La Oroya, Peru. Wikicommons/Maurice Chedel. Some rights reserved.Here in the
United States, debate over whether to grant the President Fast Track authority
for the Trans-Pacific Partnership is currently causing much inner-party strife,
and fortunately, it is an uphill battle
for TPP advocates.
Strangely
enough, President Obama has teamed up with the Republican establishment for
this massive trade deal, showing how un-socialist he really is, and how
Republican’s aren’t really opposed to executive power, as long
as it is in support of their policies.
Obviously,
controversy over the TPP has made it a tough sell for the President, one that
liberals are not buying. The TPP is full of corporate handouts, most
notoriously for the pharmaceutical
industry, which will be granted patent term extensions, and
strengthen monopoly power on important medicines around the world, making them
unaffordable in many areas. It will also strengthen intellectual property laws in
other industries, specifically in the digital sphere.
The most
notorious part of the TPP, however, is the Investor-State Dispute Settlement
(ISDS) provision, which Elizabeth Warren wrote about a few months back in the Washington Post,
saying: “ISDS would allow foreign companies to challenge U.S. laws — and
potentially to pick up huge payouts from taxpayers — without ever stepping foot
in a U.S. court.”
A scary
thought indeed, but is it true? Well, it depends who you ask. If, for example,
you were to ask the Obama administration, they would vehemently deny that the ISDS
could challenge U.S. laws – and shortly after the Warren editorial, they did
just this, with a Q&A blog for
the ISDS. “It is an often repeated, but inaccurate, claim that
ISDS gives companies the right to weaken labor or environmental standards, for
example, suggesting that a trade agreement could result in the United States
having to lower its minimum wage. The reality is that ISDS does not and cannot
require countries to change any law or regulation,” wrote Director of National
Economic Council and economic advisor to the president, Jeffrey Zients.
So, who is
correct? Both, actually; but Warren is much more intellectually honest. While
the ISDS cannot actually “require countries to change any law or regulation,”
it can and has been used by corporations as a bargaining tool, pushing
sovereign governments to back down on regulations, or fork out taxpayer money
in arbitration, and possibly millions in damages.
The ISDS is
barely a new instrument; it has been around since first being introduced in
1959, in a trade deal between Germany and Pakistan, but has become an
increasingly popular mechanism of international law since the nineties. The
original intent of the ISDS was to increase foreign investment in countries
where business was risky, by providing a bit of security for investors. While
the ISDS has been included in many trade deals, it was barely used before the
nineties. This changed towards the end of the century, and its use rapidly
increased during the 2000s, going from just a few cases filed in
the early nineties, to nearly sixty annual cases filed by 2012.
Basically,
big corporations discovered how valuable the ISDS could be when dealing with
foreign governments who were a bit too ambitious in the regulatory domain. In
many cases, the lawsuit is brought after a government regulates an industry for
environmental or health reasons. This is currently happening in Australia,
where tobacco company Phillip Morris is suing the government after
they passed a law requiring cigarettes to be “plain-packaged” without branding.
This has been shown to reduce smoking, especially in youth, and so Phillip
Morris is suing for “expropriation,” or lost profit.
The United
States has many trade agreements with the ISDS provision, most notably in
NAFTA. In once case, the extraction company, Lone Pine, has sued the
Canadian government after they filed a moratorium on
hydraulic fracturing for environmental reasons. In one notable case, US
company, The Renco Group, owned by billionaire Ira Rennert, has used the ISDS
provision to bully the Peruvian government, after they shut down a metal
smelter in the town of La Oroya, which is one of the most polluted towns
in the world, when the company delayed environmental
improvements. The Renco Group pressured the Peruvian government into restarting the
zinc smelting operations in 2012.
So, while
the ISDS cannot literally overturn a regulation or law, it can be used to bully
a country’s government into doing so. Of course, the White House has said that
it will be different under the TPP. In the same blog, Zients writes:
“ISDS has
come under criticism because of some legitimate complaints about poorly written
agreements. The U.S. shares some of those concerns, and agrees with the need
for new, higher standards, stronger safeguards and better transparency
provisions. Through TPP and other agreements, that is exactly what we are
putting in place.”
At the
time, we had to take his word, with the great secrecy surrounding the TPP; but
today, we know a bit more, thanks to Wikileaks, who released the TPP Investing chapter last
March, dated January 20, 2015. So, is the TPP’s ISDS provision different from
that of NAFTA or the other trade agreements? Are there higher standards and
stronger safeguards to prevent a company like Phillip Morris from using the
ISDS to sue for lost profit? Maybe a little, but not nearly enough. There is
some wording in the chapter that does try to prevent the ISDS from being used
as a corporate tool to sue governments over environmental, health, or other
public safety regulations. In the preamble, it is written:
“Recognizing
the inherent right to regulate and resolving to preserve the flexibility of the
Parties 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.”
This is
good, but NAFTA has similar wording in its investment
chapter, and corporations could easily argue over what a
“legitimate public welfare objective” is. Is a moratorium on fracking a
legitimate public welfare objective, for example? Trade experts
aren’t convinced that the TPP’s ISDS chapter is much
different from previous ones, either, while the arbitration process, which has
been one of the most criticized aspects of ISDS, has remained unchanged, with
three highly paid lawyers selected, one by the defendant, one by the plaintiff,
and one agreed upon by both. The same lawyers also tend to alternate between
the “suing” and “judging” positions, which critics have said creates conflict
of interest.
It is scary
to think about this provision, largely unchanged from what we know, being
included in the TPP, which covers about 40 percent of the worlds economy.
Warren was correct when she said that “agreeing to ISDS in this enormous new
treaty would tilt the playing field in the United States further in favor of
big multinational corporations. Worse, it would undermine U.S. sovereignty.”
ISDS was an international trade mechanism that was created in earnest, to
increase foreign trade by providing investors with a sort of insurance policy.
But today, it has become a dangerous weapon for multi-national corporations who
do not want to play by the rules, especially if it costs them some profit. This
endangers the safety of populations, the environment, and the sovereignty of
nations, and it should be eliminated from any future trade agreements if our
governments cannot agree on real changes.