It is set to become one of the world’s largest trade agreements but people across the Asia Pacific basin are up in arms from politicians to community groups and from unions to some sectors of business; because it is being negotiated in secret. The Trans Pacific Trade Agreement (TPP) is edging closer to finalisation but as it does elements of the document are being leaked leaving many to question if what is being negotiated in favour of sovereign states or large multi-national corporations.
In one corner is the man pushing the agreement, President Obama, while in the other are groups who feel that the agreement will deliver benefits to a minority. The agreement in original concept was developed to try and advance the interest of just about everyone else in the region with the exception of China. In fact, some argue that the agreement is similar to a pivot – a term used in defence circles to try and position a major power against another to enable one to have the edge.
Image: leaders (past and present) in negotiations for the TPP
Obama has already signalled to his fellow Democrats that on the issue of trade and the TPP they better get on board or stay behind in a push to try and continue the jobs growth platform he embarked on in 2013/14. In a business roundtable held in December last year Obama gave the strongest indication yet that he would be a firm backer of the TPP:
“Those who oppose these trade deals ironically are accepting a status quo that is more damaging to American workers,” and “There are folks in my own party and in my own constituency that have legitimate complaints about some of the trend lines of inequality, but are barking up the wrong tree when it comes to opposing TPP, and I’m going to have to make that argument.”
The stance of the Democrats is different to that of Republicans who are largely supportive of the idea but, Obama will need to work the numbers of he is to get it through what could be a divided Congress. On the one hand Democrats are lining up to shoot the TPP down while on the other Republicans may very well take the view that they should walk away and make the Democrats take the blame ahead of the Presidential election where it is widely expected that Hillary Clinton will run.
Meanwhile Japan is pushing the President to try and get fast-track authority from Congress to allow him to finalise the deal (fast-track authority is required under the law for a President to finalise such an agreement).
“It is somewhat challenging because of . . . Americans feeling as if their wages and incomes have stagnated” because of increasing global competition, Obama said. “There’s a narrative there that makes for some tough politics.”
But momentum is growing for much more explanation around elements of the TPP that could see corporations given the ability to sue sovereign governments who otherwise would have been protected by their own country laws.
Image: protestors in Japan against the TPP
Wikileaks has released one of the most controversial chapters into the public domain with founder, Julian Assange, saying “The TPP has developed in secret an unaccountable supranational court for multinationals to sue states. This system is a challenge to parliamentary and judicial sovereignty. Similar tribunals have already been shown to chill the adoption of sane environmental protection, public health and public transport policies.”
The chapter in question is on investment and more specifically the clause related to Investor-State Dispute Resolutions (ISDS). These types of clauses are not new and have been described as a way of granting an investor the right to sue (or use dispute resolution processes) a foreign Government.
One example is the tobacco giant Philip Morris suing the Australian Government over its plain packaging laws introduced by the previous Labor Government. The corporate is using a free trade agreement by way of an ISDS clause contained in an FTA signed many years ago between Australia and Hong Kong. Australia has already signed 28 agreements that contain an ISDS clause.
It appears that a tribunal may be established by way of settling disputes under the TPP where the ISDS is used. But, that does not fit well with the Chief Justice of Australia, Justice French, who told the Supreme and Federal Courts Judges’ conference in Darwin in July last year that:
“Arbitral tribunals set up under ISDS provisions are not courts. Nor are they required to act like courts. Yet their decisions may include awards which significantly impact on national economies and on regulatory systems within nation states. Questions have been raised about the consistency2 , openness and impartiality of decisions made in ISDS arbitrations. A briefing paper prepared by the European Parliamentary Research Service in January 20143 pointed to a number of concerns raised by a range of observers which include:
vague formulation of major treaty provisions leaving a wide range of interpretations open to arbitrators;
loopholes which enable abuses such as nationality shopping by companies which create subsidiaries abroad specifically to take advantage of the agreements;
lack of transparency with varying degrees of secrecy attaching to arbitral processes depending upon the institutions or rules which are applied;
a relatively small pool of arbitrators — arbitrators appointed to ISDS arbitrations are said to be mostly male (95%) and from Europe and North America;
role-swapping by arbitrators who appear from time to time as counsel in ISDS cases;
the high cost of ISDS arbitrations — estimated by OECD as averaging about $8 million each;
associated with the high cost and potentially high awards, a growing phenomenon of third party funding of claims by banks, hedge funds and insurance companies in exchange for a share of the proceeds ranging from 20% to 50%; • absence of effective review or appeal processes;
inconsistency in decisions on similar provisions
Those concerns are reflected in an enormous body of literature on the topic of ISDS. Before considering that process further, it is useful to get some idea of the number of agreements and of investment disputes in which it is applied.”
The signing of the TPP from Australia perspective could put the Government in the firing line of the Judiciary.
Image: Australia's Chief Justice has sounded caution
Of course, business and industry groups are suggesting that the TPP will generate jobs and help to grow the economy at a time when there continues to be great economic uncertainty. This is no different from the general thinking of most Governments involved in the TPP negotiations because not one of the economies listed is quite out of the woods yet in terms of stable economic growth.
They may well be betting on a nervous electorate to get the TPP passed the various legislative processes from Canada to Australia and from New Zealand to the USA with the temptation of jobs growth.
‘We would always defend the rights of companies to take action where they thought that a government has done something that is reducing their enjoyment of their investment and ability to generate profit,’ says Bryan Clark, ACCI’s head of trade and international policy. And ‘Australian firms, as they move out into the world and some frontier markets, I think they are benefitting from having those provisions in the agreements.’
That said, community and civil society groups have also indicated the vast range of issues that could come up that members of the public would be worried about such as data retention and storage whereby US based companies are compelled to store data in the US which then becomes subject to the Patriot Act. If this happens then data of citizens in New Zealand and Canada (and all signatories) could fall under the Act.
In all honesty it is irrelevant what either side of the debate thinks its whether or not they negotiate towards a common ground. Now that Justice French has suggested sovereignty by way of jurisdictional ownership is at risk this could play into the biggest fears of the public at large – of foreign dominance in domestic markets to the detriment of citizens.
So, settle in the road ahead is going to be about as bumpy as it gets.
About the Author: Matthew Tukaki is editor of EntreHub.org, Chairman of Social Investment firm, Sustain Group and former Head of Drake International and Deakin University CSaRO
Members and potential members:
Brunei, Chile, New Zealand, Singapore, USA, Australia, Peru, Vietnam, Malaysia, Mexico, Canda, Japan, Taiwan, South Korea
The TPSEP was previously known as the Pacific Three Closer Economic Partnership (P3-CEP), its negotiations launched on the sidelines of the 2002 APEC Leaders' Meeting inLos Cabos, Mexico, by Prime Ministers Helen Clark of New Zealand, Goh Chok Tong of Singapore and Chilean President Ricardo Lagos. Brunei first took part as a full negotiating party in the fifth round of talks in April 2005, after which the trade bloc became known as the Pacific-4 (P4). Although all original and negotiating parties are members of the Asia-Pacific Economic Cooperation (APEC), the TPSEP and TPP are not APEC initiatives. However, the TPP is considered to be a pathfinder for the proposed Free Trade Area of the Asia Pacific (FTAAP), an APEC initiative.
The original agreement was concluded by Brunei, Chile, New Zealand and Singapore on 3 June 2005, and entered into force on 28 May 2006 for New Zealand and Singapore, 12 July 2006 for Brunei, and 8 November 2006 for Chile. It is a comprehensive agreement, affecting trade in goods, rules of origin, trade remedies, sanitary and phytosanitary measures, technical barriers to trade, trade in services, intellectual property, government procurement and competition policy. Among other things, it called for reduction by 90 percent of all tariffs between member countries by 1 January 2006, and reduction of all trade tariffs to zero by the year 2015.
On the last day of the 2010 APEC summit, leaders of the nine negotiating countries endorsed the proposal advanced by US President Barack Obama that set a target for settlement of negotiations by the next APEC summit in November 2011.However, negotiations have continued through 2012, 2013 and 2014.
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