For nearly 30 years, American businesses operating in Mexico have been able to settle disputes with the government in an international court where an independent judge would oversee the case, but that won't be possible if the new trade agreement becomes law.
Trump's effort to simply rename the North American Free Trade Agreement (NAFTA) while leaving the overwhelming majority of the law intact includes an obscure provision that would force American businesses to file cases within Mexico under their court system.
NEW YORK/MEXICO CITY(Reuters) - The new North American trade agreement ends key legal protections for many U.S. businesses operating in Mexico, leaving their operations exposed to a risk they had avoided under the old trade deal: Mexico’s court system. [...]
The removal of the investment protection means firms would now be at the mercy of Mexico’s courts, which are notorious for corruption, an energy industry source said.
The provision has been part of numerous trade pacts to lessen risks for firms operating overseas. Its removal makes the new agreement an outlier, trade experts and industry sources in Washington said.
This may seem counterintuitive, but Mexico opposed this during negotiations with Trump's unhinged trade representative Robert Lighthizer.
No one knows the Mexican court system better than the Mexican government and they did not want to see these protections for foreign businesses eliminated under the new agreement. Protecting foreign investors from corruption is key to getting them to invest in Mexico in the first place.
For his part, Lighthizer reportedly believes the protections are a "subsidy" for American companies, which is puzzling to say the least.
If I understand the Trump regime's position, exposing American businesses to corrupt courts is intended to dissuade them from doing business in Mexico. But they're going to do business in Mexico anyway, so what's going to happen is American business will end up paying something equivalent to protection money to corrupt judges.
Lighthizer apparently believes that should be the cost of doing business outside the United States.
We're way far away from Free Market principles here.
Suffice to say, this could be something that is rolled back in the coming months and during the next session of Congress which may or may not agree to approve a deal that removes these protections for American businesses. And that seems like a no-brainer, doesn't it? Who's going to attack members of Congress for trying to protect American businesses from foreign courts?