USMCA: only a name change?
Jeffrey Frankel comments on the four aspects of the new treaty that have garnered the most attention:
- Cars: There will be some benefits for some American auto workers, at the expense of everybody else. The US auto industry as a whole may well be worse off, in terms of the decreased competitiveness of North American autos on world markets that will result from the disruption of existing efficient supply chains.
- Milk: Canada has now agreed to imports of up to 3.6 percent of its dairy market. That is reportedly worth about $70 million. The numbers are very small in the scheme of things (.00003 of total US exports). But still: the market opening is good if you are an American dairy farmer, bad if you are a Canadian dairy farmer. And, in itself, it is good if you believe in free trade.
- Sunset: The treaty will need to be reviewed after 16 years with sunset as a default option.
- Disputes: US and Canada dropped the Investor-State Dispute Settlement mechanism. US and Mexico agreed to maintain ISDS albeit with many caveats.
The New NAFTA
By: Jeffrey Frankel – Harvard University
The future of Investor-State Dispute Settlement mechanism* (ISDS)
With the USMCA the USA and Canada have agreed that their bilateral investment relationship shall not be subject to ISDS anymore. This is a major policy shift especially considering that the US and Canadian firms are heavily invested on both sides of the border and US-Canada investment relations produced no less than 41 arbitration claims over recent years. What does all that mean for EU’s future approach to international investment policy?
In the light of the political climate in Europe, it seems reasonable to assume that the EU will follow suit and further restrict investor rights and ISDS under future agreements. Overall, NAFTA 2.0 suggests that the love story of OECD economies with investment protection agreements and ISDS seems to be coming to an end.
*ISDS provisions in trade and investment agreements empower foreign investors to sue host countries for monetary compensation in case of expropriation before private ad hoc tribunals.
The future of EU international investment policy – What clues to take from NAFTA 2.0?
By: Robert Basedow – London School of Economics
