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Trans-Pacific Partnership: Congressional Republican Leadership May Protect Tobacco Despite Carve-Out

Charles Tiefer, Contributor I cover government contracting, the Pentagon and Congress.  Opinions expressed by Forbes Contributors are their own.

Charles Tiefer, Contributor
I cover government contracting, the Pentagon and Congress. Opinions expressed by Forbes Contributors are their own.

I am Professor at the University of Baltimore School of Law, where I focus on government contracting and Congressional legislating. I served as Commissioner on the Congressionally-chartered Commission on Wartime Contracting in Iraq and Afghanistan, in which I did three missions to Iraq and Afghanistan, and over 20 televised hearings. My chief published work on government contracting is a leading 750 page legal casebook, Government Contracting Law in the Twenty-First Century. I have testified before Congressional committees as an expert many times about Government contracting, problem departments, and government personnel. I was General Counsel (Acting) of the House of Representatives, serving15 years in that office and its Senate counterpart, and published a 1000 page treatise, Congressional Practice and Procedure. I am publishing with University Press of America a new book, The Polarized Congress: The Post-Traditional Procedure of its Current Struggles. I graduated from Columbia College with a B.A. summa cum laude and from Harvard Law School with a J.D. magna cum laude, and served on the Harvard Law Review.

The author is a Forbes contributor. The opinions expressed are those of the writer.

The Obama Administration denied tobacco (by the now-famous “carve-out”) the benefit of the potent corporate suit mechanism in the Trans-Pacific Partnership (TPP) against other nations’ regulations. Observers assume that ends the story. Not so. The fight has just begun.

Previous trade agreements have empowered the tobacco industry to batter down other nations’ regulations. For example, the tobacco industry took on Australia’s efforts to carry out rules for plain packaging. Australia spent $50 million to defend its mandate for plain packaging of cigarettes against industry opposition (a suit by Philip Morris International).

Toward the end of the TPP talks, the Obama Administration agreed to the “carve-out.” In the TPP, there is a potent arbitration mechanism for corporations to sue countries that do not follow the agreement – “Investor-State Dispute Settlements tribunals.” (ISDS) The “carve-out” provides that the cigarette industry cannot invoke ISDS.

Many think the carve-out will end the story. Not so. First, consider how much political power opposes the carve-out in the majority Republican House and Senate. The tobacco industry is not alone. A group of business trade organizations, including the National Association of Manufacturers and the U.S. Chamber of Commerce, said in a statement it would oppose “a wide range of product and industry exclusions from core rules.”

In fact, the industry has the support of the two key Senate Republican. Senator Mitch McConnell of Kentucky, the Senate majority leader, said a few months ago, “It is essential as you work to finalize the TPP, you allow Kentucky tobacco to realize the same economic benefits and export potential other U.S. agricultural commodities will enjoy with a successful agreement.”

Senator Orrin Hatch chairs the powerful Senate Finance Committee, which has jurisdiction over trade agreements like the TPP. He said that “Although I don’t support tobacco at all, I still think it was essential,” and the carve-out “will cost us some votes. And every vote is essential. And there are other things I am very concerned about. I’ve committed to read the bill, and I will read it, but right now I’m leaning against it.”

Second, the Congressional Republican leadership can employ power through the obscure procedure for trade agreements. In order to ratify the TPP, Congress does not pass the TPP itself, but passes “implementing legislation.” In theory, President Obama submits the implementing bill, and the House and Senate do not change anything but must vote it up or down.

However, in reality, in the next few months, long before the Administration submits its implementing bill, the House Ways and Means, and Senate Finance, committee, may hold hearings. For TPP, these hearings would show the agreement is controversial and it needs every vote it can get. Then, the House and Senate committees may hold an “unofficial” or “informal” committee markup, and later a “mock conference” session. Here they vote for what they want in the implementing bill. The White House is hard pressed to disregard the Republican Congressional version of the implementing bill if it wants the Republican Congress to swallow hard and approve the version Obama brought back.

What could the Republican Congress demand? First, it can demand clarifications, translations, or understandings of key points, in side agreements or side letters. It is not yet clear, for example, whether the carve-out applies to all tobacco, or only to the cigarette industry and not tobacco “farmers.” And apart from the carve-out, the agreement may be construed to create enforceable rights for tobacco, that are enforceable by other processes and not the carve-out. The implementing bill might insist the United States government pursue all such processes at the behest of the tobacco industry.

Second, Congress might insist that the implementing bill provide for pressure on other countries to waive the carve-out and agree to ISDS for tobacco. Congress might direct the President to oppose invocation of ISDS against the United States about agricultural products of any country that does not waive carve-out when pressed for relief on behalf of our agricultural product, tobacco.

Third, Congress could provide that the carve-out sunsets, or is subject to renegotiation, in two years. This could be part of some general sunset or renegotiation provision. Congressional Republicans will maintain that President Obama was not “strong enough” in the TPP negotiations. They will want that if a Republican President gets elected in 2016, he could revise the TPP – including, of course, to protect tobacco.

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