The United States has a long history of advancing the rules-based order and, as a practical matter, has never lost a dispute arising from one of its many investment agreements. But investor-state dispute settlement procedures may not have a future.
In Ferris Bueller’s Day Off, Bueller’s classmates stare blankly, blow bubbles, and fall asleep on their desks as high school teacher Ben Stein (an economist in real life) explains how the United States sank deeper into depression in the early 1930s. As he drones on, asking the students questions — “Anyone? Anyone?” — few of the movie’s fans realize he’s teaching one of the most important lessons in the history of trade policy: how Congress muffed the Smoot-Hawley Tariff Act of 1930.
For many years now, the U.S. Government has implemented a sugar program that ensures sugar producers and refiners get a minimum price for American-grown sugar. It’s a hidden tax paid for by Peep-lovers everywhere.
Although the steel and aluminum tariffs are promoted by the Trump administration as a strategy to seek fairness for those industries, the tariffs will incite retaliation by trading partners, imposing significant costs on large numbers of U.S. producers and consumers who have nothing to do with these industries’ grievances.
With over 2,500 international investment agreements in force and only a total of 817 known investor-state dispute settlement arbitrations, it’s safe to say that the majority of these agreements have operated without a single dispute.
Trade rules typically cover a category of goods or services and affect all firms engaged in trade. Investment disputes, on the other hand, are usually about a state’s treatment of an individual enterprise.
The two Section 201 cases that the president will shortly decide—solar panels and washing machines—are good illustrations of how much the trade landscape has changed in recent years and how unexpectedly complicated these decisions have become.
The U.S. Congress is set to consider the first major reform of the U.S. tax code in decades. The proposed Tax Cuts and Jobs Act released on November 2 by House Speaker Paul Ryan (R-WI) and House Ways and Means Committee Republican Members features significant changes to the way U.S. corporations are taxed and carries implications for how they compete around the world.
Safeguards are designed to help domestic producers adjust to competition, but there at least four reasons they don’t help the American consumer. Two high profile petitions will test how the administration deals with these competing concerns.
If the Trump administration seeks an end to binding dispute settlement procedures, it would represent a significant departure from decades of the United States leading the global charge for making dispute settlement in trade agreements binding and enforceable.