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Report from Berlin: Global Trade Deals Can No Longer Include Investor-State Dispute Settlement

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As negotiations move forward on the Transatlantic Trade and Investment Partnership (TTIP), a wide range of German elected and civic leaders are in disbelief that the U.S. remains serious about including Investor-State Dispute Settlement (ISDS). From the German perspective, that's a failed 20th century approach. U.S. Trade Representative Michael Froman increasingly will hear from German leaders and others in Europe that continuing U.S. support for ISDS as an element in any trade deal is a non-starter. ISDS provides for secret tribunals that allow multinational corporations to sue nation states for loss of future profits and circumvent national laws and courts.

By most benchmarks, Germany is the most successful large economy in the world, with a rising standard of living, an educational system that creates real opportunity to move from school to work, a deep economic safety net, and worker participation in economic decision making. Participatory mechanisms include sector-based collective bargaining, works councils at every workplace, and codetermination on the board of directors that provides employee representatives with a significant voice in corporate decision-making.

Economic inequality in Germany is a fraction of that in the U.S. For example the CEO of Deutsche Telekom earned about $4 million in 2013, about 80 times the average Deutsche Telekom call center or shop worker, while the CEO of its American subsidiary, T-Mobile US, was paid $28 million. Since call center and shop workers in the U.S. earn about half of their German counterparts, the U.S. ratio is nearly 1,000 to 1!

Much more could be said about the divergent paths of our two nations in the past 60 years. But thanks to a suit brought by the Swedish energy firm Vattenfall against the German government, opposition to ISDS is nearly universal.

Vattenfall is suing Germany for billions in future lost profits due to German Chancellor Angela Merkel's proclamation that after the horrors of Fukushima, Germany no longer supports nuclear energy development, as Der Spiegel International reports.

Unfortunately, that decision is apparently not up to the German government and people. Vattenfall believes its future profits come first, and if Germany goes non-nuclear, Vattenfall and presumably others must be paid off based on the inclusion of ISDS as part of trade policy within the European Union.

There are 500 similar cases of corporate state vs. nation state currently pending in every continent, based on almost every trade deal since the North American Free Trade Agreement. Veolia, the giant French-based transportation company, is suing Egypt for raising its minimum wage, which would mean higher pay for workers at the Alexandria bus company it owns and thus lower profits. Other lawsuits attack national legislation concerning everything from cigarette labeling to fracking regulation.

Ironically back in the U.S., proponents of TTIP and the more imminent Trans Pacific Partnership (TPP) criticize those of us who oppose ISDS as anti-trade Neanderthals. But in my discussions with German leaders last week, it is clear that the U.S. looks like the Neanderthal by supporting ISDS, coupled with dramatic increases here in economic inequality and nearly unlimited influence by corporate America in all aspects of our lives. If Froman proceeds with ISDS in the final version of the TPP, Germans and most other Europeans will never trust a future TTIP, even if there are ISDS carve outs for certain national legislation. They can read the handwriting on the TPP wall very clearly.