Trade Deals Must Protect Everyone, Not Just Investors

by James Parks, May 18, 2009

Workers across the world, like these in South Korea, are opposed to trade deals that do not protect workers’ rights.

Like the other provisions in U.S. trade agreements, the rules governing U.S. investment abroad and foreign investment in this country unfairly favor those with the capital while giving short shrift to workers and the environment.

Testifying before the House Ways and Means Subcommittee on Trade last week, AFL-CIO Policy Director Thea Lee said the investment provisions in U.S. trade agreements are out of balance, protecting investors’ rights, but not requiring investors to take responsibility to protect workers’ rights and the environment.

U.S. investors invested $333 billion in other countries in 2007 and $318 billion in 2008, more than any other country. The United States also was the largest recipient of foreign investment with $238 billion invested in 2007 and $325 billion in 2008.

Such huge numbers show clearly that trade and investment issues are “enormously important to America’s working families—impacting our jobs, our wages, our unions and the government regulations we count on to keep our communities healthy and to safeguard our rights,” Lee says.

 These rules also affect workers and the environment in other countries, so our ultimate goal is to reform these rules in a way that strengthens democratic procedures, improves transparency, and protects workers and the environment both here and abroad.

U.S. trade deals give foreign investors substantial rights and advantages not available to domestic investors, adds Lee. She cites recent experiences with the investment chapter of the North American Free Trade Agreement (NAFTA) as an example of companies using international trade tribunals to get around the democratic process to try and knock down U.S. regulations that allegedly hurt their bottom line.

Under NAFTA, if investors feel their ability to make profit has been compromised by a regulatory change, they are empowered under the trade agreement to seek compensation directly from the trading partner country.

Lee told the subcommittee other key areas of concern for the AFL-CIO, with regard to current investment provisions, include:

• Failure to distinguish between legitimate regulatory action by governments and “indirect expropriation”—or seizure of an investor’s property. Lee says: “In our view, governments should not be expected to compensate corporations—domestic or foreign—for the imposition of legitimate government regulation in the public interest, to protect public health, the environment, or workers’ rights, among other things.”
• Weak labor and environmental protections. Current trade and investment agreements include phrases like each side “shall strive to ensure” workers’ rights and the environment are protected. Those provisions need to be significantly strengthened, says Lee.

Lee summed up the view of the AFL-CIO union movement with a quote from a 2004 letter to the State Department sent jointly by the AFL-CIO, the Center for International Environmental Law, Earthjustice, Friends of the Earth, the National Wildlife Federation, Oxfam America and the Sierra Club.

We believe that expansion of investment can and must be made compatible with the protection of the public interest in the United States and overseas.

You can read the full text of the letter here.

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