Linda Sánchez | 21 March 2024

Sánchez, Doggett call for Biden Administration to reform the CAFTA-DR trade agreement

• Press Release

Doing so would address root causes of migration & prevent harmful corporate overreach

WASHINGTON – Congresswoman Linda T. Sánchez (D-CA) and Congressman Lloyd Doggett (D-TX), two senior Members of the Ways & Means Committee, led 45 of their colleagues in calling on the Biden Administration to work to remove the Investor-State Dispute Settlement (ISDS) mechanism from the Central America – Dominican Republic Free Trade Agreement (CAFTA-DR).

Foreign companies have used ISDS to deter democratically elected CAFTA-DR governments from implementing new policies that uplift democratic sovereignty, strengthen labor rights, and protect the environment.

By working to remove ISDS provisions from CAFTA-DR, the U.S. would promote a trade agenda that works to uplift democratic sovereignty in the region, protect fiscal budgets for emerging economies, and strengthen environmental protections and worker rights that would, thereby, help address the root causes of migration from the region.

“As a member of Congress and a daughter of immigrants, I believe it is crucial to address the root causes of migration. We cannot just focus on border security; we also need to tackle the reasons why people are leaving their homes in the first place,” said Congresswoman Linda T. Sánchez. “That’s why I’m urging the Biden Administration to remove the damaging ISDS mechanism that currently allows big corporations to sue democratically elected governments. It is unfair and makes life worse for families in these countries. By getting rid of ISDS, we can focus on fair trade that will build a more stable and prosperous future for the people of Central America while also addressing the underlying factors of migration.”

“While it has correctly opposed the inclusion of ISDS in any future trade agreements, the Biden Administration should move forward in removing these provisions from existing agreements. Powerful multinational corporations continue using ISDS to intimidate small countries from strengthening health, environmental, and worker rights protections. A major example is U.S. company Honduras Próspera’s pending ISDS claim against the Honduran government, seeking nearly $11 billion, equal to about two-thirds of the country’s entire national budget, based on the repeal of a law that previously allowed the creation of an autonomous zone with separate governance system, regulations and courts. Making CAFTA-DR “ISDS-free” will send a strong message that the U.S. is serious about addressing economic inequality, promoting democracy, and tackling the climate crisis in this region,” said Congressman Lloyd Doggett.

The letter —signed by 47 Members of Congress including seven from the Ways and Means Committee— echoes many of the concerns raised by 23 European Union Member States that recently exited an ISDS-enforced treaty and CAFTA-DR country Honduras that recently denounced the World Bank’s arbitration forum where many ISDS cases are settled. Signers include (in alphabetical order): Nanette Barragán (D-CA), Jamaal Bowman (D-NY), Cori Bush (D-MO), Greg Casar (D-TX), Judy Chu (D-CA), Danny Davis (D-IL), Rosa DeLauro (D-CT), Christopher Deluzio (D-PA), Mark DeSaulnier (D-CA), Lloyd Doggett (D-TX), Veronica Escobar (D-TX), Dwight Evans (D-PA), John Garamendi (D-CA), Jesús Garcia (D-IL), Daniel Goldman (D-NY), Jimmy Gomez (D-CA), Raúl Grijalva (D-AZ), Pramila Jayapal (D-WA), Henry Johnson (D-GA), Marcy Kaptur (D-OH), Ro Khanna (D-CA), Daniel Kildee (D-MI), Barbara Lee (D-CA), Summer Lee (D-PA), Ted Lieu (D-CA), Betty McCollum (D-MN), James McGovern (D-MA), Jerrold Nadler (D-NY), Eleanor Norton (D-DC), Alexandria Ocasio-Cortez (D-NY), Ilhan Omar (D-MN), Mark Pocan (D-WI), Katie Porter (D-CA), Ayanna Pressley (D-MA), Delia Ramirez (D-IL), Jamie Raskin (D-MD), Linda T. Sánchez (D-CA), Janice Schakowsky (D-IL), Adam Schiff (D-CA), Melanie Stansbury (D-NM), Shri Thanedar (D-MI), Rashida Tlaib (D-MI), Jill Tokuda (D-HI), Paul Tonko (D-NY), Nydia Velázquez (D-NY), Maxine Waters (D-CA), and Susan Wild (D-PA).

The letter was also endorsed by: Public Citizen, AFL-CIO, Endangered Habitats League, Friends of the Earth US, Greenpeace USA, Honduras Solidarity Network, Latin America Working Group, NETWORK Lobby for Catholic Social Justice, Oxfam America, Progressive Democrats of America, Pride At Work, R-CALF, Sierra Club, and Unitarian Universalists for a Just Economic Community.

“If the U.S. is serious about addressing the root causes of migration from Central American countries, it makes no sense to continue to allow multinational corporations to seek potentially billions from these small countries when they enact health, labor and environmental policies to protect their populations. President Biden has wisely recognized that ISDS is no longer an appropriate feature of international economic agreements, and trading partners like Honduras have made the prudent decision to withdraw from the World Bank venue where most ISDS cases are arbitrated. A broad coalition of labor, environmental, consumer, faith, and human rights organizations agrees, and believes it’s high time to work to remove it from existing agreements like the Central America Free Trade Agreement,” said Melinda St. Louis, Global Trade Watch director at Public Citizen.

“It’s time to stop putting corporate profits over people and the planet. Too many powerful companies use ISDS to undermine environmental and climate policies — including policies that can create green jobs and lift up domestic manufacturing for the clean energy transition — in the name of recouping lost investments or speculative profits they allege will never materialize. We urge the Biden Administration to work with trade partners in Central America and around the world to take the necessary steps to end this harmful practice once and for all," said Iliana Paul, Senior Policy Advisor for Industrial Policy and Trade at the Sierra Club.

The full text of the letter is available HERE and below.

March 21, 2024

The Honorable Anthony Blinken
Secretary of State
Department of State
2201 C Street N.W.
Washington, D.C. 20520

The Honorable Katherine Tai
U.S. Trade Representative
Office of the U.S. Trade Representative
600 17th Street N.W.
Washington, D.C. 20508

Dear Secretary Blinken and Ambassador Tai,

We commend the administration’s commitment to a “worker-centered” trade agenda that uplifts people in the United States and around the world and helps promote our humanitarian and foreign policy goals. We particularly appreciate President Biden’s opposition to including investor-state dispute settlement (ISDS) mechanisms in trade and investment agreements, which enable foreign companies to sue the U.S. and our trading partners through international arbitration.

On a bipartisan basis, Congress drastically reduced ISDS liability from the U.S.-Mexico-Canada Agreement (USMCA) because ISDS incentivizes offshoring, fuels a global race to the bottom for worker and environmental protections, and undermines the sovereignty of democratic governments. However, the U.S. has more than 50 existing trade and investment agreements on the books, most containing ISDS, including the U.S.-Central America Dominican Republic Agreement (CAFTA-DR) which entered into force in 2006. We urge you to offer CAFTA-DR governments the opportunity to work with the U.S. government to remove CAFTA-DR’s ISDS mechanism.

While there is no evidence that ISDS significantly promotes foreign direct investment, there is ample evidence that the abuse of the ISDS process harmed the Central America and Caribbean region. Multinational corporations have used ISDS to demand compensation for policies instituted by governments in CAFTA countries, undermining their democratic sovereignty and, often, harming the public good. For example, foreign companies have targeted labor rights, environmental protection, and public health policies.This ultimately works to counteract U.S. government assistance intended to address the root causes of migration from the region.

For certain Central American and Caribbean countries, even a single ISDS award (with some claims in the hundreds of millions or billions of dollars) could destabilize their economy, as limited fiscal revenues are diverted from critical domestic priorities to cover legal defense expenses, tribunal costs and damages. According to public sources, taxpayers in CAFTA-DR countries paid at least $58.9 million to foreign corporations in ISDS awards, with at least $14.5 billionin pending ISDS claims.Notably, the lack oftransparency in ISDS arbitration makes it impossible to know the full extent of ISDS liability. There are also concerns regarding the fairness of ISDS proceedings as ISDS arbitrators can appear as counsel before tribunals composed of arbitrators with whom they previously served in different ISDS proceedings.

Accordingly, we are eager to work with you to remove ISDS liability from CAFTA-DR and all other trade or investment agreements with countries in Central America and the Caribbean. This would send a powerful signal that the U.S. government is committed to a new model of partnership in the region — a model that uplifts and protects democracy, rule of law, human rights, and the environment. We look forward to working alongside you to bring the CAFTA-DR more into alignment with the current trade agenda and prevent harmful corporate overreach in emerging economies.