By Martin Khor, Executive Director of the South Centre, Geneva. Cross posted from TripleCrisis
The nature and effects of free trade agreements has become a topic of public discussion, especially with the round of talks of the Trans-Pacific Partnership Agreement (TPPA) about to take place in Malaysia.
Not much is known about the TPPA drafts. But with some of its chapters leaked and available on the internet, and since much of the TPPA is likely to be similar to bilateral FTAs that the United States has already signed, we can have a good idea of its main points.
As can be expected, there are many contentious issues to consider, especially for developing countries like Malaysia.
Actually, only a small part of the TPPA is about trade as such. Most chapters are on other issues, like services, investment, government procurement, disciplines on state-owned enterprises and intellectual property.
Joining the TPPA or similar FTAs will mean the country having to make often drastic changes to existing policies, laws and regulations, which will in turn affect the domestic economy and society.
On trade itself, the TPPA countries will have to remove tariffs on almost all products coming from one another. Perhaps only one or two products can still be protected.
The main implication is that local producers and farmers would have to compete with tariff-free imports from other TPP countries. This may lead to loss of market share or closure of some sectors.
Ironically, agricultural subsidies, which is the main trade-distorting practice of developed countries like the US, have been kept out of the agenda of the TPPA or other FTAs involving Europe.
The developed countries are clever not to include what would be damaging to them. Thus the developing countries are deprived from what would have been the major trade gain for them.
On services and investments, we can expect that TPP countries will have to open all their services and investment sectors to the entry and establishment of companies, in manufacturing as well as services including finance, commerce, telecoms, utilities, professional and business services.
If a country wants to exclude any sector, it will have to list this in a table of exceptions, and this will also be subject to negotiations. Future new services cannot be excluded as they are not even known yet today.
In the investment chapter, the country will have to commit not only to liberalise the entry of foreign companies, but also to protect the foreign investors’ rights in an extreme way that goes far beyond what is recognised in national laws and courts.
For example, the foreign investor includes any person or company who has an asset (factory, land, shares, contract, franchise, intellectual property, etc). “Fair and equitable treatment” to be given to them has been interpreted in past cases to include a standstill on (no changes in) regulation.
Thus, any new laws or changes in laws and regulations that the foreign investor claims will affect its future revenues can be challenged in an international tribunal for monetary compensation.
The regulations could be economic (for example, terms in contracts, type of or ratios on foreign ownership, financial regulation including in a crisis), health-related (food safety, tobacco control, provision of cheaper medicines), environment-related (ban on chemicals, policies on rivers, forest, climate change) and social (for example, affirmative action for disadvantaged groups or communities).
TPP countries have agreed to allow foreign companies to sue governments in an international court (usually ICSID, based in Washington) for compensation for expropriation, or for not giving them fair treatment.
Expropriation is defined not only as confiscation of property or breaking of contracts, but also as reduction of revenues due to a change in policies and regulations.
These investor-to-state disputes can cost countries a lot. A court awarded an American oil company US$ 2.3 billion against Ecuador’s government in 2012. Indonesia is being sued US$2 billion for withdrawing a contract that a state government made with a UK-based company.
The TPP will also open up government procurement, with foreigners allowed to bid on similar terms as locals for goods, services and projects of the federal government (and possibly also state and municipal governments) above a threshold value.
Existing preferences in government procurement for local companies will be affected, as will be the ability of government to use its spending and procurement policy to boost the domestic economy and as a major social and economic policy instrument.
Since government procurement contracts are considered investments, the foreign supplier can sue the government at an international tribunal by claiming unfair treatment including a renegotiation of contract.
There is also a sub-chapter on state-owned enterprises (SOEs). The USA and Australia are proposing disciplines on the operations of SOEs, including commercial companies in which the government has a share.
This would restrict the state’ ability to govern or manage government-linked companies, or provide them with incentives and preferences. This would have serious implications for many a developing country whose success is based on the role of the state in the economy, and on public-private sector partnerships.
The chapter on intellectual property has generated public debate because it obliges the TPP countries to have IP laws far beyond the WTO rules.
Longer patent terms and restrictions on the state’s policy freedom to promote generic medicines are expected to raise the prices of medicines. Tighter copyright rules would also affect access to knowledge, including books, journals and digital information.
Local producers in industry may also find it more difficult to upgrade their technologies and local farmers could have less access to agricultural inputs including seeds.
These are the specific issues that are or should be in the centre of the negotiations. There are many benefits to the foreign investors or companies, as contrasted to the local, as can be seen from the above. Local companies would lose a lot of their present advantages or preferences, they cannot stake a claim to “fair and equitable treatment” nor sue the government in a foreign court, unlike the foreign.
Naturally, there are pros and cons to any agreement. Any potential gain for a country in exports or investments should be weighed against potential losses to domestic producers and consumers, and especially the loss to the government in policy space and potential pay-outs to companies claiming compensation.
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TPP countries have agreed to allow foreign companies to sue governments in an international court (usually ICSID, based in Washington) for compensation for expropriation, or for not giving them fair treatment.
Expropriation is defined not only as confiscation of property or breaking of contracts, but also as reduction of revenues due to a change in policies and regulations.
Sort of like Asimov’s First Law of Robotics for governments. A government shall do no harm to a a foreign company’s profits or, through regulation, cause their profits to diminish.
I wonder what the definition of a foreign company is? Could Deutsche Bank sue the US government if it tried to increase regulation of their US operations? If so, why aren’t the big US banks up in arms over this? (As you pointed out, it’s not a right afforded to domestic companies). Maybe they plan to become foreign companies themselves, and get in on the action?
The US is pursing a largely parallel agreement in Europe at the same time, an EU/US trade deal. I don’t know if as much draft text has been leaked but it is believed to be similar in how national regulations will be subordinated to international trade courts.
So in your example. Citigroup could go sue the EU if it thought EU regs were reducing its profits. So banks will be able to reduce regulations to the lowest common denominator via these pacts.
I believe the EU/US deal is called TAFTA – Trans-Atlantic Free Trade Agreement.
…perhaps most important issue of our times-paired with getting $$$$ influence out of “the people’s representative government”…
well and good it is becoming part of public consciousness, as both left and right become aware of potential for ending U.S. sovereignty-democratic process…
Yes, I realized after I posted that Deutsche was probably a bad example as it wasn’t one of the included countries. Interesting to hear about the NA/EU parallel though. It seems pretty clear that this is an attempted power grab by private enterprise.
Indeed if foreign companies are advantaged over local companies, then this means that small business (which generally does not have an international presence) is absolutely disadvantaged against multinationals.
I wonder why the Chamber of Commerce and the Republican Party, the self-proclaimed guardians of small business, are not absolutely opposed to Trans Oceanic Partnerships of any water?
Because they do not serve the interests of small or local businessess and they never have.
Seriously, Chinese Huawei, a state-controlled company, is going to be able to compete fairly with Boobs Allen, a state-controlled company except for profits & bonuses, in providing services to the American central guvmint on providing services on spying on Americans?
I don’t think China is part of the TPP. Its an attempt to create a US-linked block of Asian nations that isolates China. And of course, to essentially nullify the rights of nations to regulate business. This TPP is terrifying frankly. Why does it feel like global corporate interests are attempting to create a corporate world government to control national governments and peoples? Oh right, because they are.
That is correct, China is not to be part of the TPP. Nothing like watching the last wheezes of a fading hegemon!
the tpp scares me more than almost anything else the obama administration is doing.
Sadly, there are many to choose from…
I know I get to sample from a veritable buffet of loathing every day and have written him off entirely.
At this point I think that the only explanation for his continued insistance that he cares about the American people is that he is just so out of touch he doesn’t understand it himself. That fits with the detatched way he failed to handle, or even understand, HAMP and the shoddy handling of his own signature inititative.
He’s a talker not a manager.
Sounds as if TPPA would overturn a reimposeed Glass-Steagall act. So much for any kind of fiancial reform.
Yes, that’s quite right. This is probably a reason why you’ve seen Senator Warren taking potshots at the TPP. I think Yves posted on this awhile back.
https://www.youtube.com/watch?feature=player_embedded&v=kAgJaIwdXLI
The TPP and TAFTA together will close the circle with a one-world corporatocracy.
Yes. One point not emphasized in this article is that the TPP will make it possible to challenge wage laws and other labor protections. Does Bangladesh allow a minimum wage of less than $2.50/day? Then the U.S. can be sued and forced to pay damages for presuming to maintain a minimum wage of > $7/hour. This is why President Obama’s call for raising the minimum to $9 is a completely bs attempt at covering up the fact that the TPP his administration is pushing will devastate the living standards of working Americans. The whole thing is a race to the bottom!
I’m 100% against any of these neoliberal secret trade agreements, be they with the USA, EU or any other nation.
Further, and as a Brit, I find it disgusting that our masters in Whitehall and Westminster deem it right and proper to enter any such agreement.
On Constitutional grounds in the UK Parliament, each elected Parliament is sovereign and not beholden to any agreement or law passed by the previous ‘sovereign Parliament.
The powers that UK Parliamentarians actually have is huge indeed, i.e., its legitimate to depose a sitting Prime Minister as the PM can only govern if a majority of Parliamentarians actually support him/her – our Parliamentarian’s believe it or not, are the ones who get to choose who the actual monarch is, and if dissatisfied, as with PM’s can legally dispose of them.
Given these huge powers, one would have thought our governance would have been far better than it actually has, indeed, of our present 650 sitting MP’s, at least 550 are automatons with neoliberal code, many of whom would not only sell out their nation for coin, but their grannies too if it mean’t further coin and power.
My advice to all Asian nations is to keep the USA at arms length, preferably with a bargepole and strike an independent course similar too their South American peers – the same applies to all nations composing the EU, at the end of the day its a handful of corporations, elected officials and other members of the 0.1% who benefit from this deplorable deals – the rest of us are just mean’t to put up and shut, obviously being called upon once and again to bail the ‘fuckers’ out when they screw up, i.e., socialism for the rich and a Hobbsian dystopia for the rest – this is where the NSA, UK secret services et.al come in to play.
Bloody disgusting and illegal if you ask me.
Where did free traders get the idea that they could override government regulations and domestic subsidies? It’s like MERS – they just appropriate the machinery of government without a democratic vote. They just do it. They all think government has no beneficial social function – only free trade is beneficial. If governments cannot manage countries, over time they will also be unable to backstop the corporations who are pushing this insanity. Today the only reason globalism is still alive is because of the free trade fairy tale. Free Trade is so dysfunctional as a modern international-corporation model it would be funny if it weren’t so terrifying. So if the big corporations now have redress in extra legal courts can they still write off their losses? And will they still receive tax deals locally? The TPP could change business as usual completely – not just destroy social justice. They’re nuts. Who is going to have any money to buy any imports? Are they going to force feed us basmati rice grown with toxic levels of pesticides and imported from Bangladesh without a label? Are there any labor clauses in the TPP? That prolly falls under the concomitant new immigration rules. This might explain why congress has postponed any kind of jobs program. If the private sector does jobs, they cannot be challenged in trade court? Race to the bottom.
Lori Wallach does a great job in laying out all of the potential horrors of this TPP: http://www.youtube.com/watch?v=3Wytq5cPk3Y
Well, if the TPP is meant to benefit corporations, the question should be: Why aren’t the corporations very broadly owned? Hmm?
Answer: Corporations are among the most so-called “creditworthy” and have no need to “share.”
There were similar clauses in NAFTA. A foreign corporation tried to open a plant and pollute in CA just after NAFTA passage. There was a local uproar and they cancelled their plans. Perhaps the lesson was to set up an international enforcement court. These trade agreements are seriously bad for people and good for multi-national profits.
..and CAFTA…just as South-Central America are “coming home to roost”, so are
horrible corporate control such as TPP…millions protested CAFTA, while U.S. public was told it was “trade deal”…more LIES…
If you want to read all about some of the damages NAFT has done to all the parties involved, the U.S., Canada, and Mexico, feel free to google Chapter 11 and NAFTA.
Here’s a little taste to get you started:
http://www.citizen.org/Page.aspx?pid=1218
“NAFTA’s investment chapter (Chapter 11) contains a variety of new rights and protections for investors and investments in NAFTA countries. If a company believes that a NAFTA government has violated these new investor rights and protections, it can initiate a binding dispute resolution process for monetary damages before a trade tribunal, offering none of the basic due process or openness guarantees afforded in national courts. These so-called “investor-to-state” cases are litigated in the special international arbitration bodies of the World Bank and the United Nations, which are closed to public participation, observation and input. A three-person panel composed of professional arbitrators listens to arguments in the case, with powers to award an unlimited amount of taxpayer dollars to corporations whose NAFTA investor privileges and rights they judge to have been impacted.”
“investor rights”, lol
This was just a warm-up/practice session for the TPP.
I get a feeling that both sides of the bargaining tables are seeded by “experts” from the same multi-nationals, and so end up browbeating the nations into accepting terms that will favor only the corporations.
So, having unleashed his genius on the domestic medical insurance industry, the Prez turns his attention to international trade. What a guy!
White Elephants Preaching to the Choir
…they always say it can’t be done.
Just do your part, and don’t sweat the small stuff. If your children do not wake in anticipation of exploration you have a real problem, because that is the path to the future. Kids build themselves from example. If you are unable to provide, place them in an environment with people who can, from as many different perspectives, angles of perception, as you can. The only way out of the primordial soup is to climb, and all you can do is provide the initial stepping stone. Build the path to the future, adapt.
Empire participants seek peer pressure control as their path to freedom, settling into whatever position causes the least anxiety, producing an aggregate increase in anxiety as nature wipes out their stack. In the race to the bottom they willingly exchange their physical prisons, which they willingly walked into, for intellectual prisons, climbing the corporate ladder accordingly, to become slave masters, slaves themselves. Guns and gold may incrementally improve your position relative to other empire participants, but they will not get you to the future, nor will spending the income of future generations, as History attests, with frequency.
Guns and gold can neither dissuade nor topple the US Navy, nor can they limit the insatiable land grabbing of civil authority occupied by the empire majority, which forms precisely because it cannot adapt to develop skills. The empire price of empire land spun out of control as all those capable of creating economic profit evacuated the system, causing the empire to implode. The US Navy, Fed, Congress, California, Wells Fargo, Warren Buffet machine is grabbing land all over the place, and taking it out of production to limit deflation, which the empire ponzi cannot tolerate and labor employs. The majority spins laws to control land it cannot employ, without you. Just get out of the way of its collapse.
Labor is preoccupied by space travel. Guns, gold, land, oil, credit, none of that crap can get you into space, which is why the Boomers were such a colossal failure, from a human perspective, and why this next generation of kids will have so many resources to work with, at a massive discount, at least those who understand that profit on freedom from risk, MAD actuarial insurance, is the prison. China Slump Ripples Globally…and Diane Feinstein explains her financial interest in the NSA Ponzi Internet Transmission. Hello San Jose, the root of all kinds of nonsense. Who did she marry again?
According to TWIT News, Napa/Sonoma is one of the happiest places on earth. If you have ever been through there, you know how nasty those hypocrites are. Fiscal policy increasingly favors passive investment over active investment, liquidating future productive labor to inflate historical real estate capital, as monetary policy fails to fuel the demographic ponzi, resulting in a brittle, MAD pyramid of make-work jobs. Always begin by turning the empire on its head.
Pearl Harbor was neither an accident nor a conspiracy. Ethanol, Shale and solar are simply cumulative stupidity. Everywhere Monsanto goes it brings the red fire with it; check the soil. SNAP is not a function of anger or hunger; it’s a function of corporate farms and corporate grocers. If you look at the civil military apparatus, pork distribution over time, the Gulf Wars were simply self-fulfilling gravitational stupidity, as are the current skirmishes, a false choice between corporate welfare and corporate welfare, both sides against the middle, of, by and for itself, presenting itself as a damsel-in-distress for you to rescue.
Don’t show up at a bomb fight with anything less than quantum advance, or expect an unhappy outcome. Choice C is not to be anywhere near the stupidity. One really stupid choice, for example, would be Ames Iowa. Think about the cascading fallout from APHIS, all the way through Monsanto. The Middle East Stupid Zone is just gravity, misdirection in the implementation of peer pressure martial law at home.
The empire majority is a compilation of brand advertisers, form over substance, actors competing for a stage, to pull you out of your time and into theirs, always beginning with some stock passive-aggressive, bullsh- remark to the effect that something is wrong with you if you do not concede, and continuing to employ herd pressure as necessary to ensure your compliance. The Chief Robot is simply the least-common-denominator multiplied by robot population. The US Navy, and its Commander-In-Chief, is no different.
Gravity is a false assumption, serving its purpose. Build your business, your family, to create room for others, and the economy will turn over. Intelligence is not required to seize a piece of beach under the color of law and charge the like-minded to stay at the Inn, which is why empire failure begets empire failure. Don’t plant good seed in bad soil from bad seed and pretty soon the empire will be eating its own crap, believing its own lies. The US Navy divides itself and others, with consumption. There is nothing new about Massholes.
A man carries a woman’s bag. And a woman wears a man’s watch. Figure that out and the children raise themselves, to grow the fulcrum. The pendulum swing is but angles of perception. You can drop an empire on itself at the time of your choosing accordingly.
…most truly educated ameriKans realize there is no “pendulum”…FDR era created control of banking-corporations, allowing decent way of life, which was no “pendulum”-
most historians show such way of life as complete aberration…which is also what most ameriKans who study history conclude…
Every country likes to trade its surpluses. The absurdity with these proposed agreements is the inclusion of finance in them.
The son of J K Galbraith has written persuasively on this subject and concludes that the access to money granted by Western trade agreements is not trade at all, more like an attempt to take-over and control the foreign country’s economy.
Take that section out and everyone will sign-up instanter.
Weekly, anonymous callers accused her of taking kickbacks, selling government equipment, tax fraud and, most wounding of all to this caring, meticulous professional, medical misconduct.