Image for Tell me a story… about free trade

The story started long ago.  You could pick a starting point in the 1950s and it’d be fair enough.  You could pick a starting point back in 1642 and you’d be right enough.  The story has multiple beginnings in time and place, but the story has one aim, the creation of an environment where big corporations can reap profits through any means available.

The current scenario, floated in circumstances of high unemployment in Europe in the aftermath of the austerity policies imposed in EU countries to socialise the losses of the ‘masters of the universe’, involves a whole range of free trade agreements being now negotiated to include within them what George Monbiot has described as a ‘toxic mechanism’ called investor-state dispute settlement (ISDS).

ISDS inclusions in trade agreements are not new.  They have plagued South American countries for years.  In essence an ISDS ‘allows foreign corporations to take legal action against another country’s government if they believe that government has infringed on their rights’, as the Fairfax press expressed it late last year in relation to the Abbott government including an ISDS in negotiations with South Korea. 

Australia has entered into free trade agreements with a number of countries, but before the Abbott administration came to power previous governments refused to include ISDS mechanisms in those agreements, for obvious reasons.  The history of these agreements between multinational companies operating in South America is indicative of the risks.

Some estimates are that as many as 500 lawsuits have been brought against Latin American governments by US corporations. A typical recent example is US mining company Renco suing the Peruvian government for $800 million after the government withdrew a license for a smelter operating in a notoriously polluted area.  Examples are reminiscent of the exploitation of poor countries by the agents of the powerful and wealthy through time immemorial.  The basic principles enshrined in ISDS mechanisms are to override national regulations on environmental protections and human health safeguards.

In 2013 a dozen South American countries at last bit the bullet and decided to take collective action to prevent US corporations from suing them when their own internal regulations imposed conditions on corporate behaviour.  It is too early to tell whether these countries will be able to withstand the pressure.  In the past, throughout the region, whenever governments have sought to gain control over their own affairs rather than allow themselves to be exploited by US corporations, the US government has used overt and covert means to allow the untrammelled exploitation to continue. 

For most of the period from the 1950s to the 1990s US corporations were protected by direct military intervention, by elimination of democratic regimes through CIA covert operations and a range of other measures, most of which were initiated during the Eisenhower administration by the Dulles brothers.  Since the 1990s trade agreements have been the main tool to continue business as usual, and the use of ISDS has been an important means of control.

Now, as Monbiot has argued, this is set to expand on a massive scale, notably through the creation of a single US-Europe market, giving corporations powers to override the laws of national governments throughout Europe under terms within the Transatlantic Trade and Investment Partnership.

At the same time, the Trans Pacific Partnership Agreement (TPP), comprising 12 countries including Australia, is being negotiated, with Australia’s trade minister Andrew Robb preparing to agree to ISDS powers to be included.  The countries involved in the TPP are US, Australia, Canada, NZ, Chile, Peru, Mexico, Singapore, Brunei, Malaysia, Vietnam and Japan. 

The argument Robb has put forward to include ISDS in TPP agreements is to gain greater market access for Australian exporters, whatever that means in the fine print.

What does it mean?  The best way to approach that question is to look at why other countries, especially in Latin America, have signed up to ISDS mechanisms.  The most obvious reason is that where there is clear competition between countries to attract foreign investment, ISDS agreements become crucial in playing one country against another in the investment stakes, especially in the context of short-term political gain.

That would seem to explain the stance of Andrew Robb in venturing into this dangerous arena, an arena which even the Howard administration decided was too risky back in 2004.  Perhaps Robb would be advised to have a close look at how ISDS provisions have created a backlash in South American countries when the consequences played out over a generation or so. 

There is another aspect of ISDS which is innately attractive to conservative governments, wherever they exist.  It opens the opportunity for the dismantling of environmental, health and safety legislation and regulations imposed by national governments in the interests of their own people.  It is easy to see that where democratic regimes in South America have been replaced with military regimes, that ISDS provisions are regarded as inconsequential. 

In places like Australia, where radical conservative governments come to power from time to time like the Newman government in Queensland and the Abbott government in Canberra, allowing ISDS mechanisms to be built into trade deals is a way of bypassing statute laws they don’t like – environmental, health and safety being the key areas, as well as labour costs – but which they cannot remove through the parliamentary process.  A particular type of political mindset is required to place the transnational corporate interest above the public interest in this way, but it not uncommon, and has been with us in its general current manifestations in recent times since the Second World War.

It is not as if any Australian government is unaware of the consequences.  The first test case for Australia has already begun, with Philip Morris bringing a suit against Australia for passing plain packaging legislation for cigarettes back in 2011.  This was a piece of legislation backed by all political parties, and the High Court handed down a decision in 2012 rejecting the suit and rejecting compensation claims, on the basis that plain packaging was justified on the grounds of public health.  However, Philip Morris has not abandoned the suit, using ISDS-type clauses in a trade agreement between Hong Kong (where Philip Morris says they are based) and Australia as a means to pursue their claim for compensation. 

The current cab on the rank under the Robb policy shift involves trade agreements with South Korea, as far as we the ordinary people know.  If people like Professor Rob Moodie of the department of public health at Melbourne University are right, this is just the tip of the iceberg.  Moodie is concerned that ISDS arrangements will not only ‘strengthen the hand of some industries to sue national governments for their domestic policies’, but also undermine the national pharmaceutical benefits scheme, delay the availability of cheaper generic drugs and increase the cost of medicines. 

Moodie pleads that ‘surely we must find a balance between unrestrained commercialism and maximising health and wellbeing’. 

Investor-state dispute settlement is no different to the trade arrangements organised by the Dutch in the 17th century, through their mercantile powerhouse, the Dutch East India Company, or by the British East India Company in 18th century India, or by United Fruit Company in Guatemala in the 1950s or by the ITT in Chile in the 1970s. 

The story we are now in is a story of repetition.  It is an age-old story, a story always about exploitation in the corporate interest, wrapped up in slogans like ‘delivering growth and jobs’ –  the current choice of words used by the spruikers for ISDS provisions in the Transatlantic Trade and Investment Partnership. The consequences of such arrangements invariably work very well in reaping huge profits for a few, and long lasting legacies of social and political division, economic exploitation, pollution and degradation for the rest.

More detailed information about this issue can be found on the AFTINET site, eg Dr Patricia Ranald; Fairfax Press (Hutchens 6/12/13, Moodie 5/1/14), Guardian (Monbiot 2/12/13, Chan 11/12/13), Mintpress (Carey Biron 3/10/13); New Statesman (David Cronin 27/7/13), and elsewhere.

Ealier on Tasmanian Times, Tim Thorne: Trans-Pacific Partnership Agreement: The Dangers

Andrew Wilkie: Government trade negotiations especially bad for Tasmania  “Tasmania is particularly vulnerable due to its high quarantine standards. Strict rules that prevent foreign companies from entering the market, for example fish importers, can be interpreted as discriminatory and a breach of our trade obligations. “Tasmania’s GMO-free status is another important example of something that could be challenged by foreign companies exploiting the ISDS provisions.

Senator Peter Whish-Wilson: Statement on the leak of the Trans Pacific Partnership (TPP) Environment Chapter “Just as the Jakarta Post has become the only source for news about the Abbott government’s asylum seeker policy, WikiLeaks is now our only source for information about Abbott’s trade policy. “The leaked environment chapter indicates that Australian federal environment laws would be subject to being contested in shady international arbitration panels. “And alarmingly it also indicates that the environmental laws of sub-national or state governments could also be subject to challenge. Have the state Premiers been consulted on this?

Malaysia blocks US trade shocker. Will we?