Matthew Webb

The success of the Model Bilateral Investment Treaty (BIT) process in advancing transparency in the investment policy-making at the international level provides a practical and achievable framework for other areas on trade.  Though far from perfect, the Model BIT has improved transparency for the highly controversial area of investment, while still allowing the US to successfully negotiate a multitude of BITs and investment chapters.

Because trade policies involving intellectual property rights (IPR) are also very controversial, the Model BIT framework could be used to create model IPR Agreements and chapters to increase the legitimacy of international policy making in this area.

Problems with Transparency Initiatives

Though making statements in support of transparency are easy, workable solutions to these problems are not. Transparency initiatives must consider the reality of the situations of all countries involved.

The US has a lot of power to influence other countries, but opening up the negotiations process would likely be confronted for resistance in other countries who are far less transparent domestically. The US has experienced similar resistance to external transparency initiatives in the WTO in 2000 from countries such as Egypt, Pakistan, and Mexico—all of which had certain government controls of the press around that time. More importantly, giving more public transparency to treaty negotiations is often seen by developing countries as disproportionately favoring rich nations because the beneficiaries of these transparency initiatives, Non-Governmental Organizations (NGOs), are more powerful and have greater access to funding in the global “north,” while their southern counterparts have more legitimacy in the developing world.

Requiring the US to make available treaties while they are being negotiated could deter certain countries from even coming to the table, either because they see such policies as favoring the US or because of domestic policies repressing governmental transparency in general. This availability would be a substantial hurdle to achieving economic policy goals, particularly in such harsh economic times are we are living in now.

To better understand how to approach the problems of transparency, I have divided treaty negotiations in three stages: preparation, negotiation, and ratification.

Though increased transparency would be more desirable in the latter two stages, these two also impose the most problems. For the negotiation stage, secrecy allows for the flexibility with which to cut deals, as well as creating incentives to bring other, less transparent countries to the table.

The ratification stage also faces hurdles. Although the contents of the treaty are made available to members of Congress in the US during this stage, Congress is often only given the opportunity of an up or down vote. While this limits public involvement in making treaties, it is necessary to conclude them. Imagine how another country would react if, after all the concessions it made, the US’s concessions could be completely erased by modifications to a treaty by Congress. What incentive would a country have to make promises if it had no guarantee that the promises made to it were to be kept?

This leaves the preparation stage: pre-negotiation planning and policy-making. To address the problems of transparency in that stage, I will turn to a program that the US has already had in place for decades: the US Model Bilateral Investment Treaty.

The US Model Bilateral Investment Treaty

Since 1984, the United States has negotiated Bilateral Investment Treaties (BIT) based upon a Model BIT. This process begins with an open forum to present recommendations on revisions to the model. About every 5 or 10 years, the Model BIT is revised based on suggestions by the Advisory Committee on International Economic Policy (ACIEP) under the Department of State. ACEIP incorporates a much more transparent process than is involved in trade negotiations directly.  Membership of the committee, its meetings and reports of meetings, and the final reports, are all made available to the public. After the Model BIT is amended by the Department of State and USTR after the committee’s suggestions, the final text is posted publicly online, giving stakeholders and interest groups (such as IPS, Wolters Kluwer, the Heritage Foundation, NAM, Covington & Bulring, etc)  an opportunity to comment on the revisions before they are used in an actual Agreement. The most recent revision of the Model BIT began in 2009 and was completed in April 2012.

A comparison of the leaked US proposal of the Investment Chapter of the Trans-Pacific Partnership Agreement (TPP) to the US Model BIT shows that the U.S. proposals for this chapter were largely based on the US Model BIT. USTR also states directly that it negotiates BITs from the model text.  Much of the bracketed portions of the leaked investment Chapter (assumed to be inserted by the US negotiators) are identical to language in the Model BIT. The two documents are not completely identical, however. Since BITs are stand-alone treaties and the Investment Chapter is only a portion of a larger treaty, it is difficult to determine whether language absent some areas in the Investment Chapter (particularly concerning labor and environment) is replicated in other Chapters. Differences between the treaties also reflect the fact that the TPP is a multilateral treaty, while BITs are bilateral treaties.

Extending the Principals of the Model BIT to a Model IPR Agreement

Though far from perfect, the Model BIT presents a workable framework that could be applied to other the equally controversial area of intellectual property to for a Model IPR Agreement. Though the content of the Model BIT is far from controversial, it represents a much more transparent process in treaty making than in IPR and other areas of trade. Since BITs are essentially a stand-alone Free Trade Agreements (FTAs) Investment Chapter, the Model BIT process could even been extended on a chapter by chapter basis to an entire Model FTA.  This would give stakeholders and interest groups to have a greater voice in determining the language of these agreements, without the practical problems that would occur by opening up the negotiation or ratification stages.  It could also help prevent controversies, such as ones that have arisen from the leaked IP Chapter of the TPP.

A Model IPR Agreement would allow for a more open process in determining the position of the US in treaty negotiations that could include public meetings, public reports, and a final public document—all available before it would be enacted into law at the conclusion of treaty negotiations.  It would also provide a tool for Members of Congress to request explanations to inconsistencies between the Model IPR Agreement and the finalized negotiated trade agreement submitted for ratification.  It would give trade negotiators an already vetted document as a basis for negotiations, lessening their work and adding confidence that a final agreement would be ratified by Congress.

Limitations of a Model IPR Agreement

Only Relates to the Preparation Stage of Negotiations

Though a Model IPR Agreement offers some practical solutions for transparency issues, there are still issues it cannot address. The biggest problem is that a Model IPR Agreement would not guarantee the language of the final agreement. Without opening up the later stages, there is no way to get around this problem. A Model IPR Agreement would, however, be a workable step in the right direction. It would give interest groups an opportunity to debate and raise awareness of controversial issues much earlier in the process.

Lack of Awareness

Another potential limitation of a Model FTA is seen in the apparent lack of awareness of the Model BIT process. Criticism (such as from Public Citizen) of the leaked TPP Investment Chapter often compares that Chapter to NAFTA, concluded 20 years ago. Unlike NAFTA, the 2012 Model BIT represents the current position of the US on investment. Increased awareness of the Model BIT process (and to a potential Model IPR Agreement process) is greatly needed to produce text in the best interest of all US citizens.

Slow to Adopt

The process in revising Model BIT is also slow. The most recent revision took three years from when the process began in 2009, to its conclusion in 2012.  With the TPP already underway, it is unlikely that any efforts for a Model IPR Agreement would be finished in time to apply to the TPP. If this process is eventually extended to an entire Model FTA, it would take even longer to complete the process

The US alone is not enough

A final limitation is that a Model IPR Agreement would represent only the position of the United States and not the positions of other negotiating countries. Although many European countries also produce Model Investment Treaties, among TPP negotiating parties, only the US and Canada have these model treaties. Any real effort to increase transparency in international trade negotiations would require more than just the US to implement policies to increase transparency, such as a Model IPR Agreement or even a later Model FTA.