[Congressional Record Volume 148, Number 60 (Monday, May 13, 2002)]
[Senate]
[Pages S4267-S4268]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             ANDEAN TRADE PREFERENCE EXPANSION ACT--Resumed

  The PRESIDING OFFICER. The clerk will report the pending business.
  The legislative clerk read as follows:

       A bill (H.R. 3009) to extend the Andean Trade Preference 
     Act, to grant additional trade benefits under that Act, and 
     for other purposes.

  Pending:

       Baucus/Grassley amendment No. 3401, in the nature of a 
     substitute.

  The PRESIDING OFFICER. The Senator from Montana.


                Amendment No. 3405 To Amendment No. 3401

  Mr. BAUCUS. Mr. President, I ask an amendment at the desk be called 
up relating to investor--State relationships with respect to chapter 
11.
  The legislative clerk read as follows:

       The Senator from Montana [Mr. Baucus], for himself, Mr. 
     Grassley, and Mr. Wyden, proposes an amendment numbered 3405 
     to amendment No. 3401.

  Mr. BAUCUS. I ask unanimous consent the reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To clarify the principal negotiating objectives of the United 
               States with respect to foreign investment)

       On page 229, line 23, strike all through ``United States,'' 
     on line 25, and insert the following: ``foreign investors in 
     the United States are not accorded greater rights than United 
     States investors in the United States,''.
  Mr. BAUCUS. This is an amendment I am offering on behalf of myself, 
Senator Grassley, and Senator Wyden. Our amendment concerns an 
investor-State dispute settlement. That is the ``chapter 11 question'' 
as it has come to be called. It is based on the placement of investor-
State provisions in NAFTA.
  This is not bankruptcy chapter 11. It has nothing to do with 
bankruptcy. When I say ``chapter 11,'' it sometimes causes confusion, 
but this is chapter 11 in NAFTA.
  Our amendment modifies the objective on investment in the trade bill 
to make clear that foreign investors in the United States should not be 
accorded a higher level of protection of their rights than U.S. 
citizens in the United States.
  There has been a lot of discussion of NAFTA chapter 11 in recent 
days. In particular, a number of Senators have expressed legitimate 
concerns about the impact that chapter 11, and other similar provisions 
in other agreements, may have on the ability of State and local 
governments to regulate--that is, to adopt and enforce laws that 
protect the public health, safety, and welfare.
  There is a growing consensus that we need to make sure that new trade 
and investment agreements don't give foreign investors in the United 
States greater rights than we give our own citizens. International 
agreements must not become a back door for expanded protection of 
foreign investors at the expense of protection of our environment, 
health, and safety.
  This view has been strongly and consistently expressed by various 
State and local government organizations, as well as environmental 
organizations, in recent weeks.
  For example, a resolution adopted by the National Association of 
Attorneys General at their March meeting encourages Congress:

     . . . to ensure that in any new legislation providing for 
     international trade agreements foreign investors shall 
     receive no greater rights to financial compensation than 
     those afforded to our citizens.

  A letter last week from a large coalition of environmental groups, 
including Defenders of Wildlife, Friends of the Earth, the Sierra Club, 
and the National Wildlife Federation, urged the Senate to:

     . . . require that trade and investment agreements do not 
     provide foreign corporations with greater rights than U.S. 
     citizens have under the Constitution.

  Similarly, a recent letter from the president of the National 
Wildlife Federation to Ambassador Zoellick states:

       An important step to restore consensus would be to make 
     clear in fast track legislation and in investment agreements 
     that those brining expropriation challenges under investment 
     rules will not be granted rights greater than those provided 
     under the takings jurisprudence of the U.S. Constitution.

  The United States Conference of Mayors has expressed its concern that 
the bill as now drafted:

     . . . would allow trade officials to include investor 
     protection standards in future trade agreements that go 
     beyond U.S. law and that effectively grant foreign investors 
     greater rights than U.S. citizens enjoy.

  In another letter, the National Association of Counties expresses its 
concern that under the trade bill:

     . . . foreign investors operating in the U.S. would have 
     greater legal rights against our government than our own 
     citizens possess.

  Each of these organizations makes an excellent point. We have heard 
their message, and that is why we have offered the present amendment. 
We want to make sure that in protecting the rights of U.S. citizens 
abroad, our negotiators do not inadvertently encroach on the 
prerogatives of Government here at home. This amendment seeks to strike 
the right balance between these different sets of interests.
  The bill's objective on investment opens with a statement recognizing 
that--on the whole--U.S. law provides a level of protection of 
investment that is:

       . . . consistent with or greater than the level required by 
     international law.

  It goes on to state that our negotiators should ensure that:

       United States investors in the United States are not 
     accorded lesser rights than foreign investors in the United 
     States.

  Some have read this language to imply that negotiators might seek to 
give foreign investors more rights than U.S. citizens now enjoy, and 
then seek to amend U.S. law to enhance the rights of U.S. citizens. In 
other words, they read this language as a mandate to expand individual 
property rights in the U.S. through the back door of international 
negotiations.
  Let me be very clear in stating that that was not what the language 
at issue was intended to accomplish. The committee report on the bill 
emphasizes that obligations the U.S. undertakes in investment 
agreements:

       . . . should not result in foreign investors being entitled 
     to compensation for government measures where a similarly 
     situated U.S. investor would not be entitled to relief.

  In other words, the rights of U.S. investors under U.S. law define 
the ceiling. Negotiators must not enter into agreements that grant 
foreign investors rights that breach that ceiling.
  The amendment we have laid down is intended to foreclose any doubt on 
this question. It is our objective to negotiate agreements that protect 
the

[[Page S4268]]

rights of U.S. persons abroad. But we are not willing to sacrifice the 
regulatory functions of our own Government in order to obtain that 
objective.
  As the letters I quoted attest, getting clarity on this point is the 
number one priority for many of the organizations that have written 
about chapter 11. They make a fair point. Given the interests at stake, 
we must be crystal clear about the ground rules. U.S. negotiators must 
not conclude agreements that give foreign investors greater protection 
of their property rights than our own citizens already enjoy. Our well-
developed law should define the ceiling. The amendment that we offer 
today makes that unmistakable.
  The chapter 11 issues are some of the most challenging to confront us 
in the fast track debate. Important questions about the needs of 
Government and the rights of individuals are at stake. I believe that 
the Finance Committee bill struck a very good balance. I believe that 
the amendment we have laid down makes that balance even better, and I 
urge my colleagues to support it.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I thank my distinguished colleague from 
Montana for offering this amendment. I think it helps improve what is 
already an excellent bill.
  First, I want to make it clear that the bipartisan trade promotion 
authority bill currently pending in the Senate goes further than any 
prior bill to address concerns about potential abuse of the investor-
State dispute process. At the same time, the bill recognizes that 
protecting U.S. investors abroad is also an extremely important 
objective. In short, the bill is balanced. Some people are attempting 
to undermine that balance. I think that is a mistake.
  Foreign investment is closely interrelated to trade. Companies invest 
abroad to get closer to markets, acquire new technologies, form 
strategic alliances, and enhance competitiveness by integrating 
production and distribution. When they invest abroad, U.S. companies 
often become consumers of U.S. exports--either from affiliated entities 
or other U.S. companies.
  The importance of international investment to the U.S. economy is 
large and growing. The United States receives more than 30 percent of 
worldwide investment. According to the U.S. Bureau of Economic 
Analysis, foreign investment in the United States grew sevenfold 
between 1994 and 2000, reaching almost $317 billion last year. As of 
1998, foreign companies had invested over $3.5 trillion in the United 
States. They employed 5.6 million people and paid average annual 
salaries of over $46,000, well above the average salary for U.S. 
workers as a whole.
  The ability of U.S. companies to invest abroad is also vital to U.S. 
economic growth and U.S. exports. Between 1994 and 2000, U.S. 
investment abroad doubled from $73 billion to $148 billion. U.S. 
investment abroad is critical to support a more dynamic and flexible 
U.S. economy, greater export flows and higher paying jobs for American 
workers.
  For the last 25 years, each successive administration has recognized 
that it is critical to negotiate strong, objective and fair investment 
protections in our international agreements to continue to promote such 
investment. These traditional investment protections are largely based 
on U.S. law and policy and established international law rules of which 
the U.S. has been the chief architect and advocate.
  The Senate Finance Committee gave very careful consideration to 
investment issues and some concerns expressed about NAFTA chapter 11 
when we discussed H.R. 3005, the bipartisan Trade Promotion Authority 
Act.
  Both Republican and Democratic members of the committee agreed to 
several improvements to the U.S. negotiating position on investment, 
which include: providing a mechanism for the early dismissal of 
frivolous claims, injecting greater transparency into arbitration 
proceedings, and establishing a review mechanism.
  The bill and accompanying report also provide the committee's views 
on ensuring that U.S. investors abroad enjoy protections comparable to 
those available to foreign investors in the United States under 
existing U.S. law, while at the same time not making our own 
regulations unduly subject to treaty challenge on grounds that have no 
foundation in U.S. law and practice.
  The degree of support for the final product is demonstrated by a 
strong bipartisan committee vote of 18 to 3 in favor of the bill.
  These provisions represent a very careful balance between the 
political concerns raised by particular cases under the NAFTA chapter 
11 process and the need to continue to provide U.S. citizens with 
strong investment protections overseas.
  Yet, some Members still have concerns that foreign investors in the 
United States will receive greater rights under these provisions than 
U.S. investors in the United States receive. The amendment we are 
offering today makes it clear that this is not the case. It is a good 
improvement to an already excellent bill. I urge my colleagues to 
support it.
 Mr. KERRY. Mr. President, I want to speak just briefly about 
the chairman's amendment. I understand what the Senator is trying to do 
with this amendment, and I appreciate his efforts to seek common 
ground. He has not had an easy job trying to steer this omnibus trade 
package through very stormy seas.
  I am grateful for the chairman's willingness to be responsive to some 
of the concerns that I--and others--have raised. However, on the issue 
of investor-State dispute settlement, I am afraid that substantial 
disagreement remains. The Baucus-Grassley amendment makes a minor 
change to the bill. It is certainly better than the current language, 
but it just does not do a good enough job of protecting the ability of 
Federal, State and local governments to enact legitimate public health 
and safety legislation.
  As my colleagues know by now, it is clear that NAFTA's investor-State 
dispute resolution process popularly known as ``Chapter 11''--will be 
the model upon which future such agreements are predicated. Chapter 11 
is a flawed model, not a failed model. I believe that having an 
investor-State dispute settlement process in a trade agreement is vital 
to ensuring that U.S. investors are able to invest abroad with 
confidence--but it needs to be improved.
  Regrettably, the Baucus-Grassley amendment does not despite what its 
proponents claim--effectively address the shortcomings in the chapter 
11 model. Adopting the Baucus-Grassley language without other needed 
changes will still allow future chapter 11-like tribunals to rule 
against legitimate U.S. public health and safety laws using a standard 
of expropriation that goes well beyond the clear standard that the 
Supreme Court has established in all its expropriation cases.
  The amendment before us does not give any assurances that the due 
process clause of the Constitution will be respected, nor does it 
provide safe harbor for legitimate U.S. public health and safety laws.
  Without all of these safeguards, future investor-State dispute 
settlement bodies can run roughshod over the ability of State and local 
governments--or even the Federal Government--to make laws to protect 
the public. I have an amendment that I believe will make those 
improvements to the underlying bill, and I intend to offer that 
amendment soon.
  I will not oppose the pending amendment because it does not make the 
underlying bill any worse. But let us be clear: the chapter 11 model is 
flawed. Any suggestions that the Baucus-Grassley amendment takes care 
of these problems are simply incorrect.
  So I think we should adopt this amendment by unanimous consent, but I 
do believe that the Senate should have a thorough debate on this 
issue.

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