NAFTA Investor Protection Rules Under Attack

March 7, 2002

In the midst of ongoing scrutiny by House and Senate legislators marking up the Trade Promotion Authority bill, measures protecting U.S. companies against abuse by foreign governments have come under withering fire from the television commentator Bill Moyers.

In a February PBS broadcast entitled “Trading Democracy,” Mr. Moyers alleged that foreign corporations are making an end-run around the U.S. democratic process by using the investor-to-state dispute settlement procedures set up under Chapter 11 of the NAFTA treaty to challenge the validity of a variety of state laws.  He cited two recent cases involving the Canadian firms Methanex and Loewen, which have challenged administrative and judicial rulings against them in California and Mississippi, respectively.

The Chapter 11 protections are viewed by companies and developing countries alike as necessary to create a level playing field and attract foreign investment.  Similar provisions are included in 45 bilateral investment treaties signed by the U.S. with countries around the world, and they form basis for ongoing discussions aimed at creating a Free Trade Area of the Americas.

The Moyers broadcast omitted key facts about Chapter 11 and the cases in question.  Subsequently, Mr. Moyers himself came under attack in a Washington Post column by Sebastian Mallaby, who dubbed the program “unfair and damaging to the public interest.”

Subsequently, in a letter to his legislative colleagues, Rep. Phil Crane, Chairman of the House Ways and Means Committee, observed that such protections “are essentially the same as those found in the U.S. Constitution. …Weakening investment protections in trade agreements hurts U.S. investors who operate in countries that may have underdeveloped or biased legal systems.”

In view of the Moyers broadcast and other attacks, USCIB is seeking to set the record straight with our contacts in Congress, the Bush administration and the media.  We are also working with our sister business organizations, including the Business Roundtable (which has prepared a comprehensive fact sheet on the issue) to push back against this latest assault against this fundamental principal of fairness in the international economy.

Staff contact:  Stephen J. Canner

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