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Issue #1696      August 5, 2015

Corporate dictatorship

Oppose the TPP trade deal

After five years of secret talks the “final” Trans-Pacific Partnership (TPP) ministers’ meeting in Maui (Hawaii) from July 29 to August 1 failed to reach agreement. What was to have been the largest and for the people most dangerous trade and investment agreement so far, lies languishing on the table. The collapse of what proved to be very heated negotiations buys the movement time to defeat this recipe for a corporate state.

Workers need to oppose the job-cutting TPP. (Photo: Linda Knowles)

Thanks to WikiLeaks, some of the TPP’s contents and dangers it poses have been made public, but much of the document still remains shrouded in secrecy.

If finalised, the TPP would have a far more serious impact on Australia than any of the recent free trade agreements (FTAs) that Australia signed with China, Japan and South Korea. It is as much a political instrument as an economic one, serving the interests of US corporations and US strategic interests.

As Obama stated, “The United States – and not countries like China – is the one writing this century’s rules for the world’s economy.”

He made it clear that he would not sign any agreement that did not put America first. (Whitehouse email 18-02-2015) “That’s why my Administration is currently negotiating the Trans-Pacific Partnership – so we can benefit from trade that is not just free, but also fair (sic).”

The Age columnist Kenneth Davidson summed up the real aims: “The Abbott government is reluctant to challenge even the most odious provisions of the agreement, which pretends to be a regional trade pact involving the US and 11 other countries. It is in fact a push for US regional dominance with particular relevance to its rivalry with China.” (29-06-2015)

The 12 Pacific Rim negotiating parties are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, the United States and Vietnam. China and Russia are not included.

Together these countries’ economies encompass 40 percent of global GDP and one-third of world trade.

Media reports indicate sticking points include patent protection of a new generation of biotech medicines (biologics) and export rules for dairy, sugar and car components.

Australia’s Trade Minister Andrew Robb who took part in the ministerial meeting last week, tries to sell the TPP as just another trade agreement, promising huge benefits to the economy and higher living standards:

“The TPP will help drive increased trade and investment; help secure the ongoing competitiveness of Australian businesses and make a significant contribution to supporting economic growth, job creation and higher living standards for Australians,” Robb claimed.

Similar promises were made about the US FTA with Australia in 2005. The outcome was another story.

“Not only did the US FTA siphon money from Australian taxpayers and patients to American pharmaceutical companies, it might have destroyed about $53 billion more trade than it created.” (John Garnaut, The Age, “TPP could change the story of a rising China and declining America,” 01-08-2015)

Opposition to TPP

The underlying reason for the failure to reach agreement is the strong opposition to the proposed treaty in a number of countries, including in Canada, the USA and Japan. In Australia opposition is mounting as more people are becoming aware of the TPP.

Deep divisions are developing within government ranks as National Party members fear losing their seats if the government fails to gain open markets for sugar, dairy and cotton. Japan, the US and Canada have been holding out over their highly protected agricultural products.


The “most odious” provisions, to use Davidson’s term, are those that override Australia’s sovereignty and the democratic rights of Australians.

The most important of these is the Investor-State Dispute Settlement (ISDS) mechanism.

Under ISDS provisions a government of one country can be sued by a corporation based in any of the other 11 countries for lost profits or future loss in profits arising out of measures the government takes.

For example, these might be:

  • closure of coal fired or nuclear energy plants
  • putting a price on carbon
  • revocation of licences and permits (eg fracking, construction)
  • regulation of energy tariffs
  • land zoning decisions
  • invalidation of patents.

For instance, if the government brings in legislation to shut coal power stations or puts a price on carbon. Any foreign-based corporation could then sue the government for future loss in profits.

If the government withdraws a mining licence or bans fracking, likewise it could be sued.

The cases are heard by private, international tribunals that are not courts and are not required to act like courts. They take years to be heard and can cost millions of dollars even if the government wins. Fear of being sued by powerful transnational corporations could act as a powerful deterrent to action to protect the environment.

But it is not just environmental measures that are at stake. Corporations could sue governments over actions to protect health and safety; changes to food labelling; bans on toxic substances; more stringent regulations governing construction; childcare; education; and anything else that might have a detrimental effect on profit-gouging by corporations based in any of the other 11 countries.

ISDS actions on the rise

Robb fobs off the ISDS mechanism, as though it won’t be used against Australia, but notes that Australian corporations could use it against other countries. But such clauses in other agreements are being used.

The United Nations Conference on Trade and Development (UNCTAD) review of ISDS developments (May 2015) notes that in 2014 claimants initiated 42 known treaty-based ISDS cases. The total number of known cases is now 608.

Forty percent of new cases were against governments of developed countries (the historical average was 28 percent). ( The principal targets were Argentina and Venezuela. Thirty-five of the 42 new cases were from corporations based in developed countries.

Australia sued

On October 5, 2012, the High Court delivered a judgement in which it rejected challenges to the validity of the Tobacco Plain Packaging Act 2011. The tobacco industry did not give up.

Philip Morris Asia Ltd, which is based in Hong Kong, acquired a 100 percent shareholding in Philip Morris Australia. This tactic enabled Philip Morris Australia to be transformed into a foreign investor based in Hong Kong.

Using ISDS provisions in a 1993 bilateral investment treaty between Australia and Hon Kong, the tobacco company is now attempting to override the decision of the Australian High Court to gain compensation for millions of dollars of potentially lost profits. This is the first ISDS action to be brought against Australia.

Justice Brian French, Chief Justice of the High Court, warned: “There are therefore two issues of general significance illuminated by this particular case – the use of ISDS to challenge legislative and administrative acts by governments and its use to call into question the decisions of national courts.” (“Investor-State Dispute Settlement – A Cut Above the Courts?”, Darwin, Supreme and Federal Courts Judges’ Conference, July 9, 2014.)

Above the law

“The possible inclusion of an ISDS provision in the TPP has become an issue of intense debate with some critics seeing it as a Trojan horse for the enhancement of the power of international corporations at the expense of national sovereignty and interests,” Justice French said.

He said that it has not been unusual for investors to claim that decisions of courts in a country where they have invested constitute a breach of a provision of the investment treaty. “They have general implications for national sovereignty, democratic governance and the rule of law within domestic legal system.”

Justice French points to a number of problems with the private tribunals that hear the cases:

  • a relatively small pool of arbitrators – arbitrators appointed to ISDS arbitrations are said to be mostly male (95%) and from Europe and North America
  • role-swapping by arbitrators who appear from time to time as counsel in ISDS cases
  • the high cost and potentially high awards
  • a growing phenomenon of third party funding of claims by banks, hedge funds and insurance companies in exchange for a share of the proceeds ranging from 20% to 50%
  • absence of effective review or appeal processes
  • inconsistency in decisions on similar provisions.

Capital flows

It is important that any government has the power to address destabilising flows of capital, heavy speculation, global financial shocks and be able to respond to attacks on their currency, redirect speculation to productive investment and so on.

The introduction of such measures would not be possible under the TPP. In addition, Australia would be required to permit the free flow of capital investments from the other countries. Only certain key sensitive areas such as defence would be excepted. This includes purchase of Australian dollars, government bonds and other forms of capital.

Blocking the flight of capital would be prohibited, an important measure for propping up banks and the economy in times of economic crisis.

Under the ISDS provisions, banks and insurance companies from the other 11 countries could sue the government where the introduction of financial regulation, financial transaction taxes and other measures allegedly hurt their profits.

Competition & public sector

The Competition Chapter places tight restrictions on governments in how they use and finance state-owned enterprises. They must operate on a purely commercial model. This means, for example, in the provision of services, the interests of the recipients cannot be put first, if at all. Profits come first.

State-owned enterprises cannot receive government support if it adversely affects the interests of a corporation from one of the other member countries. For example, the ABC and SBS receive government funding. It would appear that any other broadcaster based in one of the 11 other TPP countries would be entitled to similar treatment.

The effect would be to speed up the process of the privatisation of the ABC, SBS plus the CSIRO and Australia Post.


The price of a number of medications is kept relatively low in Australia because of the PBS (Pharmaceutical Benefits Scheme) and its ability to bulk bill and government subsidies. The use of generic alternatives, which kick in when patents expire also plays a big role.

The TPP contains measures for extending the life of patents and allowing companies to secure patents for “diagnostic, therapeutic, and surgical methods for the treatment of humans or animals.” This is nothing short of criminal. It would deny people access to diagnostic tests and life-saving surgery and other medical treatment. If a new use is found for a medication, then its patent could be extended.

If agreement is eventually reached on the TPP, it will be presented to Parliament as a package that cannot be amended. All that the elected Parliament has the power to do is block legislation that is required to bring Australian law into line with its provisions. Some of these, such as PBS listings do not require legislation.

There is a certain irony that the TPP is stalled over trade in goods which is not really what it was meant to be about.

“… above all it was about injecting balance into Barack Obama’s ‘rebalancing’ to Asia, so the US President could reassure partners and allies that he had an economic and diplotatic agenda to match his military one,” John Garnaut said.

“If we don’t write the rules, China will write the rules out in that region,” Obama said in an interview with The Wall Street Journal. “We will be shut out.” (Interview with Jerry Seib, 27-04-2015)

That statement goes to the heart of the aims of the TPP, to shut out China and ensure US economic domination of the region. That is why the Abbott government is prepared to sell out the Australian people, Australian industry and the Australian economy – all to serve the US’s global hegemony and shut China out.

The government should withdraw now and if it does not then at least release the text so that the public can express their views on all of its contents.

See Say NO to TPP for draft letter to send to Trade Minister Andrew Robb, Prime Minister Tony Abbott, your local MP and Independent Senators.

Next article – Editorial – Abbott’s open door to racists

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