Bantah TPPA: How can an agreement written by and for US MNCs be good for Malaysia?

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Surely, Malaysia should be setting its own rules and determining its economic and social policies, development path and laws, says Sevan Doraisamy.

We refer to Munir Majid’s commentary “Be rational and honest about TPPA” on 16 January 2016 in The Star.

Munir Majid claims that opposition against the Trans-Pacific Partnership (TPP) is “excitable and emotional”. Besides being an blanket attack to shut down debate, he doesn’t point to any evidence of excitable and emotional responses.

The anti-TPPA responses do however reflect many legitimate responses – concern, anger, outrage and fear – but unlike the claims he makes these responses are informed and backed up by independent expert analysis.

His article is substantiated only by the Institute of Strategic and International Studies (Isis) where he sits as a director and the report by Miti.

Sovereignty – ISDS and regulation

Munir dismissed the claim that the TPP reduces state sovereignty. What is national sovereignty if not the right for the people and their elected public servants (the government) to determine our laws, policies and priorities.

The TPP was negotiated in secret. In principle bad laws that a government may pass can be amended or abolished, but we cannot change the TPP through the democratic process. Future governments cannot alter the TPP and withdrawing from it is not a straightforward matter. The TPP erodes our sovereignty both by requiring immediate changes to our laws and through the threat of costly lawsuits from multinational corporations.

The investor-state dispute settlement (ISDS) clause first featured in the 1959 Pakistan–Germany bilateral trade agreement. Deutsch Bank drafted this concept for investors concerned that de-colonisation would erode the lucrative profits they could make through colonialism. They called it an international Magna Carta for investors.

In a joint statement, a group of UN Human Rights experts said “experience demonstrates that the regulatory function of many States and their ability to legislate in the public interest have been put at risk” by free trade and investment agreements such as the TPP.

Much has been written about the growing and detrimental impact of ISDS. The system provides foreign investors – but not governments, unions, citizens or national business – with the opportunity to sue the government if they pass laws that may reduce their projected profits. The ISDS has been used by corporations to directly challenge laws passed by government to protect human rights and the environment.

Developed countries attempting to protect public interest have faced lawsuits, but it is developing countries that stand to lose most when hit by an ISDS case.

Corporations using ISDS come mostly from wealthy countries: 93% of the suits come from companies with annual profits of more than US$1bn. It is a system that channels wealth from the state to multinationals. There is no equivalent opportunity for states to sue corporations for their human rights, environmental or economic violations.

The TPP makes it virtually impossible for any future government to imagine a different, fairer economic system. Argentina, Bolivia, Venezuela, El Salvador, Ecuador stand as cautionary tales of what happens to governments who attempt to put public interest ahead of corporate interests. Together they represent the most common targets of ISDS suits.

El Salvador faces a US$300m case from a mining company because El Salvadorans won their battle to stop toxic gold mining operations. Bolivia paid out $31m after it cancelled a privatised water contract that resulted in dramatic increases in the cost of water.

Ecuador has been ordered to pay a massive $2.4bn to the mining company Occidental. This represents more than 6% of the small nation’s budget essential for health, education and public services. Argentina has faced 53 claims for $80bn dollars after it introduced regulations to address a financial crisis that was pushing many people into poverty.

The threat of ISDS has been enough to prevent states from passing laws in the public interest. The UN experts stated:

“We believe the problem has been aggravated by the “chilling effect” that intrusive ISDS awards have had, when States have been penalized for adopting regulations, for example to protect the environment, food security, access to generic and essential medicines, and reduction of smoking, as required under the WHO Framework Convention on Tobacco Control, or raising the minimum wage”.

One of the UN experts, on the promotion of a democratic and equitable international order, Alfred de Zayas, conducted a specific study of ISDS and its impact over the past 20 years and concluded that “bilateral international treaties and free trade agreements with investor-state-dispute-settlement have adversely impacted the international order and undermined fundamental principles of the UN, state sovereignty, democracy and the rule of law”.

Bankruptcy

The costs of ISDS are huge and awards against governments can reach the billions. When cases are decided on their merits (rather than jurisdictional matters), corporations win 60% of the time. But a further 26% of cases are settled and these often involve large payouts to corporations by governments worried that proceedings will cost them even more given the awards are not limited.

Our taxes are used to pay these amounts and used to pay the tens of millions it costs simply to defend a case. Australia spent a reported A$50m to defend their plain packaging laws against Philip Morris (and the case was won on jurisdictional grounds so would have taken more if it proceeded with a full case argued on merits). One group that the TPP is good for is corporate lawyers.

ISDS has now become a business with investment firms offering funds to corporations to sue governments for a share of the profit – it is a lucrative business.

Human rights

Perhaps the most audacious and misleading claim made by Munir Majid is that the TPP could improve human rights compliance.

To the contrary, the UN’s own human rights experts issued a collective statement warning that the TPP and other trade agreements “are likely to have a number of retrogressive effects on the protection and promotion of human rights, including by lowering the threshold of health protection, food safety, and labour standards, by catering to the business interests of pharmaceutical monopolies and extending intellectual property protection.”

One of the UN experts, whose mandate is to assess the human rights impact of the international order has said: “Far from contributing to human rights and development, ISDS has compromised the State’s regulatory functions and resulted in growing inequality among States and within them.”

Arbitrators for ISDS have dismissed claims that public interest and human rights should prevent countries from being sued. In one case, Argentina was sued by a water company for freezing the price of water during the economic crisis. The tribunal decided that the right to water existed but that human rights must be “counterbalanced” with the rights of investors.

And suits don’t just target public services. Egypt, for example, is being sued for increasing its minimum wage.

Munir Majid argues that the references to ILO standards in the TPP will improve labour rights in Malaysia. The US has incorporated references to labour rights and ILO conventions in every free trade agreement for the past 25 years. To date there have been no trade sanctions against any country as a result of a labour complaint.

The TPP doesn’t provide workers with the same dispute settlement benefits as multinational corporations. Complaints go to a committee, and experience shows adverse findings simply result in recommendations, most of which have already been provided by the ILO.

For the US is a party to a free trade agreement with Guatemala – recognised as the most deadly place for trade unionists in the world and a repeated violator of labour rights. The US’ own assessment reports noted that labour rights had declined in the country after the agreement was signed. Despite years of evidence and complaints, the US only filed a matter in late 2014 when opposition from unions to the TPP was mounting.

The human rights of trafficked people in Malaysia have already been traded to advance the deal. The fast-track authority President Obama gained from the Congress included a clause preventing the US from signing agreements with countries classed as tier 3 in the Trafficking in Persons report .

Malaysia is a tier 3 country, and last year mass graves of Rohingya and Bangladeshi migrants found in Malaysia revealed the deep horrors of trafficking in the country. Ironically. Malaysia was simply elevated to tier 2 without having to do anything for the rights of migrants.

In fact once again the United Nations independent expert Alfred de Zayas said:

“In the light of widespread abuse over the past decades, the Investor-State Dispute Settlement mechanism, which accompanies most free trade and investment agreements must be abolished as contra bonos mores, because it encroaches on the regulatory space of States and suffers from fundamental flaws including lack of independence, transparency, accountability and predictability.”

Economic

The World Bank has been a consistent advocate for ‘free trade’ and preferential trade agreements like the TPP, yet even they have found that the TPP would increase GDP by a negligible 0.8% per annum. Nobel prize winning economist Joseph Stiglitz, a former World Bank director, has called the TPP “the worst trade agreement in decades”.

Another Nobel prize winner, Paul Krugman, argues that the GDP increases will be less than 0.5% and do not offset the negative costs of the TPP. Krugman won his Nobel Prize for his work on the distributional economic effects of international trade.

Even if we accepted that a small increase in international trade will flow from the TPP, bringing down prices by replacing local products with cheaper imports, we have to ask who benefits from increased global financial flows?

The most recent figures from Credit Suisse and Oxfam show us that most economic growth results in a massive increase in the wealth of the obscenely rich. In the past five years the wealth of the richest 62 billionaires (who own more wealth than half the world’s population), grew by more than half a trillion dollars while the wealth of the bottom half dropped by 41%.

Most economic analysis suggests that the TPP won’t increase US GDP. But it will increase profits for multinationals. The TPP increases protections for patents and copyright. Krugman argues that these copyright protections promote monopolies.

Geopolitics

President Obama has not hidden the colonial ambitions behind the TPP and has argued that the real value of the TPP is the capacity to set the rules in Asia. “Simply put, America has to write the rules of the 21st century economy in a way that benefits American workers. If we don’t, countries like China will write those rules in a way that benefits their workers,” Obama told the US Congress when selling the package.

It is hard to see where the sovereignty and interests of the 11 other signatory countries fits in this equation.

How can an agreement written both by and for US multinational corporations be good for Malaysia? Surely, Malaysia, not the US, not China, not multinational corporations and billionaires, should be setting our own rules and determining our economic and social policies, development path and laws.

Economic sovereignty has served Malaysia well in the past. It is largely now recognised that Malaysia’s decision to reject the dictates of the International Monetary Fund (IMF) following the Asian Financial Crisis of 1997 proved beneficial for the country and saved it from the lengthy economic problems Thailand and Indonesia faced.

In the final analysis any attempt through trade and investment agreements to limit the ability of the Malaysian government to meet their human rights obligations, which include labour and economic rights, must be stopped.

Sevan Doraisamy is executive director of Suaram. He wrote this piece on behalf of the Bantah TPPA Coalition.

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