Jan 20, 2015
Billed as the biggest trade agreement ever, the Transatlantic Trade and Investment Partnership is in trouble. Started in July 2013, negotiators hoped to have it wrapped up by the end of 2014. The deadline has now slipped to the end of 2015, but that too looks unlikely. So far the talks have achieved little in terms of reaching agreement for specific market sectors. And they are facing increasing scepticism because of TTIP's plans to deregulate goods and services like health through "harmonisation" of EU and US standards - something that in practice usually means levelling down.
The most contentious area is undoubtedly that of Investor-State Dispute Settlement (ISDS) which enables companies to sue for alleged losses caused by government actions. Originally, these were intended to cover physical expropriation, but companies now use ISDS to make claims for "indirect expropriation" of future profits. This might be something as simple as bringing in plain cigarette packs or health warnings, or refusing to grant a patent for medicines.
ISDS not a new idea: it has been included in bilateral trade agreements for decades. But those were generally between Western nations looking to invest in developing countries that were keen to attract foreign companies. The ISDS mechanism was there to protect investments in regions where legal systems were often weak and governments capricious.
TTIP by contrast would see the ISDS mechanism between two blocs with highly-developed legal systems. ISDS would introduce external tribunals that allowed companies to bypass national laws. It would open up the EU (and US) to the risk of ISDS claims on an unprecedented scale. If TTIP includes ISDS, there are 14,400 US-based corporations owning more than 50,800 subsidiaries in the EU, all of which could use the mechanism to sue the EU and its Member States. Even without TTIP, European nations are already facing claims of at least EUR30 billion because of ISDS chapters in existing agreements - we don't know exactly, since many cases are still secret. With TTIP, it's easy to imagine that figure multiplied by ten or even more. Moreover, this is money that must be paid by the public, making a mockery of any claims that TTIP will bring benefits to ordinary people.
The growing realisation that including ISDS in TTIP would be like giving a blank cheque to powerful and litigious US companies has led to widespread resistance to the idea. Faced by this revolt, the European Commission put discussions of ISDS on hold and announced that it consult the public. This consultation took place last summer, and immediately showed itself to be a sham. Far from asking the public what it thought about ISDS, it simply presented a few cosmetic changes to the ISDS chapter used in another recent free trade agreement, that with Canada, generally known as CETA.
Nonetheless the consultation did provide a rare opportunity for people to express their views officially, which they seized eagerly. Around 150,000 people made submissions to the consultation - an extraordinary number for an extremely technical aspect of a trade agreement, not something that normally generates much engagement from the general public.
Faced with 150,000 mostly negative submissions, how would the European Commission respond to this unequivocal rejection of ISDS? Last week we found out, when the Commission released its report on the consultation. Cecilia Malmstrom, Commissioner for Trade, was forced to admit:
"The consultation clearly shows that there is a huge scepticism against the ISDS instrument."
But the Commission went on:
"The vast majority of replies, around 145,000 (or 97%), were submitted through various on-line platforms of interest groups, containing pre-defined, negative answers. In addition, the Commission received individual replies from more than 3,000 individuals and some 450 organisations representing a wide spectrum of EU civil society, including NGOs, business organisations, trade unions, consumer groups, law firms and academics. These replies generally go into more detail on the proposed approach."
It seems the Commission is suggesting that the use of online platforms offering "pre-defined, negative answers", somehow doesn't really count - unlike the hand-crafted productions from industry lobbyists. And here's how the Commission proposed to move forward in the light of that 97% rejection of ISDS:
"In the first quarter of 2015, the Commission will organise a number of consultation meetings with EU governments, the European Parliament, and different stakeholders, including NGOs, business, trade unions, consumer and environment organisations, to discuss investment protection and ISDS in TTIP on the basis of this report."
In other words, in response to a consultation that drew more replies than any other of its kind, the Commission intends to organise another round of consultations, but this time, not with the general public. Instead it will hold more conventional meetings with the usual lobby groups, hoping this will allow it to come up with the result it is looking for - which is that ISDS just needs a little tweaking and then it will be fine.
So despite the clearest possible rejection of ISDS by huge numbers of European citizens, ISDS remains part of the planned TTIP text. It is still on hold, but will doubtless return to the negotiations once the European Commission thinks that people are sufficiently tired of fighting it.
And there are other, less well known threats, too.
Even if ISDS were removed from TTIP, Europe would still face the prospect of being sued for hundreds of billions of euros by US companies because of CETA, the trade agreement with Canada, which is further along than TTIP (but not yet fully finished.) That's because CETA also has an ISDS chapter which would grant US investors in Canada rights to sue the EU. Here's how Canadian Centre for Policy Alternatives explains it:
"The CETA definition of 'investment' and 'investor' are overly broad and far beyond what would be advisable from a regulatory or public interest perspective. The CETA defines an 'investment' as, "Every kind of asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment." It defines an 'investor' as:
'a Party, a natural person or an enterprise of a Party, other than a branch or a representative office, that seeks to make, is making or has made an investment in the territory of the other Party. For the purposes of this definition an 'enterprise of a Party' is: (a) an enterprise that is constituted or organised under the laws of that Party and has substantial business activities in the territory of that Party'.
The reference to 'substantial business activities' is not enough to prevent 'treaty shopping.' For example, U.S. investors in Canada would be able to use the CETA investment provisions and ISDS to challenge European state measures."
Thus the little-known CETA is also a serious danger here - indeed, a rather more pressing one, because the text has been agreed, and is now being prepared for final ratification, at which point it will enter into force. If we are to avoid the risk of massive claims being made against the EU by US companies who also operate in Canada, we need to take ISDS out of the treaty, or stop CETA completely.
As if that weren't enough, there is yet another trade agreement that is likely to undermine national sovereignty: the Trade in Services Agreement (TISA). Like TTIP and CETA, it is being negotiated in secret, and the public will only be able to see the text once it is finished, when nothing can be changed. However, last year WikiLeaks published TISA's financial services annexe, which gives a good idea of the treaty's direction. Summarising, Professor Jane Kelsey of the Faculty of Law, University of Auckland, New Zealand, said:
"A sample of provisions from this leaked text show that governments signing on to TISA will:
be expected to lock in and extend their current levels of financial deregulation and liberalisation;
lose the right to require data to be held onshore;
face pressure to authorise potentially toxic insurance products;
and risk a legal challenge if they adopt measures to prevent or respond to another crisis."
More recently, there has been another leak, this time of a US proposal for the part of TISA dealing with data protection. Essentially, the US wants to forbid the EU from insisting that Google and Facebook keep data relating to EU citizens within the EU. That's important, because such a condition has been suggested as a way of ensuring that EU's stringent privacy laws are applied to EU users of these services. If the US proposal were adopted, TISA would give Google and others the right to export personal data of EU citizens to the US, where it would enjoy little privacy protection, and could be used largely as the companies wished.
Finally, it's worth mentioning yet another trade deal, also being negotiated in secret. This is the Trans-Pacific Partnership (TPP) agreement, which is between the US and a group of Pacific countries - Japan, Australia, Peru, Malaysia, Vietnam, New Zealand, Chile, Singapore, Canada, Mexico, and Brunei. Although this wouldn't affect Europeans directly, it is part of a larger plan, along with TTIP and TISA, to impose global trade standards that encourage massive deregulation and privatisation, and to place corporations on the same level as countries through the use of supra-national ISDS tribunals. If the TPP negotiations are concluded successfully, it will be used to blackmail European politicians into accepting TTIP, even with ISDS, on the grounds that otherwise Europe would be left behind by the US pivot to Asia, of which TPP is a key part.
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