International investment agreements are once again in the news. The United States is trying to impose a strong investment pact within the two big so-called “partnership” agreements, one bridging the Atlantic, the other the Pacific, that are now being negotiated. But there is growing opposition to such moves.
South Africa has decided to stop the automatic renewal of investment agreements that it signed in the early post-apartheid period, and has announced that some will be terminated. Ecuador and Venezuela have already terminated theirs. India says that it will sign an investment agreement with the US only if the dispute-resolution mechanism is changed. For its part, Brazil has never had one at all.
There is good reason for the resistance. Even in the US, labor unions and environmental, health, development, and other nongovernmental organizations have objected to the agreements that the US is proposing.
The agreements would significantly inhibit the ability of developing countries’ governments to protect their environment from mining and other companies; their citizens from the tobacco companies that knowingly purvey a product that causes death and disease; and their economies from the ruinous financial products that played such a large role in the 2008 global financial crisis. They restrict governments even from placing temporary controls on the kind of destabilizing short-term capital flows that have so often wrought havoc in financial markets and fueled crises in developing countries. Indeed, the agreements have been used to challenge government actions ranging from debt restructuring to affirmative action.
Advocates of such agreements claim that they are needed to protect property rights. But countries like South Africa already have strong constitutional guarantees of property rights. There is no reason that foreign-owned property should be better protected than property owned by a country’s own citizens.