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The Obama Administration’s decision to allow foreign companies to challenge U.S. trade policies may have the effect of accelerating job loss as U.S. companies seek cheaper foreign labor and compete for foreign investment, economists say.

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The move “increases the likelihood of a race to the bottom where U.S. consumers get more expensive goods from abroad, including jobs,” said Robert E. Scott, economist at University College London and chief economist at the U.S. Bipartisan Policy Center.

The U.S. has been seeking to ease the regulatory burden imposed on U.S. companies under the trade deal with 12 other nations. Trade negotiations began this year, but negotiations appear stalled as members of Congress and the White House fight over the Trans-Pacific Partnership (TPP) and other policies that would make it easier for other nations to sign on.


The Obama administration has said the move is aimed at enabling businesses to expand globally. But critics say the new exception — for “investor-state dispute settlement” — could be used to circumvent U.S. rules and drive up costs for companies.

“The problem with these proposals is that they actually increase the costs for U.S. consumers, because they give foreign investors the right to sue us,” Scott said, referring to the investor-state dispute settlement clauses. “So, by giving foreign investors the right to set the rules of the road, the result could be less economic growth.”

The administration wants to change existing law that provides for the administration to take on foreign “nationals” who do not have a formal agreement with the U.S., but can only challenge a U.S. government rule. The administration wants to expand that law to include “state-owned enterprises.”

In its new rule, the administration says “investor-state dispute settlement can only be used in accordance with existing law, including international labor and environmental standards from the World Trade Organization (WTO).”

But Scott noted that in other trade agreements such as the North American Free Trade Agreement (NAFTA), the U.S. has already made it easier for corporations to have access to courts. Those same U.S