by Larry Jones
April 29, 2002

During the week of April 29th the full Senate is expected to begin debate on the so called fast'track trade bill, H.R. 3005, a proposal to give U.S. trade negotiators broad authority to negotiate trade agreements with other nations. To speed up the process of approving these agreements, Congress would be required to cast an up or down vote within 90 days, without an opportunity to amend them. While the Conference and other state and local groups are strong supporters of free trade, they are united in their concern about the "investor protection" provisions of the bill.

As currently drafted, the language would expand opportunities for foreign investors to challenge the action of local governments as "regulatory takings." It would also allow U.S. trade officials to include investor protection standards in future trade agreements that go beyond U.S. Constitution and law, and state and local laws that protect the environment, public health, safety, welfare and public morals. This would effectively grant foreign investors greater rights to sue for takings claims than are available to U.S. investors. Senator John Kerry (MA) plans to offer an amendment on behalf of state and local governments that would ensure that foreign investors are granted no greater legal rights than U.S. investors. State and local lobbyists have been visiting Senate offices over the last several weeks to urge support for Senator Kerry's amendment.

Section 2(b)(3)(D) of the bill provides that one of the principal trade negotiating objectives of the United States "should be seeking to establish standards for expropriation and compensation for expropriation, consistent with United States legal principles and practice." According to a number of legal experts, this opened'ended language would allow trade officials to include expansive takings provisions in future trade agreements that go well beyond federal, state and local laws. Furthermore, the bill does not require that the U.S. Constitution and U.S. legal precedents be followed in negotiating takings provisions in future trade agreements.

The serious risk posed by the investor protection language in the fast track bill is demonstrated by the billions of dollars in legal claims that have been filed under another trade law, Chapter 11 of the North American Free Trade Agreement. Along with 45 other trade agreements, NAFTA allows foreign investors to sue for damages if any court or regulatory agency of the federal, state or local government takes an action that can be viewed as a trade barrier. While this provision was intended to protect U.S. companies from unjust seizures of their assets, it works both ways. Some aggrieved foreign investors have use it to file huge claims against the U.S. government.

One egregious example of a claim is the Methanex Corporation of Canada, which is the world's largest producer of one of the key ingredients in MTBE, a gasoline additive that was banned in California and later in other states because it seeps into ground water and poses potential health risks. Methanex questioned the science behind California's decision and argued that better underground storage tanks would have prevented the MTBE from seeping out. The company claims the ban cost it $970 million in lost profits which it is seeking from U.S. taxpayers.

Commenting on pending claims Senator Kerry said the United States is "liable to foreign companies for literally billions of dollars wasted in frivolous lawsuits aimed at undermining hard'fought consumer, environmental and worker protections."