Ratification of the TPP is Necessary for the Interests of MNCs

Mr. Naoyuki Haraoka's picture

The Trans Pacific Partnership (TPP) agreement has a number of provisions critical for protecting the interests of foreign multinational corporations (MNCs). These include strong prohibitions against local content requirements by host country governments as well as host country obligations to provide compensation in the event of an unjustified taking of a foreign MNCs’ invested assets. Among the TPP’s numerous features, I believe one of the most important is that pertaining Investor-State Dispute Settlement (ISDS) since ISDS provisions enable foreign MNCs to take disagreements about a host country’s injurious policies to a neutral third-party arbitration court. This is a great benefit as host governments are tempted continuously to take protectionist actions against foreign MNCs in the supposed name of the “public interest.” In the absence of ISDS procedures, foreign MNC conflicts with host countries would have to be adjudicated through a country’s national court system and, in many countries, the expectation would have to be that national courts would decide in favor of the host country’s government. Ultimately, then, frictions would have to be settled by negotiation between the host country and the foreign MNC’s home government, a long process that could be seriously detrimental to the interest of the MNC. In addition, ISDS provisions would empower MNCs to negotiate with a host country government from a stronger position in cases of friction since the home country would have to fear that it might be ordered to pay compensation if a neutral arbitration court so commanded. Contemporary bilateral investment treaties also contain ISDS provisions. However, since the TPP covers a huge amount of global investment and trade and includes the US and Japan, two of the world’s largest economies, its offers greater potential benefits. Given this, I believe US and Japanese legislative bodies should approve the TPP as quickly as possible.