Editorial Board

What's Good for Asia Is Good for Europe

At least when it comes to resolving trade disputes.

More trade = better world.

Photographer: JERRY LAMPEN/AFP/Getty Images

There are 10 million reasons for Europe to shed its resistance to a trade deal with the U.S. -- that's the number of European jobs that depend on American exports. But negotiations are bogged down over a European proposal to change the way governments and investors settle disputes.

QuickTake Free Trade Feud

Differences over the same issue almost derailed last summer's Trans-Pacific Partnership negotiations. And the solution reached in the TPP provides a ready-made template for a European trade deal.

The rationale for the traditional arbitration process for investor-state disputes is that it enables foreign companies to bypass host-country courts, which can be biased in favor of their government's position. But in July, the European Parliament, which gets a vote on the final trade deal, instructed trade negotiators to replace that arbitration process, now embedded in thousands of trade treaties.

They might have looked to the TPP as a model for a sensible update. That deal incorporates many of Europe's current demands, such as making the proceedings public and allowing interested third parties to weigh in. It clarifies that companies bringing cases bear the burden of proof and requires countries to have ethics codes for the private-sector lawyers who act as arbitrators.

The TPP also strengthens the hand of government by making it clear that countries have the right to regulate in the public interest. Tougher banking rules to maintain financial stability, for instance, or regulations to control carbon emissions, couldn't be upended with an investor-state dispute settlement.

The U.S. and EU trade talks are picking up steam. It would be a shame if a dispute over disputes brought them to a halt.

    --Editors: Paula Dwyer, Therese Raphael.

    To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net .

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