Todd Tucker, formerly of Global Trade Watch and now studying at Cambridge University, recently did a post about my international investment regime paper. Thanks to Todd for the publicity! Read his whole post to get a full flavor; I just wanted to respond to a few specific things he says.
First off, his post is titled "Libertarians against investment treaties." To be clear, I'm not against these treaties per se. It's more that I think they should say something different from what they typically say now.
Todd starts by saying:
In the standard libertarian telling, governments don’t do much right and more government functions should be left to the private sector. Investment treaties allow private companies to sue governments to rein them in and may even chill regulation. Why wouldn’t a libertarian like this?
It is possible that investment treaties could serve the function of reining in government. But I think it's also possible that they might require more/better regulation from government. So I don't think libertarians should just accept that investment treaties will be part of the anti-government arsenal. And also, keep in mind that there is an international vs. national government distinction here. When treaties rein in national governments, this really means that international courts are reining in national governments, and courts are just another branch of government. So, in a sense, the real question is, should governmental decision-making power be shifted from national law-makers to international courts? That's a more complex question, and goes beyond the simple idea of reining in government. There are a range of libertarian views on the national vs. international balance of power. Some libertarians are fairly nationalist, others are more internationalist. Later, Todd says:
There probably aren’t many Cato Institute publications worrying that international treaties might undermine sovereignty and regulation. Likewise for the argument that diplomatic corps perform a useful filtering role. Many libertarians would not particularly care about or agree with these (reasonable) points. Apparently when we bleed the government dry, the State Department’s investment dispute filtering arm is one agency we’ll keep. I want to know more about how certain government functions get the libertarian stamp of approval.
It's definitely true that Cato people don't worry too much about undermining regulation. But as I said, sovereignty is more difficult. There isn't a uniform libertarian view on this, as far as I can tell. Same thing for the role of the State Department. I can imagine a range of views here.
(And by the way, I'm no leading expert on libertarianism. I was quietly a libertarian on my own for years; but now I'm here at Cato, so I have some sense of what a handful of libertarians think, but that's it. So please don't think I'm speaking on behalf of all libertarians here!)
Moving on to another point, Todd says:
Simon indeed likes the national treatment rules in investment treaties that can limit anti-foreign discrimination, and suggests that this is the main problem encountered by businesses operating abroad.
On this point, I'm not sure that anti-foreign discrimination is the main problem encountered by businesses. However, it is the problem that I think we should mainly care about. Also on this point, Todd says:
The breadth of claimed violations among successful investment arbitrations suggest that companies don’t cling nostalgically to national treatment rules alone. Maybe companies shouldn’t get protection from other types of arbitrary treatment for other (normative) reasons, but I don’t know that we can say they don’t care about such treatment when they make their investment decisions.
This helps emphasize my point about what we should care about: It may be that businesses care about this, but in thinking about appropriate government policy, I don't focus too much on what businesses want. If we did that, no doubt we would end up giving them massive subsidies, which they constantly demand! Instead of worrying about what business wants, my focus is on how to craft sensible policies that balance all relevant considerations.
Todd also talks about the possibility of frivolous claims, saying "how different is frivolity internationally than domestically?" To me, the better comparison may be with other forms of international law. For example, I don't hear much about frivolous claims at the WTO. That suggests to me that state-state dispute settlement offers a good filtering mechanism.
Finally, in terms of the scope of investment rules, Todd says:
it is not clear to me that national treatment and non-discrimination rules are so narrowly tailored or clearly drafted that exactly the same types of regulation couldn’t be challenged under these or FET-type rules.
That's a fair point, one I have blogged about here before (and will again pretty soon -- stay tuned). We need to keep non-discrimination from expanding in such a way that it is no longer about nationality-based discrimination. On a related point about scope, Todd says:
there is a major argument as to whether expropriation and FET rules are really so different than the takings and due process rules that one finds under some national constitutions and legal systems. Simon acknowledges and seems to hedge on this point, suggesting that these rules are not bad at the domestic level, and may even be desirable at the international level.
Here, let me just note one important distinction. I can see there being room for international legal obligations related to actual expropriation. However, it seems to me that regulatory expropriation and FET are so broad and vague, with so little consensus on what they should mean, that they don't work at the international level. They are fine at the domestic level, but creating enforceable international legal obligations here goes too far.
Thanks to Todd for pushing the discussion forward!