[CTC] Labor, Environmental Provisions In Model BIT Spark Divergent Reactions

[Arthur Stamoulis]

http://insidetrade.com/201204252396973/WTO-Daily-News/Daily-News/labor-environmental-provisions-in-model-bit-spark-divergent-reactions/menu-id-948.html

Daily News
Labor, Environmental Provisions In Model BIT Spark Divergent Reactions
Posted: April 25, 2012

Strengthened labor and environmental protections in the revised model  
bilateral investment treaty (BIT) that the Obama administration  
unveiled on April 20 have sparked divergent reactions among U.S.  
stakeholders. Business groups are worried that the provisions could  
make it more difficult to negotiate BITs with countries like India and  
China, whereas labor unions are blasting the provisions for not going  
far enough to ensure robust protections.

According to AFL-CIO Deputy Chief of Staff Thea Lee, the new labor and  
environmental protections represent an improvement, but are still  
inadequate because they are not subject to BIT dispute settlement  
procedures. The AFL-CIO is "deeply disappointed" by this, because it  
means that these protections are "little more than paper commitments,  
without any recourse in the event that consultation fails to resolve a  
problem," Lee said in a statement.

On balance, the new model BIT "remains lopsided in terms of granting  
overly broad rights and protections to multinational corporations ...  
without requiring even the most basic minimum standards of responsible  
behavior with respect to labor and the environment," Lee concluded in  
her statement. The 2004 model BIT, which the administration has now  
updated, also did not subject labor or environmental protections to  
dispute settlement processes.

By contrast, U.S. business groups, as well as House Ways and Means  
Committee Chairman Dave Camp (R-MI), are worried that, even though the  
new labor and environmental protections are not subject to dispute  
settlement, they could nonetheless make it harder for the U.S. to  
conclude BITs with countries like China and India, where the idea of  
placing labor or environmental protections in trade and investment  
deals is still a sensitive issue.

In an April 23 release, Camp said he was "very concerned" that these  
new provisions "could undermine the United States' investment  
engagement through BITs." The U.S. Chamber of Commerce and the  
Emergency Committee for American Trade (ECAT) also cited their worries  
with these new provisions in separate releases.

"The 2012 Model BIT's labor and environmental provisions go well  
beyond the scope of prior U.S. BITs and the BITs of our major  
competitors," ECAT wrote in its April 20 press release. "ECAT is  
concerned that these labor and environment provisions set a bad  
precedent and may well undermine the United States' ability to  
conclude BITs with developing countries."

The new model BIT bolsters labor and environmental protections by  
obligating BIT parties to ensure that they do not waive or otherwise  
derogate from their own labor laws. The new model also commits the  
parties to effectively enforce their own labor laws. This approach  
differs from the 2004 model, which had no obligation on effective  
enforcement and only stated that parties must "strive to ensure" that  
they do not derogate from their own labor laws (see related story).

One business source argued that the new BIT provides for binding  
commitments that a country like China would have to adhere to, even if  
those binding commitments are not subject to formal dispute  
settlement. Therefore, China or any other developing country may balk  
at the idea of signing up to a BIT with that language, as the U.S.  
could then apply diplomatic pressure if the other country fails to  
live up to the tougher BIT standard, this source said.

This source also noted that the issue of labor rights in trade  
agreements is so sensitive that India has steadfastly refused to  
discuss this topic in the World Trade Organization, even in non- 
binding terms. This therefore creates at least a question on whether  
this could complicate the relaunch of BIT talks with India, this  
source argued.

There are other reasons for worry as well, according to business  
sources. For instance, the inclusion of stronger provisions in the new  
model BIT could create a "slippery slope" where the next model BIT  
review includes the stronger provisions and full enforceability under  
dispute settlement provisions. In addition, countries like China or  
India may demand a concession from the U.S. on investment in exchange  
for agreeing to the new provisions, one source said.

At the same time, another business source stressed that these new  
provisions are only a problem for business groups to the extent that  
they actually hinder the ability of the U.S. to conclude new BITs with  
foreign countries. They also noted that the administration has  
included several new, useful provisions in its updated model BIT,  
including ones relating to the forced transfer of technology and the  
role of state-owned enterprises.
  
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