TPP

http://www.yesmagazine.org/new-economy/trade-rule-illegal-favor-local-business-tpp-leak-wikileaks

The leaked text is full of dense legal jargon. But a close reading makes its corporate agenda crystal clear.

Secret negotiations on the Trans-Pacific Partnership (TPP), a trade and investment agreement involving 12 nations of the Pacific Rim, are coming to a close, and President Barack Obama will soon submit the final agreement to the U.S. Congress for approval.

Here are the Cliffs Notes in simple English.

Presumably, he will urge the deal’s passage with the same unsubstantiated and misleading claims his administration has offered all along: that the TPP will support Made-in-America exports, enforce fundamental labor rights, promote strong environmental protection, and help small business.

But a newly leaked document belies those claims. The Trans-Pacific Partnership’s text consists of a number of chapters, among the most important of which is the one on investments. On March 25, WikiLeaks released a confidential draft of that chapter dated January 20. The draft contains instructions indicating that it will be declassified only “Four years from entry into force … or, if no agreement enters into force, four years from the close of the negotiations.”

A quick reading of the leaked chapter makes it clear why TPP sponsors have gone to great lengths to keep their negotiations secret. The document substantiates claims by opponents that the TPP is a corporate-rights agreement designed to facilitate the export of U.S. jobs, allow corporations to sue governments for enacting labor and environmental protections, make it illegal for governments to favor local businesses, and advance the colonization of national economies by global corporations and financiers.

As problematic as this chapter is, we can be thankful that it is out in the open. Now the need is to understand what all the legalese means.

The leaked document includes many technical details decipherable only by trade lawyers. Here are the Cliffs Notes in simple English.

1. Favoring local ownership is prohibited

Let’s start with the Investment Chapter’s section on how the TPP’s member countries should treat foreign investors:

Each Party [country] shall accord to investors of another Party treatment no less favorable than that it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its territory.

Put in plain English, the above paragraph means that signatory countries renounce their right to favor the domestic ownership and control of the lands, waters, and other productive assets and services essential to the lives and well-being of their people.

The 12 countries further renounce their right to favor locally owned businesses, corporations, cooperatives, or public enterprises devoted to serving their people with good local jobs, products, and services. They must instead give equal or better treatment to global corporations that come only to extract profits.

2. Corporations must be paid to stop polluting

Another provision limits what member countries can do in regard to corporate investments:

No Party may expropriate or nationalize a covered investment either directly or indirectly through measures equivalent to expropriation or nationalization (“expropriation”), except: (a) for a public purpose; (b) in a nondiscriminatory manner; (c) on payment of prompt, adequate, and effective compensation [emphasis added] … ; and (d) in accordance with due process of law.

This provision may sound reasonable, until you look at the chapter’s definition of “investment,” which includes “the expectation of gain or profit.” This odd definition means that a corporation can sue a signatory nation if the country deprives the corporation of expected profits by enacting laws that prohibit the company from selling harmful products, damaging the environment, or exploiting workers. Other language in the chapter makes it clear that this applies to actions at all levels of government.

In other words, a country in the TPP has every right to stop a foreign corporation from harming its people and the environment—but only if the country compensates the corporation for the expense of not harming them.

Similar provisions are already on the books in the North American Free Trade Agreement (NAFTA). According to Public Citizen’s Trade Watch,

Foreign firms have won more than $360 million in taxpayer dollars thus far in investor-state cases brought under NAFTA. Of the 11 claims currently pending under NAFTA, demanding a total of more than $12.4 billion, all relate to environmental, energy, land use, financial, public health and transportation policies—not traditional trade issues.

3. Three lawyers will decide who’s right in secret tribunals

The leaked chapter also describes how disagreements will be settled:

Unless the disputing parties otherwise agree, the tribunal shall comprise three arbitrators, one arbitrator appointed by each of the disputing parties and the third, who shall be the presiding arbitrator, appointed by agreement of the disputing parties.

The arbitrators are private lawyers who are not accountable to any electorate. They are empowered by the TPP to order unlimited public compensation to aggrieved investors. The proceedings and the identities of the tribunal members are secret, and the resulting decisions are not subject to review by any national judicial system.

According to The New York Times, NAFTA tribunals, on which the ones in the TPP are modeled, even have the power to overturn judgments of national courts—including the U.S. Supreme Court. John D. Echeverria, a law professor at Georgetown University, has called this method of dispute settlement “the biggest threat to United States judicial independence that no one has heard of and even fewer people understand.”

4. Speculative money must remain free

Yet another provision prohibits restrictions on movement of money from one country to another:

Each Party shall permit all transfers relating to a covered investment to be made freely and without delay into and out of its territory. …

Forms an investment may take include: (a) an enterprise; (b) shares, stock, and other forms of equity participation in an enterprise; (c) bonds, debentures, other debt instruments, and loans; (d) futures, options, and other derivatives.

Thus, the TPP guarantees the right of speculators to destabilize national economies through the manipulation of exchange rates and financial markets, without interference from national governments.

In so doing, the TPP strips national governments of the right to limit speculation in favor of investment in strong, stable, and productive national economies.

5. Corporate interests come before national ones

Another passage assures that corporations need bear no obligation to serve the interest of the people who live in the countries where they do business:

No Party may … impose or enforce any requirement or enforce any commitment or undertaking: (a) to export a given level or percentage of goods or services; (b) to achieve a given level or percentage of domestic content; (c) to purchase, use or accord a preference to goods produced in its territory, or to purchase goods from persons in its territory.

The article continues on with six additional provisions, which together prohibit governments from requiring that a foreign investor be under any obligation to serve the host country’s people or national interest.

The 12 countries would renounce their right to favor locally owned businesses
Obama administration officials say these provisions are needed to level the playing field for American companies doing business abroad. This raises an important question: What is an American company?

The Institute for Policy Studies reports that U.S. corporations and their subsidiaries currently hold $2.1 trillion in profits offshore to avoid paying taxes to the government of the United States. These include highly profitable companies like Microsoft, Google, Apple, General Electric, Exxon Mobil, and Chevron. One wonders on what basis we should consider these globe-spanning, tax-dodging, job-exporting corporations to be American.

Approval of the TPP means sacrificing our democracy and our right to manage our markets and resources for the public good. And for what gain? To secure rights for corporations—which claim an American identity only when convenient—to exploit the peoples and resources of other countries that have signed the same nefarious agreement.

Union members and community activists protest outside the Miami Dade College, where the Greater Miami Chamber of Commerce and the college were hosting a moderated conversation with Treasury Secretary Jack Lew on March 20, 2015. The protesters are against the Trans-Pacific Partnership, a proposed 12-nation pact. (Joe Raedle/Getty Images)

http://www.washingtonpost.com/blogs/monkey-cage/wp/2015/03/26/people-are-freaking-out-about-the-trans-pacific-partnerships-investor-dispute-settlement-system-why-should-you-care/

The recent leak of a secret chapter of the Trans-Pacific Partnership’s Investor-State Dispute Settlement system (ISDS) is getting many people on both the left and the right upset. Left-wingers don’t like a system in which corporations can push back against government regulations. Right-wingers don’t like a system where U.N.-affiliated tribunals can overturn U.S. law. I asked Rachel Wellhausen, an assistant professor at the University of Texas at Austin who works on investor treaties, to explain the basics of ISDS.

HF — What is ISDS?

RW — ISDS, or Investor-State Dispute Settlement, is the international system whereby multinational corporations (MNCs) can sue the governments of countries in which they invest for violating their property rights.

International treaties give MNCs access to ISDS, under which ad hoc international tribunals decide whether or not an MNC deserves compensation. There is no appeals system in place.

For example, an MNC just won $455 million in compensation from Venezuela, because in 2010 Venezuela nationalized and seized the MNC’s two bottling plants in the country. Another MNC is suing India over a retrospective tax bill, which the MNC says unlawfully devalued its property by reducing its share prices. An MNC recently lost a case against Uganda, where the tribunal found that Uganda’s regulation of transactions in the oil and gas industry was legitimate.

HF — How many ISDS arrangements are there, and how many times have governments been sued?

RW — Currently, about 3000 international treaties give MNCs the ability to sue governments. Some 2700 of these are Bilateral Investment Treaties. The rest are trade treaties, including NAFTA. These treaties have spread rapidly around the world since the 1990s.

From 1990 through the present, over 100 different countries have been sued over 550 times. Most of these are developing countries. The U.S. and Canada have been sued under NAFTA, but Western European countries have been sued only a handful of times (and Japan never). Sometimes these cases are brought at the World Bank’s International Center for the Settlement of Investment Disputes (ICSID). Sometimes they are brought under special U.N. rules (UNCITRAL). Because these cases can sometimes be private, we don’t know the full number of cases.

For my research, I have compiled a database of 360 cases in which we know what happened as of 2012. Of these, the state won 34 percent of the time. The MNC won 31 percent of the time. The case settled before reaching a final judgment 34 percent of the time (which lawyers think of as a win for the MNC). In all but a handful of cases, governments appear to have been compliant with the awards rendered.

HF — What is the leaked TPP document, and what does it tell us about ISDS in TPP?

RW — ISDS is already on the table — and under fire — in a different important trade deal: the U.S.-E.U. Transatlantic Trade and Investment Partnership (TTIP), which is also being negotiated right now. The leaked draft of the Trans-Pacific Partnership (TPP) agreement investment chapter spells out what it might look like among signatory countries in the Pacific region.

The TPP draft chapter includes some notable elements. There are clear transparency rules, requiring that all cases brought under the TPP must be public. Governments cannot be sued simply for defaulting on debt, and governments retain some rights to control the flow of capital across their borders. MNCs can sue for “pre-establishment” violations — if they feel their property rights were violated even before investing in the country — but Chile, Canada, Mexico and New Zealand had already included exceptions to this in the draft. And, Australia has said no — in the draft, it is exempted from the whole system. (Australia also refused to agree to ISDS in the recent U.S.-Australia Free Trade Agreement.)

HF — Why do many people in Europe and the U.S. worry about the consequences of ISDS?

RW — The TPP draft chapter says that the point of investment protection has long been “to encourage and promote the flow of investment…as a means to promote economic growth.” At the same time, the TPP draft chapter specifically highlights “the inherent right to regulate…to protect legitimate public welfare objectives, such as public health, safety, the environment, the conservation of living or non-living exhaustible natural resources, and public morals.”

The question is, can the ISDS system properly adjudicate between these economic and social goals? One person’s violation of MNC property rights might be another person’s legitimate government regulation. The European Union is wrestling with this: Hungary and Romania, for example, have been sued by MNCs for actions that they say were necessary for E.U. harmonization. There is broad outcry over Philip Morris’s actions against Uruguay and Australia, in which Philip Morris claims that regulations that make it hard to market cigarettes violate its intellectual property rights. Many countries are reconsidering treaties that arguably get the balance wrong.

The other potentially scary thing about ISDS is that MNCs themselves bring cases against sovereign governments. In the World Trade Organization, firms have to lobby their home governments to bring government-to-government cases over trade violations. But in ISDS, MNCs can use the treaty without their home government ever knowing. Many in the legal community have seen this as a good thing — “depoliticizing” investment disputes. In my research, however, I find that home governments regularly get pulled into disputes anyway.

HF — Are these fears justified, given the history and prospects of ISDS?

RW — The best justification for investment protection and ISDS would be evidence that it helps increase investment flows. The problem is, that evidence that it helps investment is decidedly mixed. We do know that countries that get sued lose out on foreign investment. Because of this, some scholars have recently come out against ISDS in the E.U.-U.S. TTIP negotiations. In a recent paper, I identify a benefit of ISDS — a government that generates revenue through expropriation gets cheaper access to debt, even if an MNC sues it. But this would matter more to a developing country than the U.S. While many oppose today’s ISDS, but most want it repaired, not abolished.

They think that the need for the protection of property rights is too central to the integrated global economy.

Rachel Wellhausen is an assistant professor of government at the University of Texas at Austin. Her recent book, The Shield of Nationality: When Governments Break Contracts with Foreign Firms, deals with issues around ISDS.