United States politics is witnessing a new sorry spectacle — and one with real consequences for Australia, as well as other nations on the Pacific rim.
US President Barack Obama is trying to drum up support from his party to implement the agenda of the huge corporations that sought to block his election and re-election via the proposed Trans-Pacific Partnership (TPP) “free trade” deal involving 12 Pacific rim nations.
The text of the proposed agreement and the negotiations have been kept secret, but key chapters have leaked and been published by WikiLeaks.
The leaks reveal an agenda that, if successful, will worsen access to affordable healthcare and weaken regulation of the financial sector — in the US and for all other TPP signatory nations. The deal is being negotiated between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam.
The Obama administration is seeking to convince sceptical Democrats in the House of Representatives to approve his Trade Promotion Authority (TPA) — or so-called “fast-track” bill.
The TPA would allow for the TPP to be signed without Congressional approval.
Political commentators say Obama still needs to convince between 40 and 50 Democrats to support the fast-track bill in the Republican-controlled 435-seat House of Representatives.
The vast majority of House Republicans support the fast-track bill, with the exception of a group of Tea Party-aligned members who appear to oppose it on the principle of denying Obama any further power.
If agreement is not reached before Congress goes into recess in August, it is all but certain the US will not be able to seal the deal on TPP before 2017. It is also highly unlikely the TPP could get through Congress without the fast-track bill.
Environmental groups and progressive economists and academics are backing the Congressional opposition, led by Massachusetts Senator Elizabeth Warren. The AFL-CIO trade union peak body is campaigning against the fast-track bill and is withholding contributions to Democratic congressional campaigns to maximise pressure.
A letter to all House representatives and Senators asking them to oppose the fast-track was signed by the leaders of every US union in March, representing more than 20 million workers.
But while the undermining of congressional oversight is motivating opponents of fast-track, the content of the TPP is far more worrying.
The TPP is part of a “new generation” of free trade agreements that move far beyond lowering tariffs and aim to remove “non-tariff barriers to trade” by “harmonising” each nation’s regulations on trade.
This will result in a trans-Pacific race to the bottom on labour standards and environmental protections, as well as sending jobs in industrialised nations offshore. It will open state-owned enterprises in poor nations to multinational corporations and impose stricter intellectual property demands on these nations.
If signed, the TPP will cover 800 million people and 40% of the global economy. It is also to be a “living agreement” — which means other countries can join later, and the content of the TPP can be altered with agreement from the parties.
Leaks have indicated that negotiations are nearing conclusion, with the remaining sticking points being a dispute between the US and Japan over tariffs in the US agriculture sector and in Japan’s car industry.
The chief negotiators for the 12 countries will meet again at the APEC summit in the Philippines in May. Negotiators for several countries have made it clear they are not willing to sign up to an agreement unless Obama secures congressional fast-track.
The secrecy surrounding the TPP has contributed to public opposition, as has past experience with free trade agreements.
The US now has free trade agreements with 20 states. The bitter experience of previous agreements, particularly the North American Free Trade Agreement signed in 1994, has made the US labour movement deeply wary.
During the NAFTA negotiations between the US, Canada and Mexico, then-US President Bill Clinton promised the agreement would create 20 million new export-based jobs in the US. Instead, it led to a net loss of almost one million US jobs, according to the Economic Policy Institute.
The impact of NAFTA on Mexico was much harsher. More than two million small farmers and rural labourers were ruined and dislocated. The minimum wage in Mexico in 2013 was 24% lower in real terms than in 1993.
According to US NGO Public Citizen, of the 29 chapters of the draft TPP agreement, only five are actually related to trade issues — the rest focus on the so-called non-tariff barriers.
In November 2013, WikiLeaks published the secret draft chapter on intellectual property rights, followed by the draft environment chapter in January last year.
TPP opponents expect many aspects of the NAFTA experience to be replicated in the Pacific region. The major discrepancy in labour conditions and wages across the 12 TPP countries, for instance, will mean further loss of jobs in industrialised nations — for example, to Vietnam, where the average monthly wage is US$145.
Vietnam's large state sector is also in the sights of the US corporations backing the trade deal. The US Trade Representative’s office claims that “levelling the playing field” between private firms and state-owned enterprises is a central goal of the pact.
Among the most vicious proposals in TPP is the plan pushed by major pharmaceutical companies to force impoverished Pacific countries to sign up to the US model of intellectual property rights, which go beyond the World Trade Organisation (WTO)-administered agreement on Trade-Related Aspects of Intellectual Property Rights made in 1994.
The leaked intellectual property chapter confirmed warnings by public health experts and the World Health Organisation that the US is pushing for more restrictive medicine patents, which will limit the availability of affordable medicines.
The intellectual property chapter has also alarmed internet freedom activists, who believe the TPP aims to implement key parts of the failed US Stop Online Piracy Act (SOPA) and the Senate’s Protect IP Act (PIPA), which were scuttled due to public opposition in 2012.
Digital rights group the Electronic Frontier Foundation says the leaked proposals restrict innovation and freedom of expression online. It said that provisions on trade secrets mean countries will be able to “enact harsh criminal punishments against anyone who reveals or even accesses information through a ‘computer system’ that is allegedly confidential”.
Internet privacy advocates are equally concerned by the leaked detail on data flow provisions that they believe will allow privacy protections to be challenged on the basis they act as an unfair barrier to trade.
The protection of investors’ rights is the most controversial of all aspects of the TPP, and the part environmentalists are most concerned about.
Regardless of domestic policies that may exist or be introduced to cut carbon emissions, investment in the fossil fuel industry, including in shale, will be locked in and unassailable.
The TPP proposes to ease restrictions on investment and boost protection for investors through the investor-to-state dispute settlement (ISDS) mechanism.
The ISDS mechanism will allow private companies to sue national governments in private offshore tribunals for compensation for loss of “expected future profits”. Such losses may be related to government measures that impact on the company’s activities — for instance, government measures aimed at cutting smoking levels could be considered to impact on the “expected future profits” of tobacco companies.
Leaked investment chapter
The investment chapter of the TPP, dated January 20, was leaked and published by WikiLeaks on March 25. Activists have described its content as even worse than feared.
Footnote 29 of the leaked chapter states that Australia is exempt from the ISDS provisions, but adds: “deletion of footnote is subject to certain conditions”.
Coordinator of the Australian Fair Trade and Investment Network Dr Patricia Ranald said the Australian government “is using ISDS as a bargaining chip in the hope of improved access to US agricultural markets” and appears to be “about to agree to ISDS” under certain conditions.
The former Labor government banned the inclusion of ISDS mechanisms in future trade deals. But this policy has been overturned by the Abbott government, which says it will assess each trade deal on a case-by-case basis.
The Abbott government has already signed up to a free trade agreement with South Korea, which includes an ISDS provision.
Tobacco giant Philip Morris's legal action against the Australian government over its introduction of plain packaging for cigarettes in 2010 has become the most infamous and emblematic example of ISDS in action. This has generated a deep suspicion towards ISDS internationally.
The investor-state dispute settlement mechanism was first introduced into trade agreements and treaties in the 1950s. It was rarely used until the 1990s when the US-led surge in free trade agreements made it a more readily accessible option for multinational corporations.
According to the UN Conference on Trade and Development (UNCTAD), there has been a ten-fold rise in reported cases since 2000. An ISDS mechanism is now included in more than 3000 trade agreements around the world.
By the end of last year, there had been 608 known ISDS cases brought against more than 100 national governments that have resulted in the payout to multinationals of billions of dollars. But because ISDS arbitration can be kept secret, there may be many other cases not made public.
The mechanism has repeatedly been used to directly challenge legislation by democratic governments made in the public interest. After signing NAFTA the Canadian government banned a fuel additive, MMT, due to it having been found to be a risk to human health and the environment.
It was sued by US MMT manufacturer Ethyl for a loss of expected future profits and settled the case for US$13 million. The settlement included not only a payout, but an obligation on the Canadian government to rescind the ban and publicly declare that MMT was safe.
Argentina was sued by more than 40 corporations after it took action to devalue its currency and freeze energy and water bills in the wake of its 2001 financial crisis. Compensation orders against Argentina for these actions reached $1.15 billion by 2008.
In Ecuador, after the government cancelled Occidental Petroleum contracts for illegally breaching contractual terms, the US oil company was awarded $1.77 billion.
Ecuador, Bolivia and Venezuela have now withdrawn from the World Bank’s investor dispute mechanism and withdrawn from many bilateral investment treaties that contain an ISDS mechanism.
In response to the Arab Spring in 2011, the then-Egyptian government conceded a rise in the minimum monthly wage from $56 to $99 — only to be sued in June 2012 for almost $100 million by French corporation Veolia, which objected to having to pay its Alexandria bus station workers more.
In an intellectual property case, US drug corporation Eli Lilly is suing Canada under NAFTA over a law aiming to ensure public access to affordable medicines.
In another case under NAFTA, Canada is being sued by US company Lone Pine Resources for $230 million for the Quebec government’s declaration of a moratorium on oil and gas exploration in 2011. The moratorium led to the revoking of Lone Pine’s permit to frack gas from underneath the St Lawrence River, which is an essential source of drinking water in Quebec.
If successful, the US-led drive to include ISDS provisions in TPP will result in an exponential rise in ISDS claims, where taxpayers are forced to shoulder the cost of the risks associated with foreign direct investment.
Discussing the impact of NAFTA, a former Canadian government official was quoted in The Nation as saying: “I’ve seen the letters from the New York and DC law firms coming up to the Canadian government on virtually every new environmental regulation and proposition in the last five years.”
These included pharmaceuticals, chemicals, patents and pesticides. “Virtually all of the new initiatives were targeted and most of them never saw the light of day.”
World-leading ISDS lawyer and Essex Court Chambers barrister Toby Landau QC said that this so-called regulatory chill exists “without doubt”, adding that in his role as counsel, “on a number of occasions now I’ve actually been instructed by governments to advise on possible adverse implications or consequences of a particular policy in terms of investor-state cases”.
The ISDS provisions that offer the highest success rate for multinationals are the “fair and equitable treatment” commitment and the “minimum standard treatment” guarantee.
According to Public Citizen, in 74% of cases where US investors were successful, the fair and equitable treatment provision was used. Both provisions would be extended in TPP according to the investment chapter that WikiLeaks released in March.
The chapter shows that under the minimum standard of treatment provisions, a case could be taken against government measures that increase the level of regulation or scrutiny that an investor expected based on its dealing with a previous government.
The tribunals that hear these cases are convened by the World Bank’s International Centre for Settlement of Investment Disputes or the United Nations Commission on International Trade Law dispute mechanism.
Three private lawyers are selected from a roster to arbitrate — one appointed by the investor, one by the state, and one that is agreed by both parties.
They meet in hotels or conference centres for a few days or a week, according to leading US ISDS lawyer and critic of the system George Kahale. The proceedings are often kept secret and there are no public disclosure requirements.
In its analysis of the leaked investment chapter, Public Citizen points out: “Since only foreign investors can launch cases and also select one of the three tribunalists, ISDS tribunalists have a structural incentive to concoct fanciful interpretations of foreign investors’ rights and order that they be compensated for breaches of obligations to which signatory governments never agreed.”
An investor-friendly tribunal member clearly has a higher chance of being selected by corporations to sit on future tribunals.
Waves of public opposition to the ISDS mechanism have led to some agreements including “safeguards”. The safeguards included in the Central America Free Trade Agreement in 2005 have been replicated in the TPP Investment chapter — but these measures have been ignored in practice by the tribunals, which have no substantive appeal mechanism.
The TPP is regarded as the economic arm of the Obama administration’s “Pivot to Asia” that aims to contain the rising power of China. For this reason, signing off on TPP is an urgent priority for the US president in the coming months.
However, it will not happen unless Congress approves the fast-track. Enormous pressure by multinational corporations is being exerted on Democrats to delegate this authority to the president.
If signed, the TPP will result in a historic and unprecedented transfer of political and policy-making power to multinational corporations. This makes the stakes dizzyingly high — not only for the populations of TPP countries, but for the vast majority of the world’s population that will be affected by new proposed corporate trade deals.
[Abridged from www.emmaclancy.com.]