Progressive International | 19 March 2024

Economists: "The era of corporate supremacy in the international trade system is coming to an end"

We, economists from institutions across the world, welcome the decision by the Honduran government to withdraw from the International Centre for Settlement of Investment Disputes (ICSID). We view the withdrawal as a critical defence of Honduran democracy and an important step toward its sustainable development.

For decades, international arbitration courts like ICSID have allowed corporations to sue states and restrict their freedom to regulate in favour of consumers, workers and the environment. Since 1996, governments in Latin America alone have been forced to compensate foreign corporations over $30 billion, intimidating regulators away from raising minimum wages, protecting vulnerable ecosystems, and introducing climate protections, among other domestic policy priorities. We find scant economic evidence that mechanisms like ICSID stimulate meaningful foreign direct investment, in return.

Honduras presents a powerful case of corporate abuse through the ISDS system. Since the 2021 election of the country’s first woman President, Xiomara Castro, corporations have brought a total of 10 ICSID cases against them. The largest, brought by the US corporation Próspera Inc, seeks more than $10 billion — two-thirds of the country’s annual budget — as compensation for the country’s decision to derogate the disastrous “ZEDEs” law that forfeited Honduran territory to foreign corporations like Próspera to found private cities that operate almost without regard for labour, environmental, or health regulations.

The era of corporate supremacy in the international trade system is coming to an end. The European Union recently announced its withdrawal from the Energy Charter Treaty (ECT). US President Joseph R. Biden, meanwhile, has pledged to not have provisions for these corporate courts in future trade deals. And major developing countries, such as Brazil and India, stand firm in their refusal to enter treaties like ICSID in the first place.

Now, the government of President Xiomara Castro has taken another important step to prioritise sustainable development over corporate profit. As economists, we commend President Castro and the people of Honduras, and hope that countries across the world follow their lead toward a fairer, more democratic trade system.

Signed

Ha-Joon Chang
Ann Pettifor
Jeffrey Sachs
Jayati Ghosh
José Gabriel Palma
Yanis Varoufakis
James Meadway
Guy Standing
Paul Robert Gilbert
Jason Hickel
Daniela Gabor
Isabella Weber
Gustavo Indart
Trevor Evans
Arthur MacEwan
Robert H. Wade
Leonardo E. Stanley
Amit Bhaduri
Rohith Jyothish
Fidel Aroche Reyes
Malcolm Sawyer
Kathleen McAfee
Thomas Masterson
Andres Arauz
Dean Baker
Alan B. Cibils
James Boyce
Stephan Lefebvre
Rob Larson
Immanuel Ness
Alan Aja
Max Sawicky
Patrick Bond
Mary C. King
John Willoughby
Dominik Leusder
Pablo Bortz
Oscar Ugarteche
Odd Hanssen
Sankar Varma
Mustafa Özer
Stanley Chitukwi
Farwa Sial
Daniel Kostzer
Kayhan Valadbaygi
Isabel Ortiz
Hans Despain
Lorena Valle Cuéllar
Hugo Uriarte Guerra
Danny Dorling
C P Chandrasekhar
Ilene Grabel
Dimitri Papadimitriou
Costas Lapavitsas
Prabhat Patnaik
Ron Baiman
Andrew M. Fischer
Leonardo E. Stanley
Larry Allen
Ignacio Silva Neira
Stephen Marglin
Gabriela Dutrenit
Professor P N (Raja) Junankar
Stephen McBride
Zhongjin Li
William Mitchell
Amir Lebdioui
Marcela Vera Díaz
Sankar Varma
Laura Horn
Amitava Dutt
Alfredo Saad Filho
Mahalaya Chatterjee
Matias Vernengo
Anu Chenoy
Grace Blakeley
Manuel Riesco
Gustavo Indart
Giovanni Dosi
Fadhel Kaboub
Patrick Chaylee
Luiz Carlos Bresser-Pereira
Eileen Appelbaum
Mark Weisbrot
Chris Tilly
Carolina Alves
Jerome Roos
William Lazonick