Trade agreements give rise to international tribunals and suits by foreign companies against US local and state governments.
Governor Jay Inslee of Washington state is joining the clamor against the global court system being set up by trade treaties. Washington state often brags about being the most export dependent state in the country. While I am not sure what that means or its economic relevance, it is notable that the global court system – euphemistically called the Investor-State Dispute Settlement system – is drawing fire from Inslee.
Governor Inslee sent a December 3, 2014 letter to US Trade Ambassador Michael Froman saying:
The inclusion of an investor-state mechanism in the T-TIP or TPP is particularly concerning. This mechanism provides foreign investors with both greater procedural and substantive rights than domestic companies by providing foreign companies access to extrajudicial panels and by giving them the opportunity to be awarded compensation for government measures that apply equally to domestic companies and that would not be considered a violation ofproperty rights protections under U.S. law. … In its current form, the liabilities of investor-state provisions outweigh their potential value.
I also urge the Administration to maintain a strong position in support of protecting state laws and regulations in any ongoing negotiations over trade rules (“disciplines”) impacting the domestic regulation of products and services. In particular, I urge the Administration to continue to resist pressure from some of our trading partners to include a “necessity test,” which would preclude states from maintaining regulations that are “more burdensome than necessary to ensure the quality of the service.” As you are aware, U.S. states regulate a broad range of service activities, including health care, communications, financial, utilities and professional services. States maintain many non-discriminatory regulations to advance important policy objectives that are not related to the quality of service at issue, including those related to environmental protection, land use, labor standards, fair competition and economic development. U.S. law generally permits states to pass non¬discriminatory rules related to such considerations that may burden economic transactions, as long as a rational basis for these rules can be demonstrated. Adopting a necessity test could alter this basic principle and improperly replace it with a standard less deferential to state authority. I have similar concerns about the inclusion of new rules covering trade in goods or regulatory coherence in the trade agreements currently being negotiated, and I again urge you to continue to resist their inclusion in any trade agreements ifthey could undermine non-discriminatory public interest measures.