The leaked document on the US Public Citizen website confirm the worst fears about the Trans Pacific Partnership talks. The leaked text, and Public Citizen’s analysis of the text can be accessed here.

Thanks to a process conducted entirely behind closed doors, New Zealand seems about to sign up to a document that will allow foreign investors to sue us before overseas tribunals if this government ever tried - or any future New Zealand government ever tried - to pass laws to protect our health, safety or the environment, but which happened to cause foreign investors to lose money. Such “investor state” dispute resolution panels are very cosy affairs. They do things judges would never be allowed to do. As pointed out below, such panels are commonly comprised of trade lawyers who sometimes serve as the arbitrators, and sometimes as the advocates for the claimants engaged in suing governments.

Australia – thanks perhaps to its salutary experience of being burned by its free trade deal with the United States – has baulked at the provisions that New Zealand has accepted. Trade Minister Tim Groser’s response on RNZ this morning was little help. On the one hand, Groser gave firm assurances that New Zealand would never sign up to anything that would compromise our sovereignty: “ The New Zealand government will not sign any agreement that stops us now, or any government in future from regulating for public health or any other legitimate policy purposes.. We will protect New Zealand’s legitimate rights to regulate.”

In the next breath though – and note the weasel word “legitimate” in what Groser said, which renders his assurances virtually meaningless – he went on to make the case for RNZ signing up to “ well designed” clauses that restrict our sovereignty. If such concessions are well designed, Groser argued, they will serve to re-assure prospective foreign investors that we will obey the rules, and at the same time the rules will afford similar protections to New Zealand companies investing offshore. At base, Groser is asking us to trust that he knows best, that he’ll get the balance right, and that he’ll ensure the gains overseas to firms such as Fonterra would outweigh the potential risks, liabilities and restrictions that may be involved back here at home.

Well, Groser does have a reputation for competence in trade matters, but it is largely a self–reported one. In effect, what he and his Cabinet colleagues are asking for is a blank cheque. There is utterly no transparency to the TPP negotiation process. Thus, the Key government is expecting the public to sign away significant sovereign rights, in the hope of securing a potential trade bonanza downstream – but the entire process is being carried out in a total information blackout, to the point where the first official insight the public will get about the TPP details will be well after Groser has signed up the current New Zealand government, and committed future generations to its terms. Oh, but rest assured it will all be “well designed.”

That’s what makes the leaked document significant, because it shows Groser’s assurances to be virtually worthless. New Zealand has apparently been willing to concede to terms that Australia has refused to accept. At the very least, Groser needs to explain how that situation has come about. As the Public Citizen analysis shows, the leaked text “reveals a two-track legal system, with foreign firms empowered to skirt domestic courts and laws to directly sue TPP governments in foreign tribunals. There they can demand compensation for domestic financial, health, environmental, land use laws and other laws they claim undermine their new TPP privileges.”

Nor, as Public Citizen goes on to point out, do these international trade dispute tribunals meet the normal standards of transparency, consistency or due process that we would expect to find in a New Zealand court of law. As mentioned, they do not provide fair, independent or balanced venues for resolving disputes between nations and private investors:

For instance, in a manner that would be unethical for judges, the tribunals would be staffed by private sector lawyers that rotate between acting as “judges” and as advocates for the investors suing the governments.

Allegedly, the leaked text indicates that TPP would expand on the investor privileges found in the North American Free Trade Agreement (NAFTA) and in subsequent NAFTA-style deals. As Public Citizen points out, these investor privileges have already come under attack for threatening public health, the environment, democratic policymaking, and for favoring foreign firms over domestic firms:

Over $350 million has been paid to investors by governments under the investor-state provisions in NAFTA-style pacts investor over toxic waste dump permits, logging rules, bans of toxic substances and more.2 Currently, there are over $13 billion in pending corporate “investor-state” trade pact attacks on domestic environmental, public health and transportation policy. And, mere threats of such cases have repeatedly resulted in countries dropping important public interest initiatives, exposing their populations to harm that could have been avoided. Yet the leaked text shows that while TPP countries have agreed to impose binding obligations on themselves to provide foreign investors an array of extraordinary new privileges, the TPP countries have not agreed to health, labor or environmental obligations to be required of investors.

As Groser argued, there is nothing inherently novel about sovereign rights being traded off. International law to that effect goes back for decades. Such rules, Groser added, offer protection against arbitrary expropriation, as when - in the example he gave – Argentina recently appropriated a Spanish company’s oil facilities. Two things that Groser didn’t mention: (a) investor/state disputes have increased dramatically in recent years, and (b) most investor state disputes aren’t about expropriation. Here’s Public Citizen again, on the rise in the incidence of foreign investors suing for compensation:

Investment treaties with such enforcement mechanisms have existed since the 1950s. Yet, by 1999, only 69 cases had ever been filed at the International Centre for the Settlement of Investment Disputes (ICSID) – the World Bank body listed as a venue for investor cases in the leaked text. Now ICSID’s cumulative case load is over 385 – an increase of 460 percent over the last 13 years. And ICSID is only one venue for such cases.

And contrary to Groser’s example, most cases are about health and environmental policies, not expropriation :

Over $719 million has been paid out under U.S. Free Trade Agreements (FTAs) and Bilateral Investment Treaties (BITs) alone - 70 percent which are from challenges to natural resource and environmental policies, not traditional expropriations. Tobacco firms are using the regime to challenge tobacco control policies, including a case by Phillip Morris against Australia. Absent substantial changes to the leaked text, the TPP would greatly increase the risk of investor-state attacks on public interest policies and would expose governments to massive new financial liabilities

So, what is the TPP? It began life as the P4 trade agreement among New Zealand, Brunei, Chile and Singapore and expanded to include the US, Australia, Peru and Vietnam. Canada and Malaysia are regarded as prospective members and, more ambitiously, the agreement could also in time embrace China, Japan and South Korea.

The investor/state dispute mechanisms may lie at the heart of the concerns about the TPP, but these are not the only concerns. The activities of both Pharmac and Fonterra have come under attack from other countries. (More on that in subsequent posts.) The secrecy and total lack of transparency has also been widely attacked – to the point where some US legislators are suing to make the process more open and transparent.

Sen. Ron Wyden (D-Ore.) has been so incensed by the lack of access as to introduce legislation requiring further disclosure. House Oversight Committee Chairman Darrell Issa (R-Calif.) has gone so far as to leak a separate document from the talks on his website.

On May 9th this year, the argument for greater transparency was made in an open letter written to US trade representative Ron Kirk by a group of US law professors cited here:

Our concerns flow from the now-established observation that “trade” agreements no longer focus exclusively, or perhaps even predominantly, on the regulation of trade. Rather, the agreements increasingly propose international law standards that bind the legislative branch to change, or lock in place, domestic regulatory decisions. Democratic values demand that, at minimum, the promulgation of such restrictions on domestic law making processes afford the full range of participatory inputs as similar initiatives at the domestic level.

Unfortunately, there is little about the TPP negotiating process that is open to the broad range of inputs that would be reflected in domestic policy making. There has been no publicly released text of what USTR is demanding in these negotiations, as there would be in policy making by regulation, in Congress or in multilateral forums. Reviews of leaked proposals show that the US is pushing numerous standards that are beyond those included in any past (i.e. publicly released) agreement and that could require changes in current US statutory law. Reviews also show that the US proposal is manifestly unbalanced – it predominantly proposes increases in proprietor rights, with no effort to expand the limitations and exceptions to such rights that are needed in the US and abroad to serve the public interest. Yet, we only know these things because the highly secretive law making process USTR established, including a ban on the release of all negotiation proposals until four years AFTER the conclusion of the agreement agreement, has failed to prevent the US proposals from leaking to the public.

This same issue about TPP secrecy and sovereignty concerns has also arisen in New Zealand as well - with an open letter written earlier this year by 100 legal professionals, academics and retired judges, a related column by academic Bryan Gould citing the risks posed by the TPP. An editorial response in the NZ Herald attempted to allay those concerns – largely with an argument that if the same rules will apply to all, what’s to fear ? Like most allegedly level playing fields, this view naively overlooks the fact that some investors bring a far bigger legal war chest to the playing field than others. Brazil for instance is now reportedly gunshy about investor/state dispute mechanisms, and for good reason. Brazil was embroiled in the 2000s in a long running dispute after – for health reasons – its government sought to ban the import of retreaded tyres from Europe.

Such tyres, when dumped, quickly became breeding grounds for mosquitoes bearing malaria and dengue fever. The EU sued that this was a discriminatory trade practice – and after this complex case had wound its way through various dispute panels, trade eventually trumped health and reportedly, Brazil once again became “ the tyre dump of Europe.” The conclusion of this academic analysis of the operation of dispute panels in the Brazil case makes interesting reading in the light of the TPP debate :

This dispute clearly showed that trade supersedes health and environmental issues. This was the case in both the MERCOSUR [the South American trade grouping] and WTO re-treaded tyre disputes. These organizations’ dispute settlement systems failed to take into account the actual economic impact of the import ban, the political situation that led to the adoption of the bans and the potentially negative consequences that these decisions have on the public’s perception of MERCOSUR and the WTO….

Right. In sum, the public has very good reason to feel concerned about (a) the adequacy of the TPP investor state dispute panels (b) the secrecy in which the TPP discussions are being pursued and (c) the emptiness of the Trade Minister’s assurances that everything will be hunky dory. If there is nothing to fear, why the secrecy? Can Groser at least give an assurance that before a document that will bind present and future New Zealand governments is signed, it is submitted to Parliament for scrutiny – and if not, why not?

ENDS

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