People’s FTAs – What Would Be Included in Free Trade Agreements If People Had a Say?

BERLIN, GERMANY - OCTOBER 10: More than 100.000 protesters gather to demonstrate against the TTIP and CETA trade accords on October 10, 2015 in Berlin, Germany. Tens of thousands took to the streets in Berlin to protest against TTIP (Transatlantic Trade and Investment Partnership) and CETA (Comprehensive Economic and Trade Agreement), both of them trade agreements currently under negotiation between the USA for TTIP and Canada for CETA with the European Union. Critics in Germany oppose the accords for a number of reasons, including fears over genetically-modified foods, environmental standards, workers' rights and pharmaceuticals. Photo by Axel Schmidt/Getty Images
BERLIN, GERMANY – OCTOBER 10: More than 100.000 protesters gather to demonstrate against the TTIP and CETA trade accords on October 10, 2015 in Berlin, Germany. Tens of thousands took to the streets in Berlin to protest against TTIP (Transatlantic Trade and Investment Partnership) and CETA (Comprehensive Economic and Trade Agreement), both of them trade agreements currently under negotiation between the USA for TTIP and Canada for CETA with the European Union. Critics in Germany oppose the accords for a number of reasons, including fears over genetically-modified foods, environmental standards, workers’ rights and pharmaceuticals.
Photo by Axel Schmidt/Getty Images

 

 

If you are not at the table, you are probably on the menu.

It should be obvious to anyone that when it comes to negotiations, no one will be looking after your interests better than yourself. This observation holds true even more so when there are competing interests and the stakes are high, as is the case for the recently negotiated multilateral mega trade deals such as TTP, TTIP and CETA.

Who had access to details and shaped the details during the negotiation phases which were held in secret? Transnational corporations and their lobbyists on one side of the negotiation table, the subsidiaries of said transnationals, other transnationals and their lobbyists on the opposite side. In fact, transnational influence is so persuasive that in all likelihood the texts of the treaties are direct cut and pastes from those people’s keyboards.

Who, then, were not at the negotiation table? Well, pretty much everyone else – not small businesses, who lack the financial resources to purchase direct influence; not civil society organizations and public interest advocacy groups; not even elected members of congress or parliaments who were kept completely in the dark. And the common folks? Don’t make me laugh.

It is not to say that all transnational corporations are evil and, given the opportunity, they would poison the land and sell your first born. In fact, many of them are ethical, model corporate citizens and contribute tremendously to the communities in which they produce or sell their products and services.

The reason other interest groups, and especially those broadly representing the people in general, need to be at the negotiating table is that the needs and priorities of the people are very different from those of transnational corporations. This should be intuitively obvious but is a point which bears repeating.

One common interest between a corporation and the people is the economic success of the corporation. Better profits for the corporation often, though not necessarily, result in better paychecks and bonuses for its employees. If the business the private corporation is in is not economically viable long term, the corporation is simply not going to exist for long. Although the debate of whether the corporation’s financial gains proportionally and equitably flow through to the community and the people sometimes gets contentious, a failed business makes that argument moot. So in terms of common interest, this one is a win-win for both parties. Check.

And this is where the common interests between a transnational and the people pretty much end.

When it comes to paying the workers performing the work, the workers see paychecks and medical benefits as putting food on the table for their families and mortgage payments for their homes. All else being equal, every employee wants the highest salary and benefits possible for a unit amount of time spent on the job. For a corporation, the workers’ paychecks represent labor costs. Worker productivity, non-monetary factors and other being equal, a corporation would negotiate down, automate away or move production to a lower cost jurisdiction in order to reduce this cost component.

Apart from labor costs, a dream business environment for a corporation would be: an insurmountable natural (or artificial) barrier to entry for its competitors, insatiable market demand for its products, unlimited pricing power (through superior product, monopoly or quasi-monopoly), minimum production costs and limited liabilities should something go wrong.

Just as it is natural for the workers to demand the most compensation, there isn’t anything unnatural about a corporation trying to maximize its revenue and squeeze out extra costs. Both are merely trying to serve their own interests.

Another major divergence of interest is when it comes to public health and the environment of the community. Whereas a corporation sees environmental regulations as what they are: regulations to comply with and the introduction of which constitutes extra restrictions and costs to its business, the community sees its environment as something fundamental to its existence. To the extent that a corporation regards environmental laws are to be observed and complied with, the motivation for doing so is to limit its financial liabilities and the damage to its reputation should something bad happen. In extreme cases and when worse comes to worst, the offending transnational can always ‘walk’, declaring bankruptcy on the subsidiary and pull out of the country. People who work and live in the community face a far starker decision, as they would have to live with such environmental problems for generations to come. Needless to say, for the people, that life-sustaining environment is non-negotiable and rightly so.

Given the diverging and somewhat competing interests between transnational corporations and the people, it makes one wonder what provisions, in addition to the one-sided corporate sovereign rights enshrined in the far-reaching multilateral investment treaties the likes of TTP, TTIP and CETA, would be prominently present if the people and the organizations representing them were at the negotiating table when these treaties were drafted?

Allow me to speculate, if somewhat rhetorically, what would be the tables stakes in a People’s Free Trade Agreement.

#PeoplesFTA

Rights to environmental and public health regulations

Our water, air, land and habitat in general are fundamental to our existence, and every measure must be taken to ensure they are reasonably protected. Any damage to such must be remedied and compensated, and the liabilities of a transnational causing the damage should not be limited to the subsidiary domiciled in the community affected.

Furthermore, the sovereign country has the unequivocal right to regulate and legislate policies concerning the environment and public health.

This is where Investor-State Dispute Settlement (ISDS) provisions, investment clauses increasingly used by transnationals to sue sovereign governments for introducing environmental, health and other public interest policies which threaten their profits, are getting increasingly under the spotlight. These ISDS clauses, which have been further strengthened in transnationals’ favor and trojan-horsed into TTIP, TTP and CETA, have become highly controversial and the term ISDS has become toxic in Europe, North America and other treaty member nations.

To underscore the glaring disconnect with the public, proponents of ISDS maintain that safeguards have been put in place to protect a community’s rights to health and environmental regulations. To wit, the TPP, for example, has such a clause:

that “non-discriminatory regulatory actions…designed to protect public welfare objectives, such as public health, safety, and the environment” can constitute “indirect expropriations” “in rare circumstances.”

Just how safe are these ‘safeguards’ and how frequent are such ‘rare circumstances’ resulting in ISDS lawsuits, thanks to these deliberately embedded legal loopholes? Let the numbers speak for themselves:

According to the UN, 35% of all ISDS cases in which corporations are suing governments are related to climate change. In 2014, half of the new ISDS cases targeted policies affecting oil and gas extraction, mining, or power generation (links here and here).

In a recent TPP townhall, David Lametti, Canada’s Parliamentary Secretary to the Minister of International Trade, defended transnationals’ right to seek compensation via ISDS lawsuits, stating that theoretically if you expropriate someone’s property like his house, the person has every right to demand to be compensated.

Rather than debating in the theoretical realm, let’s look at a couple of real life cases.

Exhibit A: PCB trade across Canada’s borders

When Canada legislated to stop the cross-border trade of PCBs, Meyer, a US corporation, sued the government under the NAFTA ISDS provisions, claiming its rights and profits were violated and its assets expropriated – and won. Canada paid $6 million, repealed the law and announced “sorry, my bad”. (link)

Exhibit B: Toxic gasoline additive import ban

When Canada initiated a ban on the import of a certain neurotoxin in gasoline additive, which is also banned in its home country, US Ethyl Corporation sued the Canadian government – and won. Canada paid $13 million, repealed the law and announced “sorry, my bad”. (link)

Exhibit C: Quebec moratorium on fracking under the St Lawrence River

When Quebec put a moratorium on fracking under the St Lawrence over public fear of water contamination, Lone Pine Corporation, a Canadian company headquartered in Calgary, used its mailbox address in the US to sue its motherland – and won. $250 million, thank you. (link)

Based on Mr Lametti’s argument, the transnationals’ rights to ship toxic substances into the country have been wrongfully violated and its assets expropriated, and, therefore must be compensated.

Sorry, Mr Secretary, the people’s health and their living environment are too critical to be decided by private, secret tribunals with built-in conflict of interest. Public health is simply NON-NEGOTIABLE. No ‘rare circumstances’ loophole; no if’s and’s or but’s.

‘Harmonizing’ Regulations

Common folks often think of trade in terms of tariffs. So when we talk about trade agreements, people associate them with the lowering of tariffs among member countries. Few realize that tariffs on 97% of all tradable goods are either zero or practically zero under existing bilateral agreements among TTP countries. Little do they know the vast majority of the mega trade deals have to do with harmonizing regulations to allow transnationals to operate under a common set of rules and regulations.

Problem is, the way regulations are being ‘harmonized’ under these mega treaties invariably means lowering the standards to the lowest possible common denominator. In other words, after ‘harmonization’ the least protective regulations would become the rules for all.

Take for example, health regulations governing the use of pesticides. The Europeans have much stricter rules than the U.S. on the use of agricultural pesticides aimed at protecting its citizens. Under TTIP, European rules would be relaxed to be in line with the U.S. rules.

Rhetorical question: if the people on both sides of the Atlantic had a say in which set of pesticide rules to adopt, what do you think they would choose? Would the Americans think the Europeans should just let go of their paranoia and embrace the brave new world of pesticide innovation? Would the Europeans feel finally liberated from their government’s bureaucratic stranglehold on their health? Which set of rules do you think the people both sides would pick?

The same goes for growth hormones and GMO foods. Whereas both are severely restricted in European foods, it’s a free for all in the U.S. Again, ‘harmonization’ means both ingredients would start flowing into European markets.

Rhetorical question: if folks on both sides had a choice, which set of standards do you think they would vote for?

The above examples trace their rationale back to the precautionary principle enshrined – up to now – in European health regulations.

In essence, the precautionary principle requires a company seeking approval for a chemical to scientifically prove that the chemical causes no harm, if there are legitimate reasons to suspect the chemical might not be harmless.

By contrast, the U.S. approach is that it is up to the government and society to prove that the chemical is unsafe and demonstrate harm – harm as in people start dropping like flies or developing cancers, something which might take decades to develop, or the interactions of said chemical with the environment is so complex that it is next to impossible to establish a direct linkage.

Recent leaks of the TTIP texts confirm that the precautionary principle is not anchored in the TTIP or CETA.

EU officials, naturally, are vehemently hand waving and denying their cherished health protections are being compromised. Well, fine. If they think that is not the case, then put it down in writing and in no uncertain terms.

Rhetorical question: If people on both sides were able to vote and choose, which do you think they would prefer, being a lab rat or laggards missing out on the benefits of the latest chemical or biological innovation?

Again, if people on both sides of the Atlantic were given a choice as to which approach they would prefer, which one do you really think they would choose?

Labor Standards

People do understand that labor standards can vary substantially across TPP countries such as Canada and Vietnam and even amongst economically developed nations. High labor standards take decades, if not centuries, to develop even for developed nations. It is unrealistic to expect the standards of less developed nations to come up to those of developed nations right away. However, at a minimum, a people’s free trade agreement must define a minimum set of standards guaranteeing the safety, health and welfare of workers in low cost jurisdictions. Both signatory countries and transnationals are legally bound by these regulations with enforceable penalties for those parties which violate them.

In addition, there should also be a set of improvements on the benefits and working conditions for the workers of developing countries in such a way that the labor standards will collectively rise and the gaps among member countries continue to narrow over time, and the masses benefit from the trade agreement. Just like any rules worth the toner and paper they are printed on, these improvement provisions must be tangible, measurable, time defined, and, importantly, enforceable.

Climate Change

Hot on the heels of the Paris Agreement on climate change, signed by most of the TTIP/TTP/CETA member countries, one would think that it is something people the world over are worried about and governments are committed to doing something about it.

Yet, the words “climate change” do not even get mentioned in the TTP. The treaty’s environmental chapter excludes core environmental commitments that have been included in all US trade agreements since 2007.

If citizens the world over and environmental advocacy groups had a say in drafting the agreement, do you think the topic of climate change would occupy the amount of space it deserves and constitute an important chapter?

Right to Support Local Employment and Industries

Except in rare cases where governments use ‘local content’ to erect indirect trade barriers, there is nothing wrong with communities applying preferential treatments to their home grown industries or providing training and other incentives to improve their citizens’ employment prospects.

As much as transnationals view the world as one ubiquitous market subject only to such human agnostic market principles as economy of scale, marginal utility vs costs and cost of capital, the human element simply cannot be ignored.

It is commonly accepted as a given and taught that you take care of yourself and then your children and other dependents. If you have excess capacity, then help your neighbors, friends, your local community and beyond. Ingrained in our genes, it is an extended version of the survival instinct of an individual and as a species. The atomic units of a community are the families of parents and their offspring. The strength of a nation is built upon tightly knitted and coherent local communities forming the very fabric of the nation.

Therefore, not only is it okay for regional authorities to nurture local industries, practice buy-local policies and support local farmers and demand local jobs and R&D when a transnational wants to enter the new market or start an extractive business in the region, we should acknowledge it as natural behavior.

A people’s free trade agreement would include explicit clauses which would preserve and enhance the well being of the communities in which the people live.

A People’s Forum on Free Trade

As more and more people from all nations affected by these investment treaties wake up to the fact that the process in which these trade deals are negotiated is fundamentally flawed, people should demand an equal voice at the negotiating table, and change the content of the trade deals to reflect the priorities of the 99% who will be affected the most.

The people should not just accept the hard-sell by their governments of these investment treaties written and negotiated exclusively by and for the disproportional benefits of transnationals. Instead of raising objections at after-the-fact, going-through-the-motion style public consultation forums, in a futile attempt to put in the most cosmetic of changes into these otherwise take-it-or-leave-it yes-no propositions, the peoples of different nations should demand a reset to the process.

The people, led by civil societies and advocacy groups, should demand their priorities be included. With the advent of internet and social media, it is not far fetched to envisage a global people’s forum on People’s Free Trade Agreement, where the peoples hash out a set of universal free trade provisions benefiting the global community and the people that live in it, and demand such provisions as non-negotiable and fundamental table stakes in any and all future trade agreements.

Oh, don’t forget to demand a seat at the future negotiation table.

#PeoplesFTA

Investor State Dispute Settlement (ISDS)

This article is part of the Investor State Dispute Settlement (ISDS) in-depth topic. Get a crash course and read the latest developments on this topic.

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