21.06.2015 Author: James ONeill

The Trans-Pacific Partnership : A Free Trade Agreement?

434234211The Trans-Pacific Partnership agreement (TPP) currently nearing its final stages of negotiation purports to be about increasing trade and economic co-operation among its twelve negotiating parties. These twelve countries include the United States, Australia, New Zealand and Japan. Significantly, it does not include China.

The agreement is being negotiated in conditions of extraordinary secrecy. Only recently have selected members of each countries legislatures been permitted to see the drafts. They have been taken to a secure room for that purpose. No copies can be taken. No notes may be made. They are sworn to secrecy about what they have seen, and to remain silent for a minimum of four years.

To describe this as “normal” in trade negotiations, as the Australian Trade Minister did, and other apologists persist in saying, is to create a whole new meaning for the word “normal”.

The overwhelming inference to be drawn from this secrecy is that it is clearly intended that the provisions of the TPP will not be brought before the parliament for debate and ratification. There is otherwise no rational point to a four-year gag order. Our parliament is purportedly comprised of representatives of the people. How they can reflect the views of the people they “represent” when the people are denied the most basic information is unclear. It is certainly not democratic.

Some details of the draft chapters have been leaked. Those leaks represent only a small proportion of the total, but they are sufficient to raise serious concerns about a number of issues, including the powers being given to multi-national (largely American) corporations at the expense of national sovereignty.

There is an almost identical negotiation going on between the United States and members states of the European Union. Similar concerns have been expressed in the European media as in the United States, albeit for different reasons. The Australian corporate media is notable for the absence of discussion, which can only be partially explained by the absence of details of the draft agreement. Sufficient is known for example about the proposed changes to the pharmaceutical regime, the most recently leaked material, to produce detailed critiques from Australian and New Zealand academics. This has been given widespread coverage in New Zealand, but in Australia there has been yet again little or no mainstream media coverage.

It is known that only five out of the twenty-nine chapters of the draft TPP agreement actually cover trade matters. By themselves it is difficult to see how they represent an advance to the already existing multi-lateral trade agreements such as the WTO. It is even more difficult to see how they interact with the various bi-lateral trade agreements that Australia has signed since the
TPP negotiations began, most recently with South Korea, Japan and China. Those three countries are three of Australia’s largest trading partners. As a principal reason for the TPP has been to exclude China, for reasons to be discussed below, one might have expected some discussion in the media on how Australia is going to reconcile a free trade agreement with its largest by far trading partner, China, with an anti free trade arrangement that the TPP essentially is, that specifically excludes China.

It is the remaining 24 chapters that are likely to cause the most concern. These other chapters cover areas as diverse as pharmaceuticals, copyright and intellectual property, and impacts on matters from net neutrality to digital innovation. With copyright for example, the current regime of “life of author plus 50 years” is said to be changing to life plus 70 years for individuals and either 95 years after publication or 120 years after creation for corporately owned works, like cartoon characters.

The area covered by the draft provisions that has caused the most concern to date however, are the provisions relating to Investor State Dispute Resolution (ISDS).

ISDS is not a new phenomenon. It first appeared in a bi-lateral trade agreement in 1959. It has been widely used ever since. There is nothing inherently wrong in having arbitration procedures built into contracts, for trade or anything else. They are usually more economic, and certainly much quicker than traditional Court procedures.

Their evolution since 1959, and particularly in recent years, has gone far beyond parties agreeing to economical and expeditious dispute resolution. The modern concern arises over corporations being able to sue governments (without a reciprocal right) over future loss of profits or opportunity. The ISDS provisions in the draft TPP agreement greatly extend the power of the corporations and a diminution of a sovereign State’s rights to regulate within its borders on matters of national interest.

Several hundred claims have been lodged since 1959 and the rate is accelerating. Fifty-eight new cases were lodged in 2012 alone. About a quarter (24%) of these disputes originate with US corporations.

The highest award to date was a judgment in favour of Occidental Oil Company of $2.3 billion against the government of Ecuador. That government had terminated, in accordance with Ecuadorian law, an oil concession contract; largely on the grounds that Occidental had sold a stake in its operations in Ecuador without the Ecuadorian government’s consent.

Another major dispute has been brought by Vattenfall, a Swedish company that operates nuclear plants. Two of these plants are in Germany. Following the Fukushima disaster in Japan, the German government shut down all of the country’s nuclear plants. Vattenfall is suing the German government for 3.7 billion Euros (about $4.9 billion) claiming that the German government’s decision, based on environmental and safety concerns demonstrated by the Fukushima disaster to close the nuclear plants, deprives the company of future anticipated profits.

Under a trade agreement between the Netherlands and the Czech Republic, the Czech government is being sued for failing to bail out an insolvent bank in which the plaintiff company had an interest. The plaintiff was awarded $236 million in damages.

Veolia, a French conglomerate, is suing the Egyptian government because of the latter’s decision to raise the minimum wage. Australia is a defendant (along with Uruguay) in a lawsuit brought by cigarette manufacturer Philip Morris because the plain packaging laws introduced by those two countries might impinge upon Philip Morris’ profits. This is a direct challenge to the right of a sovereign nation to introduce laws to protect and improve the health of its citizens on the incontrovertible evidence that smoking is injurious to an individual’s health and that the costs of treating the consequent illnesses is a serious burden on a nation’s health system.

Under the provisions of the TPP agreement the corporation can sue a government, not just because it has committed capital or other resources, but also for “the expectation of gain or profit.”

Such a provision runs directly counter to what most governments would consider their legitimate concerns, the environment in the case of Germany, on contractual grounds in the case of Ecuador, and the health of its citizens in the case of Australia and Uruguay. The TPP directly forbids specific forms of regulation if those might impinge on “the expectations of gain or profit.”

This is an extraordinary and unprecedented assault upon the ability of a sovereign government to pass laws or regulations by proper legislative process that it considers to be in the national interest.

It gets worse. The dispute settlement tribunals will be presided over by a corporate lawyer, not by a Judge. They will sit in secret. They are not bound by precedent. Their decisions will not be subject to appeal or judicial review. It represents a complete abdication of the careful checks and balances developed by the judicial system over hundreds of years.

What then is the real objective of the TPP? It is manifestly not about “free trade”. On the basis of the evidence available so far, including statements from politicians familiar with the proceedings, some tentative conclusions can be drawn.

The obvious one is that it is part of a continuing transfer of power from the people and their elected representatives to the huge corporate entities that in many western societies, not least the United States, are the true determinants of government policy.

Rather less obvious and one about which the Australian corporate media are even more conspicuously silent than they are on the alleged trade benefits of the TPP, is the strategic motivations of the TPP’s main drivers, the United States and its corporate entities.

At the APEC meeting in Honolulu in November 2011 the US President Barack Obama said that the US aims to revive its geopolitical, strategic and economic influence in the Asian region to counter the ascent of China. This, he said, “would be done in part through constructing a region wide legal regime that serves the interests of, and is enforceable by, the United States and its corporations”.

It is hardly surprising that this viewpoint has not received wide publicity in Australia, nor one would venture to suggest, in the other ten nations currently negotiating with the Americans. It would be very difficult for a country’s politicians to persuade their people that they were acting in the national interest when that interest was intended to be clearly subordinate to American interests.

More recently, on 8 May 2015 Obama gave a speech at the Nike factory in Oregon. There, he said:

“We have to make sure America writes the rules of the global economy and we should do it today while our economy is in a position of global strength. If we don’t write the rules for trade around the world, guess what, China will. And they’ll write those rules in a way that gives Chinese workers and Chinese businessmen the upper hand.”

Those two quotes need to be considered in the context of Obama’s so-called ‘pivot to Asia’. Stripped of its rhetoric, the ‘pivot’ is a plan to shift more American military resources to the Asian region to block, by all means possible, any challenge by China to America’s hegemonic ambitions. “Writing the rules” is shorthand for defining the 29 chapters of the TPP as an American rulebook. Serving the interests of, and being enforceable by, the US government and US corporations does not leave much in the way of alternative national interests. It is small wonder that the Australian government is anxious that the Australian people do not see the future that is being mapped out for them.

There is also an extraordinary degree of hubris conveyed by those two quotations. According to the IMF, China’s GDP measured in Purchasing Power Parity, is now greater than the US. Its population at 1.3 billion is four times that of the USA. China has a cultural tradition that extends back several thousand years. Apart from a period of approximately 150 years when China suffered from the predations of western imperialism it has been the preeminent society in the world. What we are witnessing now is a restoration of a geopolitical order where China is once more at the centre. Yet it is in this context that the Americans seek to “write the rules” for East Asia.

The Chinese for their part are pursuing a completely different strategy. Central to that strategy is the construction of a vast network of infrastructure projects, including high-speed rail links to Europe, oil and gas pipelines, and the development of Eurasia’s vast natural resources. These developments will reduce Chinese demand for Australia’s natural resources and with it the main source of Australian prosperity. That Australia should choose to pursue an American dominated TPP agreement so antithetical to its national interests is difficult to understand.

Perhaps the most significant economic development in recent years has been the emergence of the BRICS and SCO organizations of which the growing partnership of Russia and China is a prime driver. The mutual co-operation of those two nations has been accelerated in no small measure by US policy in Europe, which seeks to confront Russia for the same geopolitical reasons it confronts China.

The SCO is expected to expand its membership this year with the addition of Iran, Pakistan and Mongolia. Other initiatives include the Asian Investment Infrastructure Bank, which Australia joined in the face of American opposition (a rare show of independence); an alternative to the SWIFT system of interbank payments; and progressively diminishing the role of the US dollar as the medium of international trade.

Once the dollar loses its status as the world’s sole reserve currency, most likely this year, the whole edifice of the US imperial structure is likely to come tumbling down.

The TPP is mirrored in Europe by the TTIP from which Russia is excluded for the same reasons that China is excluded from the TPP. It is not about trade. Both sets of agreements are strategic mechanisms to maintain American domination and put American corporations in a uniquely powerful position.

The European populations are similarly being kept in the dark about the contents of these agreements. Notwithstanding that, there have been huge demonstrations in Germany, France and elsewhere as their citizens recognize that the agreements being negotiated are not in their interests, economic or otherwise.

China’s New Silk Road policies, in co-operation with their BRICS and SCO partners, show that there is an alternative route to peace and economic prosperity than the poisoned chalice represented by the TPP.

It is clear from the profoundly non-democratic approach of the Australian government that they have chosen to capitulate to the Americans. The economic, political and military costs of that decision are ones that Australia will be paying for very many years.

James O’Neill, an Australian-based Barrister at Law, exclusively for the online magazine “New Eastern Outlook”.

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