New US trade deal eliminates ISDS for Canada: partial victory for community campaigning but bad news on medicines

4 October 2018: Investor-State Dispute Settlement (ISDS) provisions in trade deals enable foreign investors to bypass national courts and sue governments in international tribunals if they can argue that a change in law or policy has harmed their investment.

The revamped NAFTA agreement between the US, Mexico and Canada, now called the United States-Mexico-Canada Agreement, will phase out ISDS between the US and Canada altogether after three years.

The deal also limits the scope for ISDS cases between the US and Mexico to cases of direct government takeover of assets. This means that cases cannot be launched for compensation over changes in environmental or health law or policy. Foreign investors must also exhaust national court processes before launching ISDS cases. This would restrict the number of ISDS cases between the US and Mexico, since most were launched by US companies claiming that changes in Mexican law or policy had harmed their investment.

The elimination of ISDS between the US and Canada, and the restrictions on ISDS cases between the US and Mexico, is an important victory for years of community campaigning against ISDS in trade agreements, resulting in strong community opposition reflected by state legislatures, economists and legal experts and now in US national trade policy.

Public Citizen has summarised the positive effects of the ISDS changes:

“Termination of ISDS between the U.S. and Canada would eliminate 92 percent of U.S. ISDS liability under NAFTA and the lion’s share of total U.S. ISDS exposure overall. This, combined with the major roll back of corporate rights and ISDS coverage between the U.S. and Mexico would prevent many new ISDS attacks on domestic environmental and health policies after more than $390 million has been paid to corporation by taxpayers to date.”

It is ironic that the Australian government is agreeing to ISDS in the TPP-11 when the US is moving away from it.

The other changes to the former NAFTA agreement deal mostly with greater market access for US dairy products into Canada, and obligations for all three countries to have higher levels of content from the three countries for their exports in the automobile sector.

The changes also include labour and environment chapters that are incorporated into the agreement, rather than treated as annexes as in the previous agreement. While the incorporated chapters have some improvements in content, they are not fully enforceable in the same way as the rest of the agreement.

A negative change is that the pharmaceutical lobby has succeeded in getting 10 years of data protection for new biologic medicines, such as many new cancer treatments, which will delay the availability of cheaper form of those medicines.  This is in addition to the 20- year monopoly patents for all new medicines. This locks in the current bad US system, and exports it to Mexico, which now does not provide any additional data protection for biologic medicines, and to Canada, which now has an eight-year period. This is a bad precedent for other trade agreements.

Public Citizen’s full analysis is available here.