Bureau of Economic, Energy and Business Affairs
September 30, 2009

The meeting was open to the public but conducted under the Chatham House Rule. Only cited participants’ statements are for attribution. The meeting drew more than 80 attendees from the membership, general public and media.

Committee Chairman Theodore (Ted) Kassinger of O’Melveny & Myers, LLP, opened the meeting of the Advisory Committee on International Economic Policy (ACIEP) and welcomed the members and participants. Chairman Kassinger called for discussion under the Chatham House Rule and introduced the newly confirmed Under Secretary for Economic, Energy and Agricultural Affairs Robert D. Hormats. Under Secretary Hormats remarked on the accomplishments of the ACIEP, expressed the importance of private sector outreach, and emphasized the value of the Committee’s advice regarding international economic policy issues, noting that members are on the front lines and experience the effects of policy. The Under Secretary gave a brief readout of his trip to the Pittsburgh Summit for the meeting of the G-20, where the world leaders focused on food security, green energy, and global economic cooperation. There was general agreement from the leaders that the world economy is improving, but still needs to be monitored. Under Secretary Hormats also underscored the importance of international investment and of the model bilateral investment treaty (BIT) review, which was the main topic of the meeting.

The co-Chairs of the Investment Subcommittee, Thea Lee, Policy Director for the AFL-CIO, and Alan Larson, Senior International Policy Advisor at Covington & Burling, LLP, led the discussion of the Investment Subcommittee’s review of the model BIT. The Investment Subcommittee was formed by the ACIEP at the request of the Department of State and the Office of the U.S. Trade Representative (USTR), which co-lead the U.S. BIT program. The Subcommittee consists of twenty-nine members, including ACIEP members and non-members, and broadly representing the business community, labor unions, environmental NGOs, academia, and the legal profession.

The Investment Subcommittee was asked to report to the ACIEP on September 30, 2009, and to focus in particular on three topics: financial services issues, state-owned enterprises (SOEs), and dispute settlement. The Subcommittee’s report addresses these and other issues related to the model BIT. The report describes areas of consensus as well as issues where members held divergent views. In addition, the report contains an annex setting forth more detailed views of many individual Subcommittee members.

The Subcommittee formed a working group on financial services that met with senior officials from the International Monetary Fund and academics to discuss a range of views affecting this sector. Among the issues addressed by the working group were access to investor-State arbitration for discrimination-based claims in the financial sector, the exception for prudential measures, free transfer provisions, sovereign debt, and the definition of “investment.” Regarding SOEs, the Subcommittee explored issues of subsidization, the “in like circumstances” element of national treatment and most-favored-nation treatment obligations, and the standard for delegated government authority. Dispute settlement was the source of divergent views, as it had been in the 2004 model BIT review.

ACIEP members participated in a lively discussion about the Investment Subcommittee’s report.
Some members criticized the 2004 model for not adequately addressing labor concerns and the public interest generally. One member commented on the devastation caused by five million jobs lost and plants in the manufacturing sector that have closed and moved overseas in recent years.

Other members stressed the importance of BITs to U.S. investment abroad. These members opposed adding new labor and environment provisions, arguing the BIT is the wrong vehicle to advance these interests. Another member added that having a high-standard model BIT will allow the U.S. to compete with countries that have already entered into such BITs to protect their investors. An industry representative called for a strong model BIT because of the importance of foreign investment to facilitating exports abroad. One member proposed that ACIEP recommend retaining the model BIT as-is, and to use this text as the basis for negotiations with Brazil, Russia, India and China. Members noted that the report comes at an opportune time and there is consensus on some items, especially transparency.

The Subcommittee leadership reiterated that it hoped the report would be useful to the Administration and that the Subcommittee prepared the report to be responsive to the questions raised by the U.S. Government. It also recommended that the ACIEP encourage the Administration to examine the report as part of the review process.

In response to the suggestion of ACIEP Chairman, Ted Kassinger, the ACIEP discussed whether and in what form the Committee should members present the work of the Subcommittee to the Department. The Committee unanimously voted to forward the Investment Subcommittee’s report, including the Annex of additional views, to Secretary of State Hillary Rodham Clinton and the Administration for their consideration.

William Craft, Acting Assistant Secretary for Economic, Energy and Business Affairs, thanked the members of the Investment Subcommittee and Co-Chairs for their work and commented that the State Department endeavors to remain engaged with the Committee and other stakeholders on these issues.

A copy of the ACIEP-adopted Investment Subcommittee’s Report on the Review of the Model Bilateral Investment Treaty is available on the ACIEP webpage: www.state.gov/e/eb/adcom/aciep/index.htm.

Subcommittee Update
William Reinsch, President of the National Foreign Trade Council and Chair of the Economic Sanctions Subcommittee, informed the Committee that at the next ACIEP meeting the Sanctions Subcommittee will present a draft letter to Secretary Clinton for ACIEP consideration and pending recommendation.

Chairman Ted Kassinger closed the meeting by thanking the meeting participants for a large turnout to discuss the report of the Investment Subcommittee.