TTIP or Democracy?

Issue 290
May/June 2015
Becoming Barbarian

Ecologist

TTIP or Democracy?
by

issue cover 290

Cover: Arctic Moss (5,500 years old), Elephant Island, Antarctic by Rachel Sussman

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Photo © Bernhard Lang www.bernhardlang.de

Photo © Bernhard Lang www.bernhardlang.de

Michael Meacher on the dangers inherent in the proposed new EU–US trade agreement.

You would expect David Cameron, or perhaps Nigel Farage, to be up in arms about it: “Faceless EU bureaucrats threaten to impose laws without the consent of the British people.” But not a word. So why hasn’t the proposed Transatlantic Trade and Investment Partnership (TTIP) between the European Union and the United States aroused the bulldog spirit in defending British sovereignty?

The TTIP is being promoted as a huge economic stimulus for Europe in its current deflationary spiral, worth up to £100 billion in extra growth. It is presented as a free-trade agreement, yet the current level of tariffs on both sides of the Atlantic is so low – currently around 3% – because of common membership of the World Trade Organization that TTIP will have relatively little effect. However, the real aim is to strip away regulations that protect our democracy, our privacy, the environment and food safety, as well as our rights to public procurement, intellectual property and financial reform. Crucially TTIP opens up public services to private companies driven primarily by profit rather than people’s needs.

Negotiations between the EU and the US were formally launched at the G8 summit meeting of leading industrial nations at Lough Erne in Northern Ireland on 17 June 2013. On the EU side the lead in trade talks is taken by the Trade Commissioner, but he or she is required to adhere to the negotiating mandate approved by the EU Foreign Affairs Council three days earlier. Unsurprisingly, progress has been sticky, with the Financial Times reporting in December last year that those involved thought that at best (or at worst, depending what position you take) “a broad political agreement” might be reached by the end of 2015, with the details to be filled in later.

At the heart of the disputed areas is the unglamorously titled investor-state dispute settlement (ISDS). If you are worried about corporate power overriding democracy, this is the big one. It works like this: if, for example, a US multinational company profiting from the increasing privatisation of Britain’s National Health Service felt that its profits from this source had been diminished or ended by the actions of a future British government (for example by reversing privatisation or outsourcing), it could use TTIP to bring an arbitration case against the UK before a panel of three trade lawyers, one of whom would be chosen by the company, sitting in secret. If the company won – and in effect this would depend on the judgement of one person, the chair – the tribunal could award unlimited compensation, and there would be no right of appeal.

For those who might think this so preposterous as to be hardly credible, it is worth looking at the evidence of what has already happened. There are already many examples of companies using trade deals to take aggressive investor-protection cases against governments for policy changes that are against their commercial interests. The Spanish government has been hit with a raft of investor-protection cases attacking its changes to solar energy policy. The German government was sued by the Swedish company Vattenfall using investor protection to demand €3.7 billion in compensation for lost profits when the German government decided to phase out nuclear energy after the Fukushima nuclear disaster. And the Australian government was attacked by Philip Morris using a similar trade agreement to claim that its new laws on cigarette packaging were tantamount to expropriation.

For the United Kingdom the biggest risk is that TTIP will give Health Service private providers and their US investors new rights to sue the British government if it brings privatised services back into public hands. Wall Street financiers like BlackRock and Invesco and big US health corporations like UnitedHealth and HCA are already heavily invested in our NHS, thanks to the Conservative–Liberal Democrat coalition’s Health and Social Care Act of 2012. Around £5.8 billion of NHS work is currently being advertised to the private sector, a 14% increase on last year. There is every reason to fear that such companies would take an investor-protection case in the UK if a future British government reversed the current NHS privatisation spree. TTIP would allow them to win cases at tribunal that they wouldn’t even bother to pursue in national courts, where they would have to contend with a whole body of national law, impartial judges, appeals and other normal legal procedures. Lord Howe, the Conservative minister responsible for quality at the UK Department of Health, has even gone so far as to justify it as an opportunity for UK pharmaceutical companies – the very same who are already being accused of ripping off the National Health Service.

But it isn’t only the NHS and other public services that are seen as being threatened. Genetically modified crops are currently strictly regulated in the European Union, and other EU directives prohibit the import and sale of meat treated with certain growth hormones, and chicken washed with chlorine, all of which the US has disputed at the World Trade Organization. It is also claimed that TTIP could water down regulations on pesticides by shifting away from the precautionary approach used in the EU to the more ambivalent risk-assessment approach. Another contested area is government procurement markets. A third issue is that TTIP might lead to the reactivation through the back door of the Anti-Counterfeiting Trade Agreement (ACTA), which was strongly rejected by the European Parliament in 2012 on the grounds that it would lead to censorship and loss of privacy online.

So why is the European Union even considering the incorporation of the ISDS mechanism into the TTIP when it has such adverse and unpopular consequences? Why have offshore arbitration at all? It isn’t even necessary. The EU’s chief negotiator, Ignacio Garcia Bercero, has stated: “Member states are already required to respect applicable domestic and EU law regarding for example the conditions for early termination of contracts.” The answer is that ISDS is intended to protect investors operating in disreputable regions of the world. In November 2013 the then British Cabinet minister Ken Clarke pronounced that investor protection “is designed to support businesses investing in countries where the rule of law is unpredictable, to say the least”. That hardly applies to the European Union! The ISDS seems less aimed at protecting businesses against failed states than at protecting them against democracy.

If proof were needed, look at what has happened in Canada. It was sued by the Ethyl Corporation for banning the chemical MMT, produced by Ethyl, which Canada and the US consider to be a dangerous toxin. Canada was forced to pay huge compensation and reversed its ban. Nor is this a one-off example. Eli Lilly filed a case against Canada over a court decision invalidating two drugs. In other parts of the world the ISDS has been used by mining companies to sue governments trying to keep them out of sensitive areas, by banks trying to resist financial regulation, and by Big Oil to override measures to control oil spills. According to the Organisation for Economic Co-operation and Development, 57 ISDS cases were filed against governments in 2013, almost half of them in developed economies.

How did we ever get into this position? From the outset this euphemistically called EU–US partnership has been driven by corporate powers and their energetic lobby groups who boast that they are able to “co-write” it. This is supported by the disclosure that the EU Commission has had just 8 meetings on this issue with civil society groups, compared with 119 with corporations and their lobbyists – which have taken place behind closed doors and have not been revealed online.

But don’t all these downsides need to be weighed against the big benefits to growth and jobs? It’s worth looking at precedents here. Former US president Bill Clinton promised 20 years ago that the North America Free Trade Agreement would create 200,000 jobs for the US; instead it reduced employment by 680,000. It was meant to stabilise the US trade balance; actually it led to sizeable trade deficits. Other trade deals have brought unpleasant surprises. President Obama promised that the US–Korea Free Trade Agreement in 2012 would increase exports by US$10bn; they immediately fell by US$3.5bn. He said it would produce 70,000 extra jobs; in the event 40,000 were lost. The bilateral trade deficit didn’t improve; it worsened by 50%. Why should the promises being made this time round be any more reliable?

None of this, however, means that TTIP is a done deal. The first question is whether this is a ‘mixed competence’ agreement, meaning that it contains elements that fall outside EU competence and therefore has to be ratified both by the EU (the Council) and by each of the 28 member states according to its constitutional tradition. It appears that the EU Commission takes the view that TTIP is indeed a mixed competence agreement. In that case, the TTIP as a treaty requiring national ratification would be presented to the British Parliament as a Command Paper. Approval of the treaty would be undertaken through secondary legislation. A draft Order in Council would be laid before Parliament and approval sought by both the Commons and the Lords under the affirmative procedure. However, critically, Parliament cannot amend the detail of the treaty itself in any way. Under international treaty law individual governments and parliaments cannot amend draft treaty texts during their ratification procedure – that is confined to the negotiation process.

This means that any one of the 28 EU member states could veto TTIP. In the case of the UK, Parliament could stop ratification either by voting against any legislation needed to authorise its ratification or by voting against ratification in a debate on the treaty when it is published during the required 21-day period and continuing to do so if and when the treaty is debated thereafter. This will be a critical decision later this year under a new government, but that decision will be heavily influenced by the strength of the social and political movement built up across the country. Are we ready?

Michael Meacher was first elected as Labour MP for Oldham West in 1970. He was Environment Minister from 1997 to 2003.

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