TPA and NAFTA. It may be just your editor's peculiar pattern of thought, but for us the hardest issue for the Administration is or should be the fact of ISDS as a negotiating objective in the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, the current version of TPA. That said, and assuming the negotiators from the three countries are successful in concluding a new, updated NAFTA, Congress will either approve it or not. At that point, the language of TPA will either be reaffirmed or overtaken. We shall see.
Out Sourcing. As for
Ambassador Lighthizer's concern that ISDS can have the effect of encouraging plant relocations from the U.S. to Mexico or other countries, here is how he put it:
On the outgoing side, there are many people who believe that it, in some circumstances ... it's more of an outsourcing issue. So what is it? It's a situation where somebody says, "I want to move a plant from Texas, and I want to put it in Mexico. And, when I go down there, I don't want to take the political risk that AMLO is going to win in Mexico and change my bargain. So I want the U.S. Government, essentially, to buy political risk insurance for me."
Our view tends to be that, if you [as an investor] want to move a plant from the United States to Mexico and the economics suggest that, then you should go with the economics. And it's too bad.
(And your responsibility, as the U.S. Congress, is to make the U.S. more competitive so that that isn't a problem.)
But, if you [the plant owner] are going there because we are underwriting the investment, we are putting our finger on the scale. We're encouraging you to move your plant down there. That's not the job, in my opinion at least, of the United States Government.
Kansas City Southern. Representative Jenkins, of course, talked about a very different kind of investment, namely Kansas City Southern's $4.5 billion investment in Mexico, which this 2009 map illustrates:
The ISDS Challenge. Our knowledge of the history of ISDS is not as rich as we would like it to be. The idea, however, that investors should have a recourse - a recourse beyond a state-to-state dispute mechanism - seems intuitively right. Sometimes companies invest to develop resources specific to a particular location, sometimes to access markets. And sometimes, as in the case of the Kansas City Southern Railway, to provide a physical connection between U.S. producers and foreign buyers. Surely it is in America's interest to provide a system for defending such U.S. investments against discrimination or expropriation.
But that is only part of the story. Any policy analysis of investment needs to take into account the fact that in today's world - and it's a world we have been living in for some time - comparative advantage is not the passive result of the sun on Portuguese grapes - it is a dynamic competition among nations. It's about who gets to make things: cars, airplanes, and medicines, and yes aluminum.
Certainly, that is what India's "Make in India" is about. It's what China's "Made in China 2025" is about. And it is what a good deal of every country's trade and investment policies are about.
It seems clear to us that, at some point, U.S. trade policy needs to recognize the reality of that competition. What is not clear, however, is the idea that gutting or dropping ISDS is the best way to do that.
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Ms. Jenkins on NAFTA. Because this entry is as much about NAFTA as it is about ISDS, we'll end it as Congresswoman Jenkins ended her statement last Wednesday, with a comment on NAFTA. She said:
To speak just a little more broadly, Ambassador Lighthizer, I can't overstate the importance of NAFTA for the farmers, ranchers, and manufacturers in my district. In fact, about two dozen county farm bureau members from eastern Kansas were just in my office yesterday to hammer this point home. They depend and rely on being able to sell to Mexico and Canada as though their livelihoods depend upon it because they do.
The message I received is the need for certainty that NAFTA benefits, which have allowed Kansas exports to surge, remain in place. This certainty is paramount to providing desperately needed assurance to all aspects of the Kansas economy. The small towns across my district that make up America's agriculture heartland are depending on the Administration getting this modernization right, and moving on to expanding into new markets and joining new trade deals.
That's why I strongly support NAFTA and why I encourage this Administration to follow through on its promise of doing no harm. With that Mr. Chairman, I yield back.