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U.S. resolves 3-year debate on investment treaty terms

WASHINGTON (Reuters) - The U.S. government on Friday said it has resolved a three-year internal debate over how strongly to press countries such as China and India to protect workers' rights and the environment in negotiations on treaties to protect U.S. foreign investment.
/ Source: Reuters

WASHINGTON (Reuters) - The U.S. government on Friday said it has resolved a three-year internal debate over how strongly to press countries such as China and India to protect workers' rights and the environment in negotiations on treaties to protect U.S. foreign investment.

The U.S. State Department and the U.S. Trade Representative's office issued a joint statement outlining a so-called "model BIT" (Bilateral Investment Treaty) that will be used as a template in future negotiations.

They said new language "will help achieve several important goals of the Obama Administration (such as) ensuring that U.S. companies benefit from a level playing field in foreign markets, providing effective mechanisms for enforcing the international obligations of our economic partners, and creating stronger labor and environmental protections."

The Emergency Committee for American Trade, a U.S. business group, welcomed the announcement and called for quick resumption of investment talks with China, India, Vietnam and Mauritius that have been on hold.

But the group, whose members range from heavy equipment manufacturer Caterpillar to publisher McGraw-Hill, said the stronger U.S. labor and environment demands in the model BIT "could be counterproductive" because they go much further than what other developed countries demand in their investment pacts.

"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 and the very improvements in labor and environmental objectives that increased foreign investment would bring," it said.

The business group added it was "very disappointed that the new 2012 model BIT does not strengthen core protections for U.S. investors overseas."

The United States and other countries negotiate bilateral investment treaties to protect their companies against potentially unfair foreign government actions.

There are some 3,000 BITS in force around the world, of which the United States is party to 40.

Critics say the treaties, which must be approved by the Senate, encourage U.S. companies to move production overseas and allow them too easily to challenge government regulations that could hurt the value of their investments.

One of the most outspoken critics, Lori Wallach, director of Public Citizen's Global Trade Watch, said the new model BIT was basically the same as "the deeply flawed 'old' model."

"At a time when multinationals like Chevron are using BITs to evade justice and get out of environmental remediation obligations, it is unthinkable that an Obama administration - post-BP oil spill, post-Wall Street crash - would privilege the rich at the expense of the 99 percent," Wallach said.

The administration of former President George W. Bush launched BIT negotiations with China and Vietnam in its waning months. Responding to concerns raised by Democrats and labor groups, the incoming Obama administration put those talks on hold and instituted a review of the U.S. model BIT in February 2009.

The U.S. Trade Representative's office, in a Fact Sheet, said the 2012 model BIT expands labor and environmental obligations in "four important ways."

It requires governments not to "waive or derogate" from their own labor and environmental laws to attract investment or to fail to effectively enforce those laws to attract investment.

U.S. BIT partners also must reaffirm their commitment to core International Labor Organization principles, such as the rights of workers to organize and bargain collectively, and recognize the importance of international environmental agreements, such as those protecting endangered species.

The new BIT model also contains "more detailed and extensive consultation procedures (on labor and environment) than those applicable under the 2004 model BIT," USTR said.

The Obama administration also responded to growing concerns about the role of foreign "state-owned enterprises" in international trade by including provisions in the model BIT to help level the playing field for U.S. companies.

(Reporting By Doug Palmer; Editing by Chizu Nomiyama, Vicki Allen and Dan Grebler)