Investor State and the TPP
Why Canada must reject the Trans Pacific Partnership (TPP)
I have been working on a film about Investor State Dispute Settlement (ISDS) provisions in trade agreements. As part of my research, I did some reading of the Trans Pacific Partnership (TPP) agreement and criticism of the agreement. This is my short analysis of the TPP.
The Transpacific Partnership Agreement (TPP) has very important and serious implications for all Canadians. The TPP consists of 30 chapters, 6000 pages of text and appendices using legal language that obfuscates their meaning and makes it difficult, if not impossible, for the average citizen to dissect and comprehend. It is important for the public to understand the implications of this far-reaching agreement, and the best way to do that would be through public hearings where experts can parse the language and make it more understandable for citizens.
There are a number of things we have learned about this agreement that concern us. Canada is not in a position to make changes to the agreement and based on the following concerns and the Canadian government’s lack of ability to address these through changes to the agreement, we believe that the TPP should be rejected and that Canada should not sign or ratify the agreement. We think, that after access to public hearings, the majority of Canadians would come to this same conclusion.
The following is a list of some of our concerns. This list is by no means comprehensive, and the more this agreement is dissected by experts the more likely is that this list of concerns will grow.
The Investment chapter contains language and clauses that are very similar to previous trade agreements including the investment chapter of NAFTA, chapter eleven. The Investor State Dispute Settlement (ISDS) provisions of this agreement will be used in the same way the ISDS provisions in NAFTA are being used. Terms such as “Minimum Standard of Treatment”, “National Treatment” and “Indirect Expropriation” have been interpreted to give foreign corporations massive leverage to challenge Canadian regulations that are created in the public interest. These ISDS provisions allow foreign corporations to bypass our judicial system and seek financial compensation in secretive arbitration tribunals that are made up of corporate lawyers who have a vested interest in perpetuating this arbitration system. Canadian taxpayers have paid out hundreds of millions of dollars in arbitration settlements under NAFTA and there are billions of dollars in disputes currently before these arbitration panels. ISDS allows foreign corporations to seek financial compensation for the loss of potential profits when Canadian regulations get in the way of corporate interests. A great many of the arbitration cases brought forward under NAFTA relate to environmental legislation and protections, but there are also many examples around the world of ISDS being used to challenge health, safety and labour standards as well. These ISDS provisions are anti-democratic in their very nature and undermine the sovereignty of nation states. Investor State provisions have no place in trade agreements.
The Intellectual property chapter extends both patent and copyright periods. It is expected that the cost of pharmaceuticals will increase as patents are extended and generic drugs take longer to come on the market. This is bad for our health care system and for Canadian consumers. It is also disastrous for health care in developing countries where the cost of pharmaceuticals will be out of reach, and many people will die as a result.
There are concerns from Canada’s tech industries that the rules on intellectual property favour the United States and threaten to make Canada a “permanent underclass” in the economy of selling ideas. There are also concerns about new criminal penalties for minor non-commercial copyright infringement.
The TPP undermines food sovereignty and the production of food through ecologically sound and sustainable methods. Increased trade in food commodities undermines small-scale local farming and shifts production to large factory farms and agro-business corporations, increasing the environmental footprint of the food chain.
The TPP will undermine the efficient and equitable supply management system in Canada, which provides a stable price and market for Canadian dairy, egg and poultry producers.
Dairy products from the United States, which can include bovine growth hormone, will be allowed into the Canadian market and will not be labeled so consumers can avoid them. These dairy products will compete with locally produced, hormone-free dairy products and undermine local farmers.
Standards set for genetically modified food (GMOs) including GMO approval processes, GMO import monitoring and GMO labelling requirements could all be cited as trade barriers. Local municipal, regional or provincial rules governing the cultivation of GMOs, the use of GMO associated herbicides, or increased food chain transparency could be challenged.
The TPP text fails to mention the words “Climate Change” even though this is one of the most pressing environmental issues of our time. The Investor State rules could be used to undermine efforts to tackle climate change and force governments to compensate corporations for mitigation initiatives. ISDS has already been used to undermine efforts to create energy alternative policies of national and state governments. Fossil fuel corporations will be able to challenge the limits placed on them by governments trying to mitigate climate change. As an example, Trans-Canada pipelines has launched a $15 billion NAFTA arbitration suit against the United States government for the loss of potential profit after the Obama administration blocked the Keystone XL pipeline project for environmental reasons.
The environmental rules in the TPP are weak and the provisions do not include specific obligations or enforcement. Rather than using stronger terms such as “obligated”, “banned” or “prohibited” the terminology is aspirational and uses terms such as “endeavour” and “promote” and non-binding lists of suggested measures that countries “should” take.
The TPP will constrain government’s abilities to regulate their financial institutions and allow financial firms to challenge financial stability measures. Governments will not be able to impose regulations on risky financial products such as derivatives or hedge funds or ban risky new financial products and services if other TPP countries permit them.
Large financial institutions from other TPP nations could challenge Canadian financial regulations using the investor state provisions of the TPP and seek compensation from taxpayers in secretive tribunals for the loss of potential profit that those regulations might entail.
Rules of Origin and the Loss of Canadian Manufacturing Jobs
The Rules of Origin chapter in the TPP will encourage the continued trend of off-shoring manufacturing jobs from North America to countries with lower labour and environmental standards and enforcement. The 62.5% content rules under NAFTA are being lowered to 45% under the TPP. Under the NAFTA rules there was a major shift in manufacturing from Canada and the USA to Mexico. Under the new rules a vehicle with 55% Chinese content could still qualify as Made in Canada or Made within the TPP signatory countries. These new rules will further undermine Canada’s auto manufacturing sector and will result in the loss of Canadian jobs.
The TPP countries have agreed to adhere to the International Labour Organization (ILO) declarations and maintain statutes and regulations governing acceptable working conditions but the agreement fails to set minimum standards for those regulations. The ILO agreements call for minimum wages but countries such as Vietnam and Brunei could establish minimum wages that are pennies per hour and still be in compliance with the ILO.
Brunei, Vietnam and Malaysia are countries with very poor human rights records; in Brunei, for example, the punishment for homosexuality is death by stoning. Brunei and Vietnam are not democratic countries. We should not be liberalizing trade with these countries without guarantees that they will reform their laws and respect human rights.
This is not an agreement that will benefit Canadians or the citizens of the other TPP countries. The main beneficiaries of the TPP are large multi-national corporations and wealthy investors. The Investment chapter of the TPP will increase the number of foreign corporations that can challenge Canadian laws and regulations though private secretive tribunals. The Financial chapter opens up sovereign countries to more de-regulation of their financial systems and increased risk from financial crashes. Rather than raising the standards of developing countries within the TPP with mandatory targets for better labour, environmental, health and safety regulations, the agreement uses aspirational language that allows countries and corporations to utilize loopholes and exploit lax regulations.
The TPP is not an agreement that is worthy of support.