Crikey! Australia Shocks Corporate America on Trade

The Australian government doesn't like it when global tobacco giants can sue them over public health laws. Corporate America finds this utterly unreasonable.

The Australian government doesn't like it when global tobacco giants can sue them over public health laws. Corporate America finds this utterly unreasonable.

Thirty-one U.S. corporate lobby groups, from the Business Roundtable to the National Potato Council, sent a letter to President Obama this week, urging him to give Australia a good smackdown.

The Aussies' offense? They have refused to accept trade rules that allow foreign investors to sue governments in international tribunals. Known as "investor-state" dispute settlement, these rules are in every U.S. trade agreement negotiated in the past 20 years - except the 2005 U.S.-Australia pact.

The Land Down Under stood up to U.S. corporate goliaths and their representatives in the U.S. Trade Representative's office that time around. But the issue has come up all over again because the two countries are negotiating a new trade pact with seven others, called the Trans-Pacific Partnership. Australia has reiterated its opposition to these so-called "investor rights" in this broader trade deal.

If anything, the government's opposition has hardened since its last go-round with U.S. trade negotiators. That's because Australia is now the target of a high-profile investor-state case. Philip Morris, of the Marlboro empire, filed a suit against Australia last year, demanding compensation for that country's plain packaging laws for cigarettes. Oops - while Australia had kept investor-state out of the U.S.-Australia trade deal, it allowed it in some other treaties. Philip Morris simply used a subsidiary in Hong Kong to file the claim under a bilateral treaty between that nation and Australia.

In a statement surprisingly lacking in the usual bureaucratic mumbo jumbo, the Australians made clear they weren't about to expand their vulnerability to such lawsuits by accepting investor-state in the Trans-Pacific Partnership.

Corporate America's hair has been on fire ever since. In the lobby group's letter to Obama, they warn ominously that "Australia's rejection of investor-state dispute settlement is not only thwarting the ability of the TPP negotiations to produce strong enforcement outcomes, it is also having a corrosive effect on the level of ambition and other key aspects of the TPP negotiations. If Australia were able to extract such a major exemption, other countries would press forward to seek their own major exemptions from core commitments."

Translation: they fear if the United States goes all soft on the Australians on investor-state, the other countries will smell blood and demand similar rules that are pro-public interest, but corporate-unfriendly. Several of the other governments are already attempting to stand up to U.S. pharmaceutical company proposals that would reduce access to affordable medicines.

Another hot-button issue is capital controls, which include various measures designed to manage the flow of volatile "hot money" across borders. More than 100 economists from TPP countries signed a statement this week urging negotiators to allow governments to use this proven tool for preventing and mitigating financial crisis. Seventeen corporate lobby groups have argued in another letter that permitting U.S. trade partners to support financial stability through the use of capital controls would undermine everything from U.S. jobs to national security. Despite growing consensus among economists that such controls are legitimate policy tools, it is standard U.S. trade policy to prohibit their use and allow investor-state claims against governments that violate these restrictions.

Besides the United States and Australia, others involved in the Trans-Pacific talks are: Brunei, Chile, Malaysia, Peru, New Zealand, Singapore, and Vietnam. Their 11th round of negotiations is taking place in Melbourne, Australia from March 1 to 9. Let's hope the Australian team that is taking on Corporate America can make the most of their home turf advantage.

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