Yesterday, as the U.S. Senate resolved to ‘fast- track’ the TPP, in Australia, the Productivity Commission came out all guns blazing declaring the ‘free’ trade agreement ‘preferential’ and ‘dangerous’. Bill Davis and Dr Matthew Mitchell report.
THESE TWO EVENTS occurring on opposite sides of the Pacific should trigger ring alarm bells with the Australian public because the Abbott government is on the brink of signing away our sovereign rights (ISDS clause) amongst other things.
What is the TPP?
Firstly, what is the TPP? The U.S. trade representative’s official description is:
... an ambitious,21st-century Trans-Pacific Partnership (TPP) agreement that will enhance trade and investment among the TPP partner countries, promote innovation, economic growth and development, and support the creation and retention of jobs.
The US aims to revive its geopolitical, strategic and economic influence in the Asian region to counter the ascent of China, in part through constructing a region-wide legal regime that serves the interests of, and is enforceable by, the US and its corporations.
So this proposed TPP “agreement” involves Australia as well as a host of other potential member nations including Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Canada, Japan, Mexico, Vietnam and the United States. South Korea has also indicated it may sign up.
How far off is agreement on the TPP?
The deal is essentially done in terms of agreement between the 12 countries which make up this bloc and could be signed by end of the year. Fast-tracking the TPP has removed a major impediment in the United States. Fast-tracking is summarised by journalist Dave Johnson as follows:
With fast track, Congress agrees to set aside its duties under Article 1 section 8 of the Constitution and vote on TPP within 90 days of it being signed, to severely limit discussion and debate, not to filibuster the agreement in the Senate and not to amend it not matter what problems turn up after the agreement is revealed. Fast track essentially pre-approves the Trans-Pacific Partnership (TPP) agreement (and future trade bills) before the public gets a chance to know what is in it.'
Overnight, Reuters reported that the Senate voted 60 to 38 giving Obama the power to negotiate the TPP and other trade deals and fast track them through Congress. The bill goes next to President Obama for his signature
Australia’s process for approving trade agreements is not so different to the U.S.’s fast-track process.
AFTINET describes Australia’s process as follows [IA emphasis]:
The Trade Minister presents the text to the Cabinet, which is made up of the Prime Minister and other Cabinet Ministers. The decision to sign the text is made by Cabinet, not the whole Parliament.
The text cannot be changed after it is signed.
Parliament only votes on the implementing legislation, not on the whole text of the agreement. The Trans-Pacific Partnership (TPP), for example, has 29 chapters and only a few of these will require changes to legislation.”
However, many other chapters will restrict the ways in which current and future Australian governments can legislate, but will not require legislation. For example, the inclusion of the right of foreign investors to sue governments over domestic legislation (investor-state dispute settlement or ISDS) does not require a change to Australian legislation. Other changes, like changes to the Pharmaceutical Benefits Scheme, could be done by changing regulation rather than through legislation.
As many journalists and commentators have argued, agreements like the TPP have dubious benefits for the populations of the countries involved.
ISDS Clause: Giving corporations the right to hijack our sovereignty
One element of the TPP, the "investor state dispute settlement" (ISDS) provisions have been criticised by U.S. Constitutional lawyer Lori Wallach, as follows:
Investor-State Dispute Resolution, it empowers corporations to sue governments—outside their domestic court systems—over any action the corporations believe undermines their expected future profits or rights under the pact by reporting breaches, removing online content and even denying access to Internet users.
ISDS is the controversial mechanism by which Philip Morris is suing the Australian Government over tobacco advertising under an obscure Hong Kong trade treaty. ISDS is becoming a standard request in trade agreements, including our recently announced FTA with China and Korea — but not Japan.
In an article entitled ISDS: 'The trap Australia-Japan Free Trade Agreement escaped', the Sydney Morning Herald reported [IA emphasis]:
The United States loves investor state dispute settlement procedures. It has insisted on them in every one of the 14 free trade agreements it has signed and the 17 it wants to sign. Its companies use them to browbeat and potentially bankrupt governments that introduce environmental or health-related laws they don’t like, a practice Australia’s productivity Commission refers to as "regulatory chill".
One of the serious ramifications of ISDS is this chilling effect on the local legislature.
For instance, in February 2013, New Zealand's Ministry of Health announced that the government planned to introduce plain packaging legislation, but indicated that it intended to wait until the ISDS case by Phlip Morris was decided. The legislation has been introduced since then, but has not been enacted. [See No. 7 here.]
We also should note that John Howard himself was strongly against ISDS and refused to allow it to be included in the U.S.-Australian Free Trade Agreement with George W. Bush in 2004, as quoted in the Sydney Morning Herald in 2014. Our own conservative Productivity Commission examined ISDS procedures in 2010 and found no evidence that they boosted investment in nations likely to be sued. It recommended the Government "seek to avoid" them in the future.
The TPP negotiations have been going on since 2008.
During former Prime Minister Julia Gillard’s term of office, the ABC reported that, like the Howard government, the Gillard Government also
...flatly refused to support the inclusion of an ISDS clause.
But not so the Abbott Government.
Regardless of the fact that both the Howard and Gillard governments refused to include ISDS clauses in trade agreements, the Abbott government appears reckless in its rush to finalise trade agreements by agreeing to provisions it has been warned against. As mentioned above, in 2014 trade minister, Andrew Robb, negotiated the Japan FTA without the ISDS provisions, but included them in the Chinese and Korean agreements.
So we know the Abbott Government can respect Australian sovereignty if it so chooses.
The government’s inclusion of ISDS provisions in these FTAs prompted a blistering rebuke from the Productivity Commission, which re-entered the debate yesterday.
The Sydney Morning Herald reported the attack:
The Productivity Commission has launched a scathing attack on Australia's latest series of free trade agreements, saying they grant legal rights to foreign investors not available to Australians, expose the government to potentially large unfunded liabilities and add extra costs on businesses attempting to comply with them.
The assessment comes after trade minister Andrew Robb successfully concluded agreements with Japan, Korea and China, and on the cusp of final negotiations to seal a so-called Trans Pacific Partnership with eleven Pacific-facing nations including the United States, Japan, New Zealand and Singapore.
The costly Canadian experience of ISDS clauses
We only have to visit the Canadian experience of ISDS clauses to see how dangerous and costly these can be. Looking at NAFTA, the North American Free Trade Agreement, the Canadian experience 20 years down the track shows that Canada has lost or settled six claims paying a total of $170 million in damages, while Mexico has lost 5 cases, and paid out 204 million. The U.S., meanwhile, has won 11 cases and has never lost a NAFTA ISDS case.
One of those cases was the Ethyl Corp v. Government of Canada. MMT is a manganese-based compound that is added to gasoline to enhance octane and reduce engine "knocking." Canadian legislators are concerned that the manganese in MMT emissions poses a significant public health risk. In addition, automobile manufacturers have long argued that MMT damages emissions diagnostics and control equipment in cars, thus increasing fuel emissions in general. Ethyl is the product's only manufacturer.
The Environmental Defense Fund (EDF), which tracks the use of MMT, reports that the additive is used only in Canada. The United States EPA has banned its use in the formulated gasoline, which includes approximately one-third of the U.S. gasoline market. An EDF survey of the remaining producers reports that none use the additive.
California has imposed a total ban on MMT. Canadian legislators wanted to ban the use of MMT in order to protect the Canadian public. Because they could not do so under Canadian Environmental Protection Act (CEPA) provisions, they chose the best available alternative: banning MMT's import and transport.
The Ethyl case suggests that critics of NAFTA and ISDS since GATT may have been correct in arguing that these agreements could pose a threat to national sovereignty. The likelihood that NAFTA, and other agreements like it, could restrict the ability of democratically elected governments to legislate on such matters as public health and safety and environmental protection was downplayed by many advocates of the agreement.
Yet the Ethyl case suggests that critics' concerns were not misplaced
Abbott government continues to ignore warnings from the Productivity Commission on the TPP
As reported above, the Productivity Commission has been issuing warnings about the type of process used to negotiate the TPP since its 2010 trade report (see p 301):
In the Commission’s view, a more transparent and strategic approach is required to ensure that there is an appropriate focus on policies that are most in Australia’s interests.
Unfortunately, these warnings have fallen on deaf ears as far as the Abbott Government is concerned.
Productivity Commission savages TPP and ‘free’ trade deals: The Productivity Commission has launched an extrao... http://t.co/PSlG2oScgB— Australia News Links (@dlAustralianews) June 24, 2015
The TPP is being negotiated in complete secrecy. Our only access, so far, is via leaks published by WikiLeaks. Australian politicians who asked to see the text were told if they did, they could not talk about the text for four years.
A Chilean trade official also commented on the TPP saying that in consideration of the existing FTA:
‘... he could only expect greater, politically and perhaps economically difficult, demands from the Americans in a TPP.’
Who actually benefits from the TPP?
It seems no-one thinks that trade agreements like the TPP are a good idea — except the Abbott Government (alone among Australian politicians and former federal governments), the U.S. and multi-national corporations.
The question is: "What are we going to do about it?"
You can follow Bill Davis on Twitter @kcbill13.
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