Take Courage – Remember the MAI?
“Please Mr Gould, what can we do to stop it?” was a question prompted by my article in the Herald a couple of weeks ago about the risks posed to our democracy by the Trans Pacific Partnership.
My first reaction was to reply “I wish I knew!” The government’s readiness to ignore public opinion if it runs counter to the interests of big business, and – as in the case of the deal over pokies with Sky City – to prevent any future government from reviewing such arrangements does not, after all, inspire much confidence that public opposition to a carte blanche for overseas corporations will have any effect.
But I have had second and better thoughts – and those who have followed these issues over a couple of decades or more might understand why. We have, after all, been here before – and on that earlier occasion, governments and big business backed down in the face of public concern.
We should not forget that the TPP is just the latest of the persistent attempts by global corporations (most often American) to establish a regime that allows them to pursue their own interests in any given country, irrespective of the wishes of the citizens of that country and of the policies of their elected governments.
The saga begins with the power conferred on international corporates, as the global economy began to develop, to threaten national governments that, if they didn’t do what they were told, they would lose valuable investment to more compliant regimes. The subsidies demanded from our government by Warner Brothers are just one recent minor example.
But that was not enough for global investors. They feared that once an investment was made, and the country concerned realised what a bad deal had been done, a future government of that country might try to reassert domestic law to ensure that national interests were properly protected.
So they demanded as the price of investment in individual countries a series of Bilateral Investment Treaties whose effect was to limit the ability of both governments and courts in the host country to restrict the freedom of overseas investors to do what they liked.
But even this did not go far enough. Global corporates persuaded the OECD that these bilateral treaties should be brought together in a wide-ranging international treaty which would rationalise and make uniform all such provisions and would establish the primacy of global corporate interests over national democracy right across the globe.
Negotiations for this Multilateral Agreement on Investment (MAI) began within the OECD in 1995. At first sight, there was a cautious welcome for the idea; national governments saw the opportunity to restrain the freedom enjoyed by international investors to ride roughshod over local democratic interests.
As the negotiations proceeded, however, it became increasingly clear that the proposed treaty was really a charter for global investors – a charter that would ensure that their operations could never be challenged either by elected governments or properly constituted national courts.
It was proposed, for example, to establish a compliance regime under which “liberalisation” would always move forward, with no power to wind it back — the so-called “ratchet” effect. This would be enforced by so-called “rollback” and “standstill” provisions, requiring nations to eliminate regulations that were contrary to MAI provisions — either immediately or over a period — and to refrain from passing any such laws in the future.
Compensation would have to be paid for any national rules that caused loss of profit to investors. Disputes arising under the agreement would be settled in a specially constituted tribunal instead of by the national courts of the host state. The intention was that neither governments nor affected communities could challenge the behaviour of investors, who accepted no binding obligations on themselves.
There was little public awareness of these details of these provisions until – crucially – a draft of the agreement was leaked in March 1997. The leaked material prompted a wave of criticism. Opposition to the MAI began to mount – first in the US and then increasingly among other OECD countries. Such was the backlash that first France and then other countries successively withdrew from the negotiations. On 3 December 1998, the OECD announced that “negotiations on the MAI are no longer taking place.”
Does this brief account of the central features of the MAI sound familiar? Of course it does. Not deterred by the failure of their project in 1998, global corporates have now returned to make another attempt. The MAI provisions that were – as soon as they were exposed to “sunlight” – rightly condemned and finally rejected are now central elements of a TPP being peddled as an innocent “free trade” arrangement but being negotiated in secret.
The signs are growing that, like the MAI before it, the TPP is in trouble; as more information is leaked and becomes available, the chances of a secret deal being agreed over the heads of voters are falling fast. Concern is mounting in participant countries, including the US. Even our own government might be forced to think again once we are no longer kept in the dark and realise what is at stake. We still have the chance to make our voices heard.
Bryan Gould
29 November 2013
This article was published in the NZ Herald on 6 December.
“Free Trade” for Big Corporations, Not For Us
The leaked document from the negotiations over the Trans Pacific Partnership, reported in the Herald last week, shows that the fears expressed in many quarters as to the outcome of those negotiations are more than justified.
We are constantly assured that the great advantages of extending free trade, particularly with the Americans, will more than offset any minor changes we might have to make as the price of such an agreement. The record of the negotiations shows, however, that – exactly as was to be expected – the Americans see the supposed advantages of free trade entirely in terms of advancing the interests of major American corporations.
The inevitable result? Since cooperative arrangements for handling both exports and imports are regarded by “free trade” zealots as an infringement of the “free” market, what is peddled as a simple free trade deal could require major concessions in the way we organise our exports – through Fonterra or Zespri – and in the freedom we have to negotiate, by using our collective purchasing power through agencies like Pharmac, the best possible prices for imports like pharmaceuticals.
The leaked document, focusing as it does on intellectual property issues like patents and copyright, pays little attention, however, to one of the main threats from the TPPA – the requirement that overseas corporations should be able to sue a future New Zealand government in a specially constituted tribunal if their trading opportunities were to be reduced by future legislation.
Foreign businesses would, as a consequence, have much greater legal rights than any New Zealand enterprise would enjoy, and those legal rights could not be altered, even by a future government elected with a mandate to do so.
These fears are in no sense fanciful. Other countries which have agreed to such obligations in the past are now regretting having done so. South Africa, for example, which accepted such arrangements in trade deals with the Americans in earlier years is now insisting that the deal should be re-negotiated in the light of their damaging experience of what they mean in practice.
Ecuador and Venezuela have already refused to extend trade agreements with the US containing such provisions and India has rejected an investment agreement with the US only if the dispute-resolution mechanism is changed.
Countries like these understand that granting permanent rights of this kind to American corporations would mean, for example, giving up the ability to protect the environment from the activities of mining and petroleum companies, or (as the Australian government has discovered) being sued as a result of trying to restrain tobacco companies from selling a product that is known to cause death and disease.
Our government would have to accept many other restrictions, as the Argentine government discovered when it imposed a freeze on energy and water prices, in an attempt to help hard-pressed consumers, and had to pay over a billion dollars in compensation to international utility companies.
Even the judges who sit on these specially constituted tribunals are amazed at the power they exercise; as one has commented, these provisions mean that “three private individuals are entrusted with the power to review, without any restriction or appeal procedure, all actions of the government, all decisions of the courts, and all laws and regulations emanating from parliament.”
Concerns like these have now extended to Europe and to the UK in particular. The Americans are negotiating a Transatlantic Trade and Investment Partnership with European countries which will contain the same investor-state dispute settlement provisions as are intended for the TPPA. It seems likely that those countries will provide stiffer resistance to these provisions than our own government will offer in the TPPA negotiations.
What justifies such pessimism about our government, you may ask? The first warning sign is that the negotiations are being conducted in secret and that, by the time the deal is done and announced, it will be too late. The government’s willingness to defy public opinion over asset sales is convincing evidence of the scant regard it pays to what our citizens want when it is a question of pleasing business interests.
Even more worryingly, the government has demonstrated in the deal it has made with Sky City over an Auckland convention centre that it suffers no twinge of conscience over signing up to a legally binding arrangement that is intended to prevent future governments from altering the deal. The granting of the licence for an increased number of pokies is meant to run for 35 years, whatever a new government – or the voters – might think.
The risk is clear – the TPPA, while presented as a free-trade arrangement, is really a very different beast. Free trade, in principle, is undoubtedly to be welcomed, but in the normal sense is meant to remove restrictions in order to benefit the consumer and ordinary citizen through lower prices and increased opportunities.
The TPPA is intended to do the reverse – to ensure that the dominant market positions of powerful overseas corporations are immune from challenge, so that prices stay high and the interests of the ordinary citizen, and the principles of democracy, are sidelined. You have been warned!
Bryan Gould
14 November 2013
This article was published in the NZ Herald on 21 November.
Can We Trust John Key to Fight Our Corner?
Ask yourself a simple question. If John Key had come to power before our non-nuclear policy had been decided, would he have initiated it on his own account? Or would keeping in with the Americans have been his first priority?
The question is worth asking because New Zealand Prime Ministers are constantly faced with striking the right balance between protecting our own interests on the one hand and pleasing powerful external forces on the other.
The answer to the question is surely obvious. The Key government has shown itself repeatedly to be keen to meet the demands – whether commercial or political – of outside interests. Whether it be reducing the rights of New Zealand workers at the behest of Warner Bros – described by the New York Times as John Key being “bent to the will” of the film studios – or denying the right to protest on the occasion of a visit from the Chinese Vice-President, or following the US lead in abandoning the Kyoto Protocol, we can have little confidence that our government will stand up for us when they come under pressure.
The issue arises again in the context of the negotiations over the Trans Pacific Partnership. Once again, we need to know whether we can rely on our government to resist the pressure to sell us short.
Typically enough, the attempt is being made to define the debate about the TPPA in the black and white terms of being either for or against free trade. If only it were that simple. Most people, me included, would see – all other things being equal – considerable advantages in an extension of free trade. But we might also observe that many countries – especially smaller and weaker ones – have prudently avoided opening up their economies to powerful competitors until they are confident they can handle the challenge.
It is sensible to ask, therefore, whether we are strong enough to face direct competition in our own backyard from the world’s most powerful economies; and, if there is doubt about that, should we not realise that what is presented as a free trade agreement might really just be a recipe for absorption into those selfsame economies?
The TPPA also raises a number of specific issues. It is agreed by experts in international trade law – even by those who are in favour of the TPPA – that New Zealand will need to pay particular attention to at least three of those issues which, unless satisfactorily resolved, could adversely affect our interests.
First, the powerful US pharmaceutical industry has attacked Pharmac – the state agency for drug purchase that has saved us billions of dollars – as a barrier to the kind of profits they want to see. The danger here is that, even if Pharmac is not targeted for actual abolition, its powers may be scaled down to make it less effective. On the same principle, other public and cooperative mechanisms, such as Fonterra and Zespri, could be challenged as unacceptable to the concept of “free”trade. And, ironically, the kind of tax sweetener we provided to Warner Bros could also be struck down as a distortion of trade.
Second, it is recognised that attempts to restrain the buying up of our assets by foreign interests would be opposed as contrary to the “free trade” encapsulated in a TPPA. Nor would discriminating in favour of local New Zealand suppliers in preference to overseas companies be tolerated. When it comes under pressure on this issue, our government will be reduced to asking for special exemptions – something sure to be strenuously resisted by the Americans and others.
A third area which warrants concern is the “investor protection” provision – typically found in this kind of “free trade” agreement – that allows overseas corporations to sue our government in special tribunals, even though they are not parties to the TPPA and even though a later government might have been elected to put in place a totally different policy on a given issue. Again, the unduly optimistic language in the face of this threat is that of the need for “mitigation”.
The Herald’s advice – that we need not worry about these issues because we could always break the treaty if it turned out badly – is not guidance that should be offered to or accepted by a responsible government.
No one disputes that the Americans will push these issues hard and will expect to win. Whether we can defend our interests will depend entirely on how strongly our government fights our corner, and whether it is prepared to say no.
Hence the question with which I started. Do you have confidence that John Key will stand up to the pressure? I fear that the best we can hope for is a fudged outcome that will in reality be a capitulation on each of these issues. Our confidence cannot be helped by the fact that the negotiations are being conducted in secret and that, by the time we know the outcomes, it will be a done deal that cannot be changed.
And all of this gambled on the hope that the powerful US dairy industry will welcome the tariff-free entry of our dairy products into the US!
Bryan Gould
9 December 2012