Restructuring the State through Economic and Trade Agreements: The Case of Investment Disputes Resolution

This essay will examine the emergence of transnational governance via supranational economic agreements which promote global imposition of liberalizing policies in the interests of transnational investors. The stalled multilateral World Trade Organization (WTO) process has given way to a plethora of regional and bilateral economic agreements covering a range of new issues—investment, intellectual property, services, and regulations—which trench ever more deeply on domestic decision-making. Informed by Phillip Cerny’s conception of “competition states”, Colin Crouch’s (2000) lament about “post-democracy”, Carroll and Sapinski’s analysis of “global corporate elites”, and David Held’s depiction of “global governance complexes”, the essay will examine the role of transnational corporate and institutional elites in advancing economic agreements which narrow the scope for democratic governance. These authors depict the combination of constraint and empowerment of states induced by these transnational agreements which force most liberal democracies to cut or tweak programs and regulations in economic and social fields to protect investor rights, while boosting restraints on citizens in areas like intellectual property—what Cerny (1997) calls the “paradox” of the competition state. Given the number and complexity of these transnational governance arrangements, this essay will focus on the transnational constraints of investor state arbitration and disputes settlement systems. This will be illustrated by examining the growth of investor disputes settlement claims in bilateral treaties and major European and North American economic agreements and the rise of arbitration cases which impose costs on states for violations of investor rights. The essay considers the implications of these new forms of transnational governance for democratic governments’ responsive to popular demands. It concludes by suggesting the need for revisions to theories of the democratic state, which may be morphing into pluralistic plutocracy

Populist Backlash and Trade Agreements in North America: The Prospects for Progressive Trade

Populist rejection of the embedded liberal international order is evident in many Western democracies. This is partly attributable to the architects of this system, who over-promised widespread benefits while ignoring warnings from labour and fair-trade advocates about risks to economic security from transnational economic competition. This article contrasts Canadian and American conservative populist positions on free trade. Globalisation and free trade without consideration for fair trade weakened the embedded liberal compromise and undermined the Keynesian welfare state model which sustained it. While regional free trade agreements like the North American Free Trade Agreement have had marginal negative effects, they became convenient scapegoats in a strategy of “othering” adopted by Trump and other populists. Populism arose in part in response to middle- and working-class decline (alongside cultural changes and revitalised nativism), which eroded support for embedded liberalism. The heretofore pro-trade GOP followed Trump to a more protectionist and bilateral model to press for “America first,” tinged by nativist othering towards Mexico and China. This diverged from Canadian right-populist leaders, whose rhetoric generally supports freer trade despite scepticism among some supporters. Asymmetrical circumstances of the US as a global economic hegemon vs. Canada as trade-dependent middle power limits the feasibility of a protectionist, “Canada first” position while particularities of political and electoral systems create more room for nativism in the US. Polling results indicate support for free trade in both nations, with a priority for labour and social protections, which provides the potential for further engagement in progressive trade liberalisation. Hence a significant percentage of the population supports “fair-trade” approaches, not protectionism. However, many conservative politicians eschew fair-trade positions and endorse anti-labour policies. Despite gains such as the labour provisions in the Canada–US–Mexico Agreement, a right-populist alliance with fair-trade advocates and labour unions is unsustainable and would entail compromises like climate denial, anti-immigrant, and anti-equity approaches which hinder the pursuit of progressive multilateral trading regimes