Thursday, 8 January 2015

EU's TTIP trade deal is above all a threat to democracy

writes DM campaign director Stuart Coster

Controversy is growing around the free trade deal the European Union is currently negotiating with the USA.

Talks over the Transatlantic Trade and Investment Partnership (TTIP), launched 18 months ago, have run into a wall of public protest over its potential impact on public services, the high levels of secrecy surrounding the negotiations and, in particular, the deal's investor dispute clauses.

Beyond concerns about whether the deal will threaten key public services like the NHS and lock in the existing privatisation of services that already have commercial involvement, the negotiations are finally opening the eyes of numerous commentators and activists particularly on the left of the political spectrum to the EU's corporatist and anti-democratic nature.

John Hilary, executive director of anti-poverty campaign War on Want, has gone as far as calling the proposed TTIP deal “an assault on European and US societies by transnational corporations.”


The motivation for the deal comes from desperation in both the US and Europe to light fires under flatlining economies, following the impact of the financial crisis. Since tariffs barriers between the EU and US are already low, averaging around 3%, elimination of these would not offer such a big step forward.

So the main focus of the TTIP negotiations is on reducing 'non tariff barriers' to trade and investment, like the harmonisation or mutual recognition of product regulations and the reduction import/export bureaucracy. Within the detail here, much of which remains shrouded in secrecy - and it seems will stay that way until the complete 'take it or leave it' deal is unveiled - lies the extent to which the negotiations will impact on public services and standards.

Speaking in last week's debate in parliament about TTIP, independently-minded Conservative MP Zac Goldsmith said: "At this stage, no one can talk with any real certainty about the minutiae of TTIP—that is just not possible—but we can see the direction of travel. For my part, I think it is incredibly worrying." Sentiments that were repeated across the party divide, from the Labour MP Geraint Davies who secured the debate to the Green party's Caroline Lucas and Eilidh Whiteford for the SNP. 

Until suspicions are resolved about the extent to which the EU, beyond meaningful accountability, will accept on all our behalves reductions in our product standards to ease US trade, the main opposition to TTIP is focused on its provisions for "investor-state dispute settlement" (ISDS). Rightly so, because within the ISDS clauses lies the most dangerous aspect of the TTIP deal of all - a sinister threat to democracy.

Democracy inhibitor

ISDS mechanisms aren't new. They have long been included in bilateral trade agreements around the world. But in the past these have generally been deals between Western nations wanting to invest in developing countries but looking to protect themselves against the expropriation of their assets by perhaps legally unreliable and politically volatile regimes.

Today, however, in deals like TTIP, the process is not only being included between continents with stable governments and well-developed justice systems but it is even being extended to include government policy decisions that may impact on an investor's future profits.

ISDS would allow companies to sue governments for compensation over claims law changes amount to 'unfair treatment' - and worse, not even in public courts. Under the process, private supra-national arbitration tribunals would meet in secret to make the decision for or against a government and on the amount of investor compensation.

No-one has yet satisfactorily explained why what is being termed as a special, corporate "parallel system of justice" is required between jurisdictions that appear to have perfectly well managed inward investment to date. Yet, as Goldsmith points out in his comments to parliament, what the mechanism would create is a "permanent inhibitor for legislators". For example, if the government felt a pesticide had to be banned in the public interest, they would have to think twice about the potentially huge cost should an affected investor sue. 

Even if the EU does not allow TTIP to directly undermine welfare and regulatory standards, particularly in areas like food, chemicals and pharmaceuticals, critics of the deal see the ISDS mechanism as a way for large, multi-national corporations to - in the future - bully governments out of tightening standards, or possibly into reducing them, on the grounds that such 'unfair' changes compromise their investments.

Public cost

In his pamphlet on TTIP, War on Want's John Hilary cites the case of Slovakia;

"When the people of Slovakia voted in a leftist government in 2006 as a response to the unpopular privatization of health care, one of its first moves was to restrict the powers of private insurance firms to extract profits from the public health system. In retaliation, a number of health insurance companies sued the Slovak government for damages, with Dutch firm Achmea eventually seizing €29.5 million in public assets by way of ‘compensation’. In a groundbreaking case filed in 2013, Achmea is now attempting to use the same powers to block the Slovak government from setting up a public insurance scheme that would provide health cover to all the country’s citizens."

Zac Goldsmith, in his recent contribution to the Commons TTIP debate, gave another example;

"Canada has been sued 35 times under current ISDS mechanisms. In one appalling case, Canada was sued by Ethyl Corporation for $250 million, via an ISDS mechanism, after it banned the highly toxic chemical MMT, which is an additive for fuel. Despite unequivocal evidence of harm—no one disputes the scientific case—Canada not only had to settle with Ethyl but reverse its ban."

Other abuses have been highlighted, such as the case in Australia where tobacco giant Philip Morris used a 1993 trade agreement with Hong Kong as the basis for a legal move to stop a change to cigarette packaging. And a case in Germany where energy company Vattenfall sued the government for
€3.7 billion in damages because two nuclear reactors were switched off as part of Germany’s withdrawal from nuclear power generation.

According to a pretty startling recent Friends of the Earth report, even before TTIP comes into effect European nations are already facing claims of compensation due from public funds of at least €30 billion because of ISDS chapters in existing trade agreements. Even this only represents information on compensation sought that is publicly available - and that's for less than half of the cases pursued by investors. Public information about compensation actually paid out by governments is even more limited - amounting to
€3.5 billion relating to just 14 of 127 cases.

It seems overwhelmingly clear that an ISDS process should have no place in any EU-US trade deal.

Politics at play

David Cameron is especially keen to seal a TTIP deal as a signal that he can secure EU reform and make Brussels 'deliver for Britain'. But this claim is unlikely to appease even those EU critics who support wider free trade, since such a deal with the USA was on the cards over 20 years ago yet Britain was unable to pursue it having already abdicated control of its trade policy to Brussels.

That 20 year delay before the EU came around to the idea of a US trade deal, they will argue, has cost the UK tens of billions in lost jobs and prosperity. And they will go on to ask how much longer we must wait, and how much more could it cost us, before the lumbering EU seeks trade deals with future economic powerhouses like India and China?

The European Commission's response to the growing weight of public opposition to TTIP and particularly its ISDS clauses - displayed through a public consultation that has in any case been dismissed as a sham - will be over the next few months to hold a round of meetings with its favourite 'stakeholder' lobby groups. Currently negotiations on the ISDS mechanism are suspended, but many suspect the EU's aim is to have its chosen stakeholders propose the 'right' answer that the ISDS clauses simply need minor, cosmetic changes and implementation can proceed as planned.

Big questions

The incompetence of Brussels in exposing European governments to massively expensive legal actions by major corporations for loss of profits due to democratically decided and even mandated changes of policy appears to be a scandal yet to be fully exposed and could well prove to be one of the biggest final nails in the EU's coffin.

Questions about TTIP go way beyond whether you are pro- or anti-privatisation; pro- or anti-free trade. If a majority of people have voted for a government that will restrict private involvement in healthcare, or re-nationalise a public service, then companies have no right to powers that could subvert such a government from implementing that majority-mandated policy.

That's why, above all, the biggest challenge for TTIP supporters is whether they are pro- or anti-democracy.


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