THE TRANS-PACIFIC PARTNERSHIP TRADE PACT

Features

More Draconian Than NAFTA

by Peter Dolack, Systemic Disorder

Imagine a world in which which labor safeguards, safety rules and environmental regulations will be struck down because a multi-national corporation's profits might be affected. A world in which measures to reign in financial speculation are illegal. A world in which the task of governments, codified in law, is to maximize corporate profits.

Imagine a world in which corporations can bypass national laws and courts when they are in a dispute with a government, and instead can have their dispute adjudicated by a closed tribunal controlled by their lawyers.

Unfortunately, the above is not dystopian science fiction; it is the reality of the top-secret Trans-Pacific Partnership. If you like NAFTA, you will love the TPP.

Haven't heard of the Trans-Pacific Partnership? There is good reason. It is a proposed trade agreement being secretly negotiated that would not only codify the one-sided rules heavily favoring corporate interests exemplified in the North American Free Trade Agreement, it would go beyond them. And many of the harshest rules proposed to be included in the TPP are being pushed by the Obama administration.

Nine countries—Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam and the United States—have negotiated for four years. No text has ever been released to the public, and even the US Congress has been left in the dark as to the TPP's contents. That we know anything at all about it is due to leaks. A portion of the text, the chapter covering investment rules, is posted as a PDF on the website of the Citizens Trade Campaign.

What the TPP represents is multi-national corporations going beyond lobbying for deregulation, bending rules and decisively influencing government policy to actually having their interests in profit maximization regardless of impact written into international law, and controlling the tribunals that will adjudicate corporation/government disputes. "Free trade" agreements have become a favored route toward this corporate goal. In the nearly two decades that NAFTA has been in force among Canada, Mexico and the United States, there has been a steady procession of corporations filing complaints alleging that regulations "harm" them.

Thus we have had the spectacle of a US corporate parcel-delivery service suing Canada in an attempt to have the Canadian postal system dismantled and chemical companies suing because a chemical they produce has been banned because it is poisoning water supplies. The key NAFTA provision is Chapter 11, which codifies the "equal treatment" of the business interests of signatory nations and enables corporations to sue over any regulation or other government act that violates "investor rights"—which means any regulation or act that might prevent the corporation from earning the maximum possible profit.

The usual result is either the complaining corporation wins its case or the defendant government settles on terms advantageous to the corporation to avoid a worse result. Multi-national corporations don't win every time—for instance, Canada was graciously allowed to retain its postal service. The TPP is designed to tilt the scales still more heavily in favor of "investors"—not only via rules granting more "rights" to multi-national corporations, but further expanding the definition of "investor." There are extensive rules governing the "right" to a near guarantee of profits, but no rules concerning labor, environment, public health or safety.

NAFTA, as draconian as it is, is but a starting point. The TPP's extraordinarily one-sided rules, which go beyond NAFTA in several ways, are intended to be a new floor in the ongoing effort to lock in the domination of industrialists and financiers through the multi-national corporations that they control. The TPP is intended to be "scalable"—that is, other countries can join but are forbidden to oppose any measure already agreed upon. Just two months ago, Canada and Mexico accepted invitations to join, so it is quite conceivable that TPP may supplant NAFTA.

The US watchdog group Public Citizen issued an analysis (PDF) of the leaked TPP investor chapter earlier this summer. Sounding the alarm, Public Citizen said:

Over $350 million has been paid to investors by governments under the investor-state provisions in NAFTA alone over toxic waste dump permits, logging rules, bans of toxic substances and more. Currently, there are over $13 billion in pending corporate "investor-state" trade pact attacks on domestic environmental, public health and transportation policy. And, mere threats of such cases have repeatedly resulted in countries dropping important public interest initiatives, exposing their populations to harm that could have been avoided. Yet the leaked text shows that while TPP countries have agreed to impose binding obligations on themselves to provide foreign investors an array of extraordinary new privileges, the TPP countries have not agreed to health, labor or environmental obligations to be required of investors.

The Public Citizen report notes that the use of international tribunals to overturn regulations has increased dramatically in the past decade:

Over $719 million has been paid out under US Free Trade Agreements and Bilateral Investment Treaties alone—70 percent which are from challenges to natural resource and environmental policies, not traditional expropriations. Tobacco firms are using the regime to challenge tobacco control policies, including a case by Phillip Morris against Australia. Absent substantial changes to the leaked text, TPP would greatly increase the number of investor-state attacks on public interest policies and would expose governments to massive new financial liabilities.

The use of international tribunals is an aspect of bi-lateral and multi-lateral trade agreements often overlooked. The TPP would require the use of the International Centre for Settlement of Investor Disputes (ICSID) — an arbitration board that is an arm of, and controlled by, the World Bank. Cases that go before one of the Centre's tribunals are decided by a panel of three judges that are selected from a roster. The judges are appointed by the national governments that have signed on to ICSID, which are most of the world's countries.

Eight of the judges have been appointed by the United States. Each is a lawyer whose career has been spent in the service of large corporations. Six are currently partners in some of the world's most formidable corporate law firms, one is an academic who formerly was a corporate lawyer, and one is a lobbyist for a business group that seeks to codify pro-corporate trade rules under law. Five of the eight US-named lawyers have been counsel to various Republican Party administrations and several of the eight specialize in representing corporations before international arbitration boards.

These are the US panelists who are among those judging the merits of corporate claims against government regulations:

Fred Fielding: An attorney who bounces back and forth between Republican administrations and corporate law firms; among his clients has been the mercenary military contractor Blackwater.
William Park: Currently a law school professor but has practiced with three corporate law firms and has been an arbitrator on many business-arbitration boards.
Daniel Price: A corporate lawyer who represents companies in international arbitration and a former economic adviser to George W. Bush.
John M. Townsend: A corporate lawyer who represents pharmaceutical companies and specializes in representing companies in arbitrations against governments; he is also a trustee of a business lobbying group.
J. Caleb Boggs III: A corporate lawyer who specializes in representing financial institutions and other clients before regulators and helped write a law deregulating banks while a Senate aide.
William A. Burck: A corporate lawyer who specializes in representing companies and corporate officers in disputes with US and other governments; he is a former legal adviser to George W. Bush.
Ronald A. Cass: The chair of a lobbying group that seeks to tilt international trade law further in favor of business; he was a trade representative for two Republican administrations.
Emmet Flood: A corporate lawyer who represents companies in disputes against government regulations and a former counsel to George W. Bush; among his past clients are the Koch brothers.

The rules that panelists will adjudicate would supersede national laws. Article 12.7 of the TPP, for instance, provides a long list of prohibitions against government actions; under it, laws imposing capital controls (even to ameliorate a crisis), rules governing domestic content of products or any protections of any domestic industry would be illegal. It then provides a generic exception allowing environmental or other measures "that are not inconsistent with the Agreement; necessary to protect human, animal, or plant life or health; or related to the conservation of living or non-living exhaustible natural resources."

That exception, however, is meaningless. It specifically requires that excepted rules must be "not inconsistent with the Agreement"—and that is the towering thorn sticking out of the minuscule rose. The key sentence opens Article 12.6: "Each Party shall accord to covered investments treatment in accordance with customary international law." The "Party" here means national governments, and the "customary international law" is that already established by NAFTA and the decisions made in bodies such as ICSID concerning disputes under NAFTA and other trade agreements. Those decisions skew heavily toward corporate complainants.

Venezuela recently became the third South American country to withdraw from ICSID; in doing so, the country's foreign ministry said ICSID "has ruled 232 times in favor of transnational interests out of 234 lawsuits received throughout its history." A 2007 report issued by the Institute for Policy Studies and Food and Water Watch, "Challenging Corporate Investor Rule," said multi-national corporations have won 70% of the cases (it did not specify how many of the remainder were a loss for the corporation nor how many were not decided or withdrawn). These tribunals are conducted in secret; only two ICSID cases have been conducted with public attendance in its history.

The World Bank is one of the principal bodies imposing austerity on countries around the world; it routinely conditions loans to governments of developing countries on the swift privatization of state-owned enterprises and public utilities, typically conducted at fire-sale prices as salivating corporate executives are aware of the hammer being held over the selling government. When the buying corporation decides it has not made the profits it expected, it can file a claim heard by ICSID, which is controlled by the very same World Bank.

In one notorious case, the World Bank forced the privatization of the water system in the Bolivian city of Cochabamba. Bechtel, the company that was handed the water system as the sole bidder in a secret process, charged a sum for average per-household water use equal to one-quarter of city residents' income, and imposed a contract provision banning the collection of rainwater. After massive local protests backed by a global campaign forced it to leave the city, Bechtel sued Bolivia for US$50 million in damages and lost profits although its investment is believed to have been less than $1 million and Bechtel’s revenues are six times the size of Bolivia's gross domestic product.

Bechtel settled without receiving a payment only because of massive international pressure and because Bolivians continued to resist in large numbers despite being repeatedly fired upon. That pressure was necessary as, according to Earthjustice, World Bank officials refused to disclose when or where the first hearing in the case would take place.

That is a very rare ending. Although developing countries are most often the targets of ICSID actions, regulations anywhere can be overturned. For instance, in one of the cases cited above, Canada was sued under the provisions of NAFTA by a US-based chemical company after it banned the use of a gasoline additive already banned in the US because it is a known toxic agent. Thanks to ICSID, Canada had to reverse its ban, pay millions of dollars to cover the company's "lost profits" and issue an apology to the chemical company.

Among the features of NAFTA to be replicated in the TPP are that:

• Governments pay attorney costs, win or lose, in addition to paying judgments.
• Taxation and regulation constitute "indirect expropriation" mandating compensation.
(A reduction in the value of an asset is sufficient to establish "expropriation" rather than a physical taking of property as required under US law).
• Older decisions become precedents for further expansions of investor "rights," and will be incorporated into the "evolving standard of investor rights" required under the TPP.
• No mention of labor rights, nor any standards for environmental, health or safety that must be met.

The London Court of International Arbitration, ruling in July 2005 for a unit of Occidental Petroleum in a case heard under the US-Ecuador bilateral investment treaty, declared that any change in business conditions constitutes a violation of "investor rights." If such a ruling is accepted as precedent, any attempt at regulation is potentially illegal.

Among the features of the TPP that go beyond NAFTA are:

• An expansion of who or what constitutes an "investor"—extending those eligible to file a claim to anyone who applies for a permit or license, or who "channels" resources or capital to set up a business, without placing any limits on what qualifies for such a status.
• No language to block frivolous claims.
• The US is seeking to include government bonds as a covered investment; if that stands, speculators would have the right to recover the full value of government bonds bought at discounted prices.
• Requiring new intellectual property laws that would criminalize many acts not currently classified as such.
• Significantly tighten corporate control of the Internet and force service providers to hand over personal data.

A separately leaked section of the TPP, covering pharmaceutical products, contains this interesting item on its cover page: "Declassify on: Four years from entry into force of the TPP agreement or, if no agreement enters into force, four years from the close of the negotiations." What is being hidden? New monopoly rights for pharmaceutical companies and the ability to overturn the policies of countries such as Australia and New Zealand that force much lower prices on drugs, policies that U.S.-based pharmaceutical companies wish to overturn. In addition, Citizens Trade Campaign reports:

This US intellectual property proposal, which rolls back initial reforms made in a trade pact that the Bush administration signed with Peru only four years ago, would lengthen pharmaceutical monopolies, eliminate safeguards against patent abuse, grant additional exclusive controls over clinical trial data and favor the giant pharmaceutical companies' monopoly interests at every stage.

Médecins Sans Frontières/Doctors Without Borders similarly reports that:

The Obama administration is walking away from previous efforts to ensure that developing countries can access affordable medicines, setting a dangerous new standard that will likely be replicated in future trade agreements with developing nations. The administration is touting a so-called ‘access window’ as a mechanism to boost access to medicines. In fact, the administration is confusing access with affordability. The ‘access window’ is all about getting brand-name drugs to market faster, and giving their producers longer monopoly rights that prevent price-lowering competition and keeping medicines out of the hands of the millions of people who need them.

The White House claims that: "The Obama Administration has been working in partnership with Congress and consulting closely with stakeholders around the country to ensure TPP addresses the issues that American businesses and workers are facing today, and may confront in the future." That clearly is not true, as senators and representatives are demanding disclosure. Nor does any of the agreement's text appear on the Web page dedicated to the TPP.

Executives and lobbyists from some of the largest corporations on the planet—commanding revenues much larger than the gross domestic products of the smaller TPP countries—are meeting in secret with government officials to give themselves yet more power and control.

Corporate-written rules for self-benefit are intimately connected with financiers manipulating markets and benefiting from the austerity they insist governments impose. Industrialists extract the surplus value from their from their workers that becomes profit and financiers provide the whip that intensifies the process, and create the speculative instruments that profits are poured into. We can have corporate dictatorship, or democracy. But not both.

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This essay ran on Aug. 1 on the Systemic Disorder blog.

From our Daily Report:

Pacific FTAs advance amid Sino-Japanese tensions
World War 4 Report, Sept. 19, 2012

High court rejects Chevron appeal in Ecuador case
World War 4 Report, Oct. 14, 2012

Mexico: study blames NAFTA in obesity epidemic
World War 4 Report, April 9, 2012

See also:

BEHIND THE FOOD CRISIS
Global Markets and Deregulation Strike Again
by Gretchen Gordon, Policy Fellow, Food First
World War 4 Report, May 2008