The TPP is dumping on democracy


On 22 August the government of Brunei will kick off the 19th round of negotiations of the Trans-Pacific Partnership Agreement (TPP), a massive trade and investment pact among twelve Asia-Pacific countries including all of North America, Australia, Malaysia and Vietnam. The latest country to accede is Japan.

Although the twelve governments are keen to wrap up the agreement by the time of the APEC Leaders’ Summit in October in Indonesia, the odds for a conclusion are slim.

With a view to Japan’s accession, the US announced on Monday that they are doing their best to make a tariff-reduction offer to Japan as soon as September.

The stress is also high in Japan: the government has prepared an army of 100 negotiators in an attempt to catch up with the negotiations that have already taken place between the other governments.

But, no matter how important tariffs are to trade, the negotiations are centred on non-trade issues such as achieving ’regulatory coherence’ and ’competitive neutrality’.

The agreement is not only intended to open the markets of goods and services between the twelve partners, but it will also establish ‘horizontal guidelines’ to dictate how regulation is put in place and what regulation is unnecessary.

For example, if a government wants to set stricter rules on pesticide residues in fruit, it will have to prove that the desired result cannot be reached with non-regulatory means.

The government will then be encouraged to conduct a ’regulatory impact assessment’ (RIA) to measure the costs and benefits of the regulation.

The RIA is a hangover from the deregulatory agenda of the Reagan era, intended for use at a national level.

One of the problems is that, although business costs are easily assessed in monetary terms, social benefits like public health and environmental protection are not.

On these matters, governments should be free to make decisions using political, cultural and social criteria, not only economic ones.


Shadowy tribunals

The TPP will also establish ad-hoc tribunals where private investors can file complaints against sovereign governments that implement policies which directly or indirectly impact on their investments or expected profits.

Measures like increasing wages, protecting public health through anti-smoking legislation, the implementation of clean energy policies or even the enforcement of national laws can be appealed.

The tribunals are to be run by a shadowy clique of legal firms who will act as judge one day and jury the next. History shows that just by threatening to use such a tribunal, a company can achieve a ’chilling effect’ on a government that wants to design or enact new regulations and policies.

Foreign investors will have enormous power through the TPP, yet it lacks any mechanism to enforce investor responsibilities.

The TPP could make a difference in eliminating abusive corporate behaviour such as worker exploitation, poor working conditions, unfair trading practices against small producers and the corruption of state officials – but the negotiators have kept this off the agenda.

The TPP governments are even failing to get it right when it comes to financial markets.

After the financial crisis, governments enacted legislation that re-regulated some of the functions of capital markets – for instance, the Dodd-Frank Act in the US.

The TPP and other regional trade agreements, like the Transatlantic Trade and Investment Partnership, provide a back-door for big capital to get around the new regulations and return to the exuberant financial toxicity which plunged the world into recession.

The agreement dedicates a particular chapter on financial services that aims to further deregulate capital markets.

It is expected to limit the ability of governments to use rules and measures to promote productive investment and protect against speculation.

Governments are pressured to give up their competence to protect their balance of payments with capital controls in case of extreme imbalances, defying IMF research that proves the usefulness of – and need for –these tools.


Patents on medicine

Yet another concern is that the negotiators in Brunei are to discuss the extension of patents on medicines.

Without convincing evidence, some governments claim that granting additional protection to medical patents would enhance innovation.

In truth, this would mean extra costs for patients and bigger burdens on health budgets.

Incentives for innovation are already high, and extending patents could have a contrary effect by dampening investment in research and development, and diverting funds for research to lawyers instead of scientists.

It is clear that governments are putting a lot on the line in these negotiations. An agreement that fails to address these and many other problems will cause damage that is difficult or impossible to reverse.

In order to make it an inclusive agreement, the negotiating parties must establish enforceable standards on labour, the environment and business behaviour so that the gains from trade can be distributed fairly, instead of granting excessive rights to corporations.

Organised labour has been taking part in many rounds of negotiations trying to promote these goals.

Workers from Asia and the Americas have raised their concerns in this new video produced by the US national trade union centre, the AFL-CIO:

Governments need to bring their negotiators to heel before it is too late.