According to recent reports, U.S. trade negotiators are currently considering proposals to revise the chapter of the North American Free Trade Agreement (NAFTA) that covers international investment. As currently written, NAFTA incorporates a principle that is so basic our founding fathers included it in the U.S. Constitution: the right to own property. Just as the U.S. Constitution protects Americans from unlawful seizures of property by our government, our trade agreements should prohibit foreign governments from confiscating Americans’ property without providing compensation.
Coincidentally, this discussion is taking place just weeks before Mexico will celebrate the 80th anniversary of “La Expropiacion Petrolera,” a national civic holiday marking the date Mexico nationalized the petroleum industry. It is a strange time to discuss weakening NAFTA’s investment rules.
NAFTA was designed to protect Americans whose property may have been confiscated by one of our North American trading partners. Instead of being forced to dispute the expropriation via the court system of the government that just took their property and hoping for the best, Americans can use neutral dispute resolution panels to make sure Canada and Mexico are playing by NAFTA’s rules. While the current system is far from perfect and could certainly be reformed during the renegotiation process, its primary intent should be preserved.
ISDS safeguards have long been a target of vocal free trade critics like Sen. Elizabeth Warren (D-MA) and others. U.S. trade negotiators are now being pressured to take Sen. Warren’s advice and gut NAFTA’s investor protection provisions.
That would be inconsistent with the Trump administration’s key trade objectives, which include “Strongly advocating for all U.S. workers, farmers, ranchers, services providers, and businesses, large and small – to assure the fairest possible treatment of American interests in the U.S. market and in other markets around the world.”
Under Trade Promotion Authority (TPA), the law governing trade negotiations, one objective of trade agreements is to provide “compensation for expropriation, consistent with United States legal principles and practice” while “providing meaningful procedures for resolving investment disputes.” If U.S. Trade Representative Robert Lighthizer deviates substantially from these objectives, any North American agreement he negotiates might be ineligible for expedited congressional consideration under the guidelines provided for by TPA.
U.S. negotiators should aim for agreements that benefit Americans and contain strong enforcement measures to make sure our trading partners play by the rules. This includes siding with our Founding Fathers and not retreating from the constitutional principles that made America great.