Investment Treaties Bring More Risk Than Benefit
Kevin P. Gallagher is the author of the new book Ruling Capital: Emerging Markets and the Reregulation of Cross-border Finance. He is a professor on the Pardee School of Global Studies, Boston University.
As they negotiate a mega-trade and investment deal with the United States—the Transatlantic Trade and Investment Partnership (TTIP)—Germany and the rest of Europe have recently started to question the merits of signing treaties that allow private investors to sue their governments over new regulations to promote economic prosperity. This is old news to emerging market and developing countries that have experienced an onslaught of corporate suits against their governments as they have attempted to foster policies for human rights and environmental protection that create inclusive growth for their citizens. While Europe debates the costs and benefits of singing a deal with the U.S. that allows such loopholes, pioneering nations such as South Africa and Ecuador offer sober lessons.
Both South Africa and Ecuador have been subject to pasts where ultra-right regimes favored foreign driven elites. By the turn of the century both countries had toppled such regimes in favor of new governments focused on correcting past inequities and putting their countries on a path of broad-based equitable prosperity.
Yet, to allay fears, once these new regimes took office, South Africa and Ecuador both signed or inherited whatever they could to send the “right” signals to the world investment community that they were open for business and that the boat wouldn’t be rocked.