Ohio state Senate Democratic Caucus, “Ohioans have long felt the pain of NAFTA and bad trade policy. We lost more than 150,000 jobs because of overseas trade, and that devastated our economy, local communities and families across the state. Over 300 lawmakers have come together to demand that one of the worst provisions of NAFTA be removed. When we stop incentivizing outsourcing, we can bring jobs back home, focus on our workers and grow American businesses.”

View the letter and full list of signers.