TPPA – A Stealth Attempt to Undermine Democracy

The below article was gernerously shared by Lori Wallach, the director of the USA organisation, Public Citizen’s Global Trade Watch.
Lori was recently in Melbourne for the TPPA talks and spoke at OccupyFriday on 2 March 2012. 

It takes quite a “trade” agreement to undermine financial regulation, increase drug prices, flood us with unsafe imported food and products, ban Buy America policies aimed at recovery and redevelopment, and empower corporations to attack our environmental and health safeguards before tribunals of corporate lawyers. Trade, in fact, is the least of the TPP.

Backdoor deregulation and imposition of new corporate investor and patent rights via “trade” negotiation began in the 1990s, with the “mission creep” of the World Trade Organization and North American Free Trade Agreement. But the TPP now threatens a slow motion stealth attack against a century of progressive domestic policy, of an unprecedented scope. At stake is nothing less than a democratic society’s ability to regulate a market economy in the broad public interest.

Under the framework now being negotiated, U.S. states and the federal government would be obliged to bring our existing and future policies into compliance with expansive norms set forth in 26 proposed TPP chapters. These include domestic policy on financial, healthcare, energy, telecommunications, and other service sector regulation; patents and copyrights; food and product standards; land use and natural resources; professional licensing and immigration; government procurement, and more.

The obligation that signatory countries “ensure conformity of their laws, regulations and administrative procedures” to these terms would be strongly enforced, including by our own government. Failure to do so would subject the U.S. to lawsuits before dispute resolution tribunals empowered to authorize trade sanctions against the U.S. until our policies are changed. Attacks against our non-trade laws could also be launched by any “investor” that happens to be incorporated in any one of these countries. And the TPP is being designed so that other countries – China, Japan, you name it – could join in the future.

We know this much only thanks to a combination of rare text leaks and grilling of trade negotiators. As trade lawyer Gary Horlick, a former U.S trade official with four decades in the game, recently noted: “This is the least transparent trade negotiation I have ever seen.” In fact, a recent text leak revealed that the parties signed a special secrecy Memorandum of Understanding that forbids released of negotiating documents for four years after a deal is done or abandoned.

Such an extreme proposal could only get this far under cover of unprecedented secrecy. Important policy decisions that could affect us all in myriad ways are now being made by executive branch trade officials and corporate allies, without public access to any documents or details, or input from members of Congress serving on most of the Committees whose jurisdiction is directly implicated. The involved governments have ignored a global “release the texts” campaign led by unions and civil society groups. This is especially appalling for the Obama administration, given its stated priority of enhancing government transparency. The opaque process has contributed to a near total absence of press coverage.

Meanwhile, more than 600 business representatives serving as official U.S. trade advisors have full access to an array of draft texts and an inside role in the process. The strategy is to squelch informed congressional and public debate until a deal is signed and any alternations become extremely difficult..

The implications for the principle and practice of democratic governance are especially dire. Setting binding rules in trade pacts does not facilitate later modifications even when governments or the public demands change. Not only would a vast array of decisions affecting our daily lives be made in venues where we have no role, but alterations to an adopted pact require consent by all signatory countries. Thus, accompanying the imposition of specific retrograde policies would be an unprecedented shift of power towards locking in corporate rule insulated against the normal means of democratic accountability, such as elections, advocacy and public protest.

If this description of the proposed TPP sounds far-fetched, consider the consequences of other “trade” pacts sold under the appealing brands of “trade expansion” and “free trade.” Canada is threatening key aspects of the Dodd-Frank financial reregulation package as violating NAFTA while Texas oil and gas tycoon T. Boone Pickens is using NAFTA to attack Canadian renewable energy policies. The European Commission staff contends that the proposed financial transaction tax conflicts with European WTO commitments. Billions in U.S. stimulus money leaked offshore, because of limits on Buy America procurement preferences already established in past trade pacts. Last year alone, the WTO struck down U.S. dolphin-safe-tuna and country-of-origin meat labeling and the ban on candy-flavored cigarettes, which is aimed at curbing youth smoking, as violating U.S. “trade” obligations.

Now, the TPP threatens to combine the most damaging elements of past pacts and expand on them. And, with the later addition of Japan, China, Russian, Indonesia and other Pacific Rim nations a large swath of the world’s nations could end up under this retrograde corporate rule regime. This is precisely the vision for TPP former U.S. trade officials and corporate lobbyists presented to the Obama transition team in their ultimately successful push to get Obama to engage in these talks: a Pacific region NAFTA-on-steroids that can increase offshoring while rolling back domestic consumer safety, financial, environmental and other safeguards.

Investor Rules to Facilitate Offshoring, Undermine Domestic Law

Past U.S.-sponsored “free trade” agreements have included a set of extreme foreign investor rights and U.S. negotiators are looking to use TPP to expand these terms. This package includes many special protections that incentivize offshoring of U.S. jobs, by eliminating risks typically associated with relocating to developing countries with rock bottom wages, while significantly handcuffing domestic regulatory officials from implementing even the most essential environmental, land use, health and safety laws that apply equally to domestic and foreign firms,

Under the U.S. FTA investment model, foreign firms are guaranteed a “minimum standard of treatment” that extends beyond being treated the same as local firms. And, a U.S. firm could obtain this treatment, effectively a pass on regulation, by simply selling some portion of its shares to a foreign subsidiary incorporated in one of the TPP nations. Such firms  also are granted new rights to obtain compensation from host governments for loss of “expected future profits” due to  health, environmental, zoning, labor, or other policies. Compensation can be obtained for indirect or “regulatory” takings, a concept championed by extreme conservatives but generally not recognized under the robust property rights provided by U.S. law.

The U.S. proposes that this chapter also forbid host countries from limiting capital transfers. This removes a prospective complication for U.S. firms considering relocating, and poses a risk to global financial stability. In an era when even the International Monetary Fund has reversed its traditional opposition to capital controls, imposing such limits via “trade” pact is both disingenuous and reckless policy.

The chapter also would establish new rights for foreign investors to acquire land, natural resources, factories and more. All performance requirements, including domestic content rules, would be forbidden. Freign firms or foreign subsidiaries of domestic firms would have new rights under the deal to operate such mines, polluting industrial facilities, toxic waste dumps, coal power plants – whatever investment they have acquired – under the terms of the agreement that limits domestic regulation. If the same policies applicable to domestic firms are applied to them, they can demand compensation from us taxpayers.

This raises concerns about our ability to determine what sorts of investment from what sorts of countries is best for our country, and to regulate foreign firms operating here so that they operate on equal terms with domestic firms and in compliance with our land use, environmental and health laws.

Most stunningly, these new rights in a public treaty could be privately enforceable. The U.S. is pushing for inclusion of “investor-state” enforcement. This little-known mechanism allows foreign firms to bypass domestic court systems and directly sue governments for cash damages (our tax dollars) over alleged violations of their new rights before UN and World Bank tribunals staffed by private sector attorneys who rotate between serving as “judges” and bringing cases for corporations. The scope of domestic policies that would be exposed to such attacks is vast, including government procurement decisions, regulatory permits, intellectual property rights, regulation of financial instruments such as derivatives, and more.

Avoiding domestic courts not only eliminates another major risk for firms seeking to relocate, but inclusion of this regime in past pacts is establishing an alarming two-track system of justice privileging corporations. Chevron is now asking one of these corporate tribunals to invalidate 18 years of U.S. and Ecuadorian court judgments that resulted in the company being ordered to pay for clean-up of horrific Amazonian toxic contamination. In other kangaroo trade courts, Philip Morris International is attacking Australian and Uruguayan cigarette plain-packaging policy.

Under similar NAFTA provisions, over $350 million has been paid to investors by governments over toxic waste dump permits, logging rules, bans of toxic substances and more. Currently, there are over $12 billion in pending corporate attacks on environmental, public health and transportation policy under existing U.S. free trade agreements—and the proposed TPP would create vast new opportunities for litigation. Even when governments win, they waste scarce budgetary resources defending national policies against these corporate attacks.

Green Procurement Policies Threatened

The pact’s procurement chapter would require that all firms operating in any signatory country be provided equal access to government procurement contracts over a certain dollar threshold. These rules not only constrain how our national and state governments may use our tax dollars in local construction projects and purchase of goods. They also limit what specifications governments can require for goods and services and the qualifications for bidding companies. Thus requiring that electricity come from renewable sources or that uniforms meet sweat-free standards could be forbidden. Rules excluding firms that refuse to meet prevailing wage requirements or that are based in countries with terrible human or labor rights records could be challenged. Effectively, these rules expropriate our tax dollars and transfer them into new private units for corporate profit, while eliminating important policy tools for job creation, development of green economy capacity and the building of demand for preferred business practices.

Backdoor Financial Deregulation

U.S. trade officials engaged in the TPP are seeking to extend older trade deals’ ban on capital controls, even as Rep. Barney Frank (D-Mass.) has demanded a review of whether the past pacts require changes. U.S. negotiators are also pushing for additional expansive limits on domestic financial regulation which conflict with policies now being implemented by many countries to get banks, insurance and securities firms under control.

This includes a prohibition on bans of risky services and financial products. It would expose to challenge domestic policies that set limits on firms’ size, the types of services any one firm may offer and the legal entity through which a service or product may be provided. This would foreclose many policy tools aimed at dealing with too-big-to-fail firms, limiting risk via firewalls or, for instance,  requiring clearing facilities for derivatives. These would be absolute bans on certain forms of regulation which countries would be forbidden to “adopt or maintain,” not requirements to treat domestic and foreign firms the same.

Higher Medicine Prices

The notion that any “free trade” agreement would expand monopoly rights for “rent seeking” (excess profits) would induce Adam Smith and David Ricardo to rotate in their graves.

But that’s exactly what our current trade policy does and TPP is poised to go further. According to a study conducted by the University of Minnesota, U.S. drug prices increased $6 billion when WTO patent rules required the U.S. to change its patent term from 17 to 20 years. The TPP would be even more of a gift to drug companies at the expense of consumers and taxpayers.

Leaked negotiating texts show that the TPP would extend monopoly controls over drug safety testing data, which could cut off millions of people from access to life-saving drugs. (Even when a patent monopoly ends, lower cost generics cannot be marketed because the safety data is withheld.) A majority of target TPP countries are developing nations with significant HIV-AIDS rates, so this is a particularly depraved proposal. Thanks to a leak, we know that U.S. negotiators are proposing to roll back even the modest trade pact access to medicine reforms obtained during the George W. Bush administration!

The U.S. proposal could also undermine the drug formularies of Australia, New Zealand and other countries that have successfully controlled drug costs. This could also boomerang home. State officials participating in the development of formulary rules for Medicare and Medicaid have reacted with alarm about how this proposal could undermine possible gains hard won here in the epic health care reform battle.

And there’s more…

Even given the lack of access to actual negotiating texts, we know that the scope of domestic policy space that could be foreclosed by this deal is immense.

The pact’s coverage of the service sector would include basically anything you can’t drop on your foot, from an education to healthcare. The rules would not be limited to trade in services, but would limit how we can regulate foreign service firms operating here. This would mean foreclosed domestic policy space for critical sectors such as health, energy, education, water, transportation and more. Even local land use and zoning policy is implicated.

These rules would even cover the movement of natural persons across borders to deliver a service, otherwise known as immigration and visa policy. Some past U.S. trade deals have guaranteed specific numbers of U.S. work visas. Other countries are demanding the same in the TPP. Whatever your view on immigration policy, obviously setting it behind closed doors in a trade pact whose terms cannot be altered without consent of all parties is a very bad idea.

We also know that there are several chapters that would impose limits on product environmental, health and safety standards. The U.S. has proposed a new “Regulatory Coherence” chapter that would require each signatory country to establish an agency to do cost-benefit analysis of regulation. And, we know that constraints on food and product safety and inspection are being negotiated, including a requirement that the U.S. accept imported food that does not meet our actual safety laws.

Consider just seafood, a lot of which is imported from TPP target countries. Before WTO and NAFTA, half of the seafood consumed here was imported. Today that figure is 84 percent, while the FDA only tests 0.1 percent of it. Rep. Rosa DeLauro (D-Conn.) uncovered that, even with this lax inspection, last year FDA issued numerous import alerts for Vietnamese seafood detained for misbranding, E. coli, antibiotic residues, microbial contamination, and other serious safety problems. Yet, the TPP could undercut even our current safety rules.

And, thanks to leaked texts, we know that the same provisions deemed to be a threat to Internet freedom and innovation found in the discredited Stop Online Piracy Act (SOPA) are lurking in TPP. This includes a requirement that each country establish large mandatory fines for unintentional, non-commercial, small scale copying of Internet content protected by copyright. Also forbidden would be circumvention of digital locks, even for lawful uses such as running the DVD you purchased on your computer running on Linux. As well as exposing us all to personal liability, the technology industry says these policies stifle innovation, given the threat of a multi-million dollar lawsuits.

Why Obama, Why Now?

All this begs an obvious question: why are Obama trade negotiators pushing a NAFTA-on-steroids deal that could potentially include China and the rest of Asia? Certainly the White House policy team does not want international preemption of the domestic agenda it is fighting to enact. Nor must the Chicago reelection campaign team be celebrating a deal that will infuriate its base while benefitting only Obama’s most implacable corporate opponents.

The most hopeful explanation is ignorance made possible by the sad habit of elite fealty to the “free trade” brand and extraordinary secrecy that has forestalled the external alarms that might otherwise warn officials outside of the “trade” policymaking silo of what is really at stake. Those in the U.S. government who are positioned to know the expansive non-trade policy implications are also those who support this approach, including many Clinton-era retreads connected to the passage of NAFTA.

Yet, if these talks result in the adoption of a final agreement based on the framework now under negotiation, it could lock our country onto a future path devastating to most of us.

The only good news is that, in the past, some attempts to use the Trojan Horse of “trade” negotiation to impose and lock in massive deregulation have been foiled. Citizen activism and pubicity derailed the proposed Free Trade Area of the Americas in 2005, the aborted Multilateral Agreement on Investment in 1998 – and the original attempt to negotiate a free trade area for APEC nations, many of who are parties to the TPP. Then, as now, the public, policymakers and the press can help derail these stealth attempts to undermine democracy by awakening to the threat before it is too late.


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