This week Inside Trade reported something that would have been unthinkable 20 years ago - that worker rights and protection of the environment are on the table in the negotiation of a bilateral investment treaty between the United States and India this summer. Just 13 years ago World Trade Organization talks in Seattle collapsed in part because countries on the rise like India and China opposed Bill Clinton's efforts to include protection of worker rights and the environment in WTO treaty provisions.
Bilateral Investment Treaties or BITs as they are known to trade wonks generally contain arbitration clauses ostensibly intended to make it possible for multi-national and foreign companies to challenge government actions that take their property without just compensation through seizure, taxation or other measures. Although designed to protect multi-national and foreign companies from discrimination in relation to national companies as well as from the whimsy of national court systems, BIT arbitration provisions are a sore point and major target for fair trade and anti-free trade activists, as multi-national and foreign companies frequently use - often with success - BIT arbitration as a vehicle to undermine federal, state and local laws protecting the environment, communities and worker rights. The issue came to a heated boil in the late 1990s as companies in North America utilized NAFTA Chapter 13 - essentially a BIT within a trade treaty - to undermine health regulations in California and the efforts of a local community in Mexico to prevent the establishment of a nearby toxic waste dump.
Scholarly literature about BITS has long pointed out that developing countries are at a disadvantage when they negotiate BITS with richer countries because of their desperate desire for foreign investment to help build their economies and increase employment. Thus they have readily acceded to provisions that they may not be pleased with such as BIT arbitration clauses that undermine the integrity of national regulatory and judicial processes even when it seemed as though such clauses go against their national interests. Now it appears as though the U.S. government is utilizing the negotiation leverage posed by the BIT in an effort to support improvement of application of global labor and environmental standards. Such a move is nothing than revolutionary in historic terms.
According to an April 27, 2012 report in Inside U.S. Trade, on April 20 the Obama Administration unveiled its new and improved Model BIT - the fundamental negotiation document it will utilize for all future BITs. Under this model, both signatories to the BIT obligate themselves to not fail to effectively enforce labor laws in order to attract investment and to ensure that they do not waive or otherwise derogate from labor and environmental laws to attract investment. Inside U.S. Trade points out that these provisions are stronger than those of the 2004 U.S. Model BIT which only required signatory nations to "strive to ensure". The Model BIT also requires signatory states to reconfirm their commitment to respect the 1998 ILO Declaration on Fundamental Rights and Principles at Work.
Trade unions and fair trade advocates are quick to point out that the new BIT environmental and labor provisions will be difficult - if not impossible - to enforce, while their counterparts in the business sector express fear that it may indeed be possible to enforce environmental and labor provisions through the BIT. As with the NAFTA labor side agreement itself almost 20 years ago, labor and environmental provisions in a BIT between the U.S. and India are a small step in the direction of a fair trade system - though we are still far from a global trading system that is equitable between and among nations. Finally, one wonders whether labor provisions in the US-India BIT will serve as an effective tool for advocates striving to eradicate the endemic problem of child labor in India - or in the United States for that matter.
For more information about the US-India BIT see: