Congress Finally Releases Fast Track Trade Bill, And It's A Mess

from the why-do-republicans-want-to-do-this? dept

For the past few months there have been rumors every few weeks that Congress was finally going to push out a "fast track" or "trade promotion authority" bill. As we've explained, these bills are Congress giving up their Constitutional right to regulate international trade, and handing the power over the USTR, a part of the executive branch. While some supporters of this argue that it actually gives Congress more power, by laying out the conditions of a trade deal it will approve, that's ridiculous. That might be true if fast track authority were granted prior to a deal being done, but with the TPP and TTIP pretty far along, it's clearly not true. Either way, despite massive opposition from the President's own party, an agreement has been reached between Senator Hatch and Senator Wyden and a trade promotion bill has been released.

Back in February, we presented a simple litmus test concerning whether or not any such effort would actually be reasonable on intellectual property issues: would the text of the bill concerning intellectual property be any different than the last fast track authority bill from 2002 (or an attempt to update it in 2014). Both of those bills had nearly verbatim text. And... as we feared, so does this new bill. Given just how much the internet has changed since 2002, it is simply inconceivable to suggest that the same intellectual property rules that made sense then would continue to make sense now. In other words, despite the involvement of Senator Wyden, it appears that little has been done here to make it clear to the USTR that bad IP rules in the TPP or TTIP agreement are unacceptable. That's a disappointment. Here are the key provisions on intellectual property. Note that they are basically all about enforcement (i.e., protectionism) rather than the free flow of information (which is what you'd expect a trade deal to be about).

providing strong protection for new and emerging technologies and new methods of transmitting and distributing products embodying intellectual property, including in a manner that facilitates legitimate digital trade;

preventing or eliminating discrimination with respect to matters affecting the availability, acquisition, scope, maintenance, use, and enforcement of intellectual property rights;

ensuring that standards of protection and enforcement keep pace with technological developments, and in particular ensuring that rightholders have the legal and technological means to control the use of their works through the Internet and other global communication media, and to prevent the unauthorized use of their works;

providing strong enforcement of intellectual property rights, including through accessible, expeditious, and effective civil, administrative, and criminal enforcement mechanisms; and

preventing or eliminating government involvement in the violation of intellectual property rights, including cyber theft and piracy;

These are basically word for word the same from 2002. In other words, despite over a decade of seeing how the USTR has used trade deals to browbeat other countries into bad intellectual property laws, this new trade promotion authority is saying "go ahead and continue doing just that, no matter what harm it may do to the internet and all of the economic growth it creates."

Unlike some who are totally against any trade deals, I believe there are ways in which increasing actual free trade can be helpful. I had held out hope that the new trade promotion agreement would be more reasonable than what we'd seen in the past. But just looking at the intellectual property section alone, and the fact that it has remained unchanged since the 2002 version -- despite over a decade of seeing how bad IP policy can hurt internet innovation and economic growth -- suggests that this TPA agreement continues the mistakes of the past, rather than fixes them. That's unfortunate.

And so, now comes a very, very weird fight in Congress. With nearly all Democrats opposed to this bill even including the surprise change in position by Senator Chuck Schumer, we'll have a situation where Congressional Republicans try and convince their colleagues to give President Obama more power, by removing the Constitutional authority from Congress, while Congressional Democrats push back against giving their own President that power. It's a really weird fight in oh so many ways.

Filed Under: chuck schumer, fast track, fast track authority, intellectual property, orrin hatch, ron wyden, tafta, trade, trade agreements, trade promotion, trade promotion authority, ttip, ttp, ustr

EU Politicians Say: Don't Undermine Data Protection Rules With TAFTA/TTIP -- And Stop The Mass Surveillance

from the you-have-been-warned dept

The mosaic of interlocking political, economic and civil society groups at multiple levels -- local, national, regional and continental -- makes decision-making within the European Union extremely complex. That means the European Parliament's decision whether or not to ratify TAFTA/TTIP at the end of the negotiations is subject to a vast array of contrasting forces and opinions, which can lead to the outcome of that final vote shifting dramatically in a very short space of time, as the ACTA saga demonstrated so clearly.

The European Parliament's committees play a key role in determining policy, and one of the most important -- for civil liberties -- has just formally adopted an "opinion" on TAFTA/TTIP that will feed into the final position of European politicians. It re-iterates many of the points the committee made last year, and places great emphasis on protecting the personal data of Europeans:

The European Commission should incorporate in the Transatlantic Trade and Investment Partnership (TTIP), as a key priority, an unambiguous horizontal self-standing provision that "fully exempts the existing and future EU legal framework on the protection of personal data from the agreement", says the Civil Liberties Committee in its TTIP opinion adopted on Tuesday.

That "horizontal provision" basically means across the entire agreement, and not just in certain chapters. To achieve that, the Civil Liberties MEPs call on the Commission:

to incorporate, as a key priority, "a comprehensive and unambiguous horizontal self-standing provision based on Article XIV of the GATS [general exceptions] that fully exempts the existing and future EU legal framework on the protection of personal data from the agreement, without any condition that it must be consistent with other parts of the TTIP".

Article XIV of the General Agreement on Trade in Services (GATS) says:

Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail, or a disguised restriction on trade in services, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Member of measures:

...

(c) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement including those relating to:

...

(ii) the protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts;

The Committee points out that this threat to data protection is present not only in TTIP, but also in TISA, as Techdirt has discussed before:

Ongoing negotiations on international trade agreements, such as TTIP and the Trade in Services Agreement (TiSA), also touch upon international data flows, while excluding privacy and data protection entirely, which will be discussed in parallel track within the framework of the US-EU Safe Harbor and the data protection "umbrella agreement".

Safe Harbor, as we've noted, is major point of contention between the US and EU. Another, of course, is the mass surveillance revealed by Edward Snowden, and the Civil Liberties Committee is not shy about mentioning that, too:

The negotiators should keep in mind that that the consent of the European Parliament to the final TTIP agreement "could be endangered as long as the blanket mass surveillance activities are not completely abandoned and an adequate solution is found for the data privacy rights of EU citizens, including administrative and judicial redress", MEPs say

This is only one committee, albeit a key one. But at the very least it gives an indication of some of the serious issues that will be raised if and when it comes to a vote on ratifying TAFTA/TTIP -- and of the difficulty of gaining enough support among MEPs to do so.

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Filed Under: data protection, eu, europe, privacy, tafta, trade deals, ttip

European Commission Discovers The Hard Way That Corporate Sovereignty Provisions And EU Laws Are Incompatible

from the we-did-warn-you dept

The US government and European Commission insist that the inclusion of a corporate sovereignty chapter in the TAFTA/TTIP treaty will not in any way diminish the ability of nations to pass laws as they wish. A fascinating case involving an investment in Romania shows why that's just not true. It concerns a state aid scheme instituted by Romania to attract investments in the country, which offered tax breaks or refunds of customs duties on raw materials. The scheme was supposed to remain in place for 10 years. But as part of Romania's accession to the EU, it was required to cancel this scheme, which was regarded by the European Commission as providing unfair state aid. So, obediently, Romania abolished the scheme in 2005, some years earlier than it had promised.

That didn't go down too well with investors. Two of them were able to use the investor-state dispute settlement (ISDS) clauses of a bilateral treaty between Sweden and Romania to sue the latter. Here's what happened next, as described in the European Commission's press release:

An arbitral award of December 2013 found that by revoking an investment incentive scheme in 2005, four years prior to its scheduled expiry in 2009, Romania had infringed a bilateral investment treaty between Romania and Sweden. The arbitral tribunal ordered Romania to compensate the claimants, two investors with Swedish citizenship, for not having benefitted in full from the scheme.

Just part of the price of joining the European Union, you might think. But the European Commission is unhappy that compensation has been paid:

By paying the compensation awarded to the claimants, Romania actually grants them advantages equivalent to those provided for by the abolished aid scheme. The Commission has therefore concluded that this compensation amounts to incompatible state aid and has to be paid back by the beneficiaries.

That is, both the original state aid and the subsequent compensation for not providing that aid for the full term of the agreement are regarded as forbidden under EU law. So the European Commission is ordering Romania somehow to pull back from the Swedish investors the compensation awarded by the ISDS tribunal. Leaving aside the difficulty of doing so, even if Romania manages that, it will then be in breach of the corporate sovereignty tribunal ruling, which could leave it open to further legal action, and further awards against it. On the other hand, if it doesn't rescind the compensation, it will be fined by the European Commission.

This provides a perfect demonstration of how corporate sovereignty provisions in treaties take away the ability of national governments to act freely. Moreover, in this particular case, whatever Romania chooses to do, its people will suffer financially.

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Filed Under: corporate sovereignty, eu, eu commission, isds, romania, sweden, tafta, ttip

Unimpressed, UK's Parliamentary Committee For Business Calls For 'Evidence-Based Approach' To TAFTA/TTIP

from the making-astrology-look-respectable dept

Given the magnitude of the effect that TAFTA/TTIP could have on the economies and daily life of both the US and EU, it is surprising that there has not been more analysis of its likely impact. In particular, you would have thought that the governments who favor it would have made great efforts to deploy plenty of evidence supporting the agreement. Instead, the European Commission simply repeats the same set of figures from the 2013 analysis that it commissioned from the London-based CEPR group (pdf), while the US side seems to think even one study is one too many.

Analyses from the public's political representatives are also surprisingly thin on the ground. That makes a new report from one of the UK Parliament's specialist committees, which are made up of current MPs, particularly welcome. It comes from the Business, Innovation and Skills (BIS) Committee, so you might expect it to be really upbeat about the TTIP negotiations. Instead, it is pretty unimpressed by the debate so far:

The BIS Committee finds that while a lack of detail on negotiations makes it difficult to assess the benefits of TTIP, all involved in the debate -- campaigners, lobbyists, business groups, the UK Government and the European Commission -- must ensure they take an evidence-based approach when assessing TTIP’s potential.

The report focuses on two main areas: TTIP's economic benefits and the corporate sovereignty provisions, also known as investor-state dispute settlement (ISDS). As it notes, the main figures used time and again in support of the trade deal come from the European Commission's CEPR report. Leaving aside its many debatable assumptions, one key fact that has emerged is that the core prediction for the best-case scenario -- US and EU economies to grow by 0.4% and 0.5% respectively as a result of TTIP -- refers to cumulative growth by 2027, and therefore amounts to around 0.05% extra GDP per year, on average. Regarding this fact, the economist Dean Baker wrote: "As growth policy, this trade deal doesn't pass the laugh test." On this issue, the Committee commented:

When we challenged the [UK Trade] Minister on the accuracy of the estimated benefits of TTIP, he appeared to agree that they should not be taken as fact. In doing so he quoted JK Galbraith, who said that the only purpose of economic forecasts was to make astrology look respectable.

The Committee was equally unimpressed with the arguments in favor of including a corporate sovereignty chapter:

We have yet to be convinced of the need for ISDS provisions in TTIP. The UK Government and the EU must demonstrate that the advanced legal institutions of the EU and the US cannot protect foreign investors before any ISDS is considered in the TTIP.

Again, coming from a naturally pro-business Parliamentary Committee, that's a pretty damning comment. It shows just how much work the US and EU governments need to do in order to convince people -- even those favorably inclined to the idea -- that TAFTA/TTIP is worth bothering with at all.

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Filed Under: evidence-based approach, tafta, trade agreements, ttip, uk parliament

USTR Pushes Congress To Approve Trade Deals... But Threatens Reps With Criminal Prosecution If They Tell The Public What's In Them

from the transparency! dept

For years now, we've been trying to understand why the US Trade Rep (USTR) is so anti-transparency with its trade negotiations. It insists that everything it's negotiating be kept in near total secrecy until everything is settled, and the public can no longer give input to fix the problems in the agreement. It's a highly questionable stance. Whenever this criticism is put to the USTR directly, it responds by saying that it will listen to anyone who wants to come and talk to the USTR. But, as we've explained multiple times, "listening" is about information going into the USTR. "Transparency" is about information coming out of the USTR. They're not the same thing by any stretch of the imagination.

As the fight over new trade agreements gets louder and louder, a key stumbling block is having Congress approve so-called "fast track authority" or "Trade Promotion Authority," which basically means that Congress can't even jump in to try to fix the problems in whatever the USTR negotiates -- it can only give a straight "yes" or "no" vote on the entire package. For reasons that aren't entirely clear, Congressional Republicans are all for this, even though it means directly giving up Congress's Constitutional authority to a President that the Republicans appear to hate. Meanwhile, Democrats seem reasonably skeptical of these new trade deals.

So the White House and the USTR have been pushing a charm offensive on Congressional Democrats concerning these trade deals, but the charm offensive also comes with this rather startling statement: if you reveal what we're telling you, you may go to jail:

As the Obama administration gives House Democrats a hard sell on a major controversial trade pact this week, it will be doing so under severe conditions: Any member of Congress who shares information with the public from a Wednesday briefing could be prosecuted for a crime.

Yes, the USTR has declared that the briefing is entirely classified. Why? Mainly to keep the details secret from the American public. As Rep. Alan Grayson notes:

"It is part of a multi-year campaign of deception and destruction. Why do we classify information? It's to keep sensitive information out of the hands of foreign governments. In this case, foreign governments already have this information. They're the people the administration is negotiating with. The only purpose of classifying this information is to keep it from the American people."

The USTR's lame response to all of this is that any member of Congerss is allowed to come to its office and see the text of the negotiating documents. But that's misleading in the extreme. As we've discussed before, the USTR tells elected officials that they can't copy anything, take any notes, or even bring staff experts on trade agreements (or related issues)... even when those staffers have security clearance.

We pointed out this was a problem back in 2012 and it appears to be ongoing. The Huffington Post article above quotes Rep. Rosa DeLauro who appears to be having the same problem:

"Even now, when they are finally beginning to share details of the proposed deal with Members of Congress, they are denying us the ability to consult with our staff or discuss details of the agreement with experts. This flies in the face of how past negotiations have been conducted and does not help the Administration’s credibility. If the TPP would be as good for American jobs as they claim, there should be nothing to hide."

Rep. Lloyd Doggett also seems amazed that his staffers with security clearance are blocked from getting information about the TPP agreement:

"I tried to find out what level of classification applies," he said. "Can my top cleared staff read it? If he can hear about ISIS, is there something in here that prevents him from seeing these trade documents?"

It really does make you wonder, once again, just what is the USTR hiding here? There is simply no reason to keep these details secret -- except if you know that the American public won't approve of them.

Filed Under: classified, congress, fast track, secrecy, tafta, tpp, trade promotion authority, transparency, ttip, ustr

How Corporate Sovereignty In Trade Agreements Can Force National Laws To Be Changed

from the they-said-it-couldn't-be-done dept

As we noted recently, one of the most worrying aspects of corporate sovereignty chapters in trade agreements is the chilling effect that they can have on future legislation. That's something that the supporters of this investor-state dispute settlement (ISDS) mechanism never talk about. What they do say, though, is that corporate sovereignty cannot force governments to change existing laws. A recent defeat for Canada before an ISDS tribunal proves that's not the case:

An international trade tribunal has ordered Ottawa to pay ExxonMobil and another oil company $17.3 million, following a complaint that the companies were required to spend money in Newfoundland and Labrador on research and development.

The case was brought by ExxonMobil using the corporate sovereignty provisions in the North American Free Trade Agreement (NAFTA), and concerned another agreement, called the Atlantic Accord. As CBC News explains:

Under the terms of the Atlantic Accord, a federal-provincial agreement on oil development first negotiated in 1985, oil companies are required to support petroleum-focused research and development in Newfoundland and Labrador, as part of its local benefits package.

In other words, three decades ago, Canadian politicians had passed a research and development package, one of whose measures was designed to boost local employment -- exactly the kind of thing that voters want their politicians to do. But the ISDS tribunal ruled that under NAFTA, this was not permitted, and awarded substantial damages to ExxonMobil for being required to comply with the Atlantic Accord. But it gets worse:

Unless the governments of Canada and Newfoundland and Labrador agree to change the R&D legislation, Ottawa could be on the hook for continued damages. The federal government is responsible because NAFTA is an agreement between sovereign nations.

That is, the corporate sovereignty provisions in NAFTA are being used to force the Canadian government to change existing and long-standing legislation -- something that ISDS fans assure us never happens.

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Filed Under: corporate sovereignty, isds, laws, regulations, tafta, tpp, trade agreements, ttip

The White House Has Gone Full Doublespeak On Fast Track And The TPP

from the up-is-down,-black-is-white dept

Sen. Ron Wyden and Sen. Orrin Hatch are now in a stand-off over a bill that would put secretive trade deals like the Trans-Pacific Partnership (TPP) agreement on the Fast Track to passage through Congress. The White House meanwhile, has intensified their propaganda campaign, going so far as to mislead the public about how trade deals—like the TPP and its counterpart, the Transatlantic Trade and Investment Partnership (TTIP)—will effect the Internet and users' rights. They are creating videos, writing several blog posts, and then this week, even sent out a letter from an "online small business owner" to everyone on the White House's massive email list, to further misinform the public about Fast Track.

In a blog post published this week, the White House flat out uses doublespeak to tout the benefits of the TPP, even going so far as to claim that without these new trade agreements, "there would be no rules protecting American invention, artistic creativity, and research". That is pure bogus, much like the other lies the White House has been recently saying about its trade policies. Let's look at the four main myths they have been saying to sell lawmakers and the public on Fast Track for the TPP.

Myth #1: TPP Is Good for the Internet

First, there are the claims that this agreement will create "stronger protections of a free and open Internet". As we know from previous leaks of the TPP's Intellectual Property chapter, the complete opposite is true. Most of all, the TPP's ISP liability provisions could create greater incentives for Internet and content providers to block and filter content, or even monitor their users in the name of copyright enforcement. What they believe are efforts toward protecting the future of the Internet are provisions they're advocating for in this and other secret agreements on the "free flow of information". In short, these are policies aimed at subverting data localization laws.

Such an obligation could be a good or a bad thing, depending on what kind of impact it could have on national censorship, or consumer protections for personal data. It's a complicated issue without an easy solution—which is exactly why this should not be decided through secretive trade negotiations. These "free flow of information" rules have likely been lobbied for by major tech companies, which do not want laws to restrict them on how they deal with users' data. It is dishonest to say that what these tech companies can do with people's data is good for all users and the Internet at large.

Myth #2: Fast Track Would Strengthen Congressional Oversight

The second, oft-repeated claim is that Fast Track would strengthen congressional oversight—which is again not true. The U.S. Trade Representative has made this claim throughout the past couple months, including at a Senate Finance Committee hearing in January when he said:

TPA puts Congress in the driver’s seat to define our negotiating objectives and strengthens Congressional oversight by requiring consultations and transparency throughout the negotiating process.

Maybe we could believe this if the White House had fought for Fast Track before delegates began negotiating the TPP and TTIP. Maybe it could also have been true if that bill had ensured that Congress members had easy access to the text and kept a close leash on the White House throughout the process to ensure that the negotiating objectives they had outline were in fact being met in the deal. However, we know from the past several years of TPP negotiations, that Congress has largely been shut out of the process. Many members of Congress have spoken out about the White House's strict rules that have made it exceedingly difficult to influence or even see the terms of these trade deals.

The only way Fast Track could really put "Congress in the driver's seat" over trade policy would be if it fully addressed the lack of congressional oversight over the TPP and TTIP thus far. Lawmakers should be able to hold unlimited debate over the policies being proposed in these deals, and if it comes to it, to amend their provisions. It would be meaningless if the new Fast Track bill enabled more congressional oversight, but if it did not apply to agreements that are ongoing or almost completed.

Myth #3: Small Online Businesses Would Benefit from Fast Track

Then the third misleading claim is that Fast Track would help small businesses. Their repetition of this has become louder amid increasing public awareness that the TPP has primarily been driven by major corporations. What may be good for established multinational companies could also benefit certain small online businesses as well. The White House says that tariffs are hindering small online businesses from selling their products abroad, but research has shown that the kinds of traditional trade barriers, like tariffs, that past trade agreements were negotiated to address are already close to non-existent. Therefore it is unclear what other kind of benefits online businesses would see from the TPP.

Even if there were some benefits, there are many more ways that the TPP could harm small Internet-based companies. The TPP's copyright provisions could lead to policies where ISPs would be forced to implement costly systems to oversee all users' activities and process each takedown notice they receive. They could also discourage investment in new innovative start-ups, even those that plan to "play by the rules", due to the risk that companies would have to sink significant resources into legal defenses against copyright holders, or face heavy deterrent penalties for infringement established by the TPP.

Myth #4: TPP and Other Secret Trade Deals Are a National Security Issue

The last, and most confounding of the White House's assertions is that the TPP and TTIP are an "integral part" of the United States' national security strategy, because its "global strategic interests are intimately linked with [its] broader economic interests." As we have seen with the U.S. government's expansive surveillance regime, "national security" is often invoked for policies even if they directly undermine our civil liberties. It is hard to argue with the administration whether the TPP and TTIP are in fact in the United States' economic or strategic interests, since only they are allowed to see the entire contents of these agreements. Either way, it seems like a huge stretch to say that we can trust the White House and major corporate representatives to determine, in secret, what is in fact good digital policy for the country and the world. We may be hearing this line more and more in the coming weeks as the White House becomes more desperate to legitimize the need for Fast Track to pass the TPP and TTIP.

Conclusion

The fact that the White House has resorted to distorting the truth about its trade policies is enough to demonstrate how little the administration values honesty and transparency in policy making, and how much the public stands to lose from these agreements negotiated in secret. The more they try and espouse the potential gains from Fast Track—while the trade agreements this legislation would advance remain secret—the more reason we ought to be skeptical. If the TPP is so great and if Fast Track would in fact enable more democratic oversight, why are the contents of either of them still not public?

Reposted from the Electronic Frontier Foundation Deeplinks blog

Filed Under: administration, copyright, fast track, fast track authority, intellectual property, internet freedom, tafta, tpp, trade, trade promotion authority, ttip, ustr, white house

EU's Socialist Politicians Come Out Strongly Against Corporate Sovereignty -- To A Certain Extent...

from the definite-maybe dept

Techdirt has been writing about corporate sovereignty for nearly two years now. The public is beginning to wake up to the dangers it poses, which means that politicians, too, are suddenly discovering that they need to have an opinion on the subject. Over in the European Union, attention is focused on the S&D (Socialists and Democrats) Group in the European Parliament. Because of the way seats were won in the recent EU elections, it is the S&D group that will make or break TTIP/TAFTA; that makes its position on investor-state dispute settlement (ISDS) crucial. This week, the S&D Group published a position paper that gives some insight into its thinking on this issue (pdf). Here's the opening statement:

The S&D Group opposes the inclusion of ISDS in Trade Agreements in which other options to enforce investment protection are available, whether domestic or international. In agreements with countries that have fully functioning legal systems and in which no risks of political interference in the judiciary or denial of justice have been identified, ISDS is not necessary.

That seems clear enough: "opposes the inclusion," "ISDS is not necessary." But of course, statements from political groups are never that simple. Later on, the paper says:

The S&D Group has already on numerous occasions expressed its serious reservations concerning ISDS. In particular in the case of TTIP, we have made it clear that we do not see a need for its inclusion and have called for it to be excluded when negotiations for the investment chapter start.

Here, the S&D Group does not "see a need for its inclusion" of ISDS in TTIP, which is a rather weaker statement. The paper concludes:

We have an interest in a good TTIP that becomes a gold standard agreement. We do not want to see this opportunity jeopardized by the inclusion of provisions on ISDS which are not acceptable to the S&D Group, a majority in the European Parliament, and the general public.

Now, that could mean two different things. Either:

We do not want to see this opportunity jeopardized by the inclusion of provisions on ISDS, since these will be unacceptable.

Or:

We do not want to see this opportunity jeopardized by the inclusion of provisions on ISDS if they take a form that is unacceptable.

The first is a categorical rejection of corporate sovereignty in TTIP, the second is a rejection of certain kinds of ISDS, but not the idea itself. Clearly, then, the difference is significant: in the first case, S&D would vote against TAFTA/TTIP if it contains ISDS, while in the second, it might tolerate corporate sovereignty if certain conditions are met, and vote in favor of TTIP. That second position could well become that of the European Parliament itself. That's because the "draft report on Parliament's recommendations to the Commission on the negotiations for the Transatlantic Trade and Investment Partnership" (pdf), put together by the European Parliament's Committee on International Trade, includes the following paragraph on corporate sovereignty:

Given the EU's and the US developed legal systems, a state-to-state dispute settlement system and the use of national courts are the most appropriate tools to address investment disputes. Should ISDS provisions be included in the TTIP, it seems to be clear, that further reforms to the current model, are critical to avoid the problems that have arisen under the provisions in existing FTAs and BITs. Now that the results of the public consultation are available, a reflection processes is needed within and between the three European institutions on the needed reforms. Investors abroad have to be treated in a non-discriminatory fashion and should have a fair opportunity to seek and achieve redress of grievances. This can be attained in TTIP without the inclusion of ISDS provisions.

This notes that ISDS is not needed in TTIP, but does not go so far as to reject it outright, and even speaks of what needs to be done "should ISDS provisions be included."

Clearly, then, the politicians are hedging here. They have noted -- how could they not? -- the huge rejection of ISDS by the public in the consultation carried out last year, and the 1.5 million signatures on the European petition against TTIP. But they are obviously unwilling to reject ISDS outright, not least because some MEPs, notably those from the conservative parties in the European Parliament, are largely behind TTIP, and do not want it jeopardized because of a statement that any form of ISDS is unacceptable.

What this means in practice, as in the US, is that the politicians will continue to try to gauge the public mood as they re-calibrate their responses. The latest statement by the S&D Group is part of that complex dance: an important rejection of corporate sovereignty, but by no means a definitive one.

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Filed Under: corporate sovereignty, eu, isds, s&d, tafta, trade, ttip

Is America About To Experience The Billion-Dollar Pain Of Corporate Sovereignty First Hand?

from the not-your-parents'-ISDS dept

Readers of Techdirt have been hearing about corporate sovereignty -- the ability of foreign investors to sue governments directly in special courts over alleged losses, also known as Investor-State Dispute Settlement (ISDS) -- for a while now. For others who have yet to discover this particular feature of so-called trade agreements, Senator Elizabeth Warren has a good, approachable summary of the key issues in a Washington Post opinion piece. In fact, it was clearly so good that the White House Blog felt obliged to try to rebut its main arguments (there's also a great point-by-point response to that response by the Cato Institute's Simon Lester.). The White House Blogt post, written by Jeff Zients, Director of the National Economic Council, pretty much concedes that the criticisms of ISDS are valid, but would have us believe that everything has been fixed now:

ISDS has come under criticism because of some legitimate complaints about poorly written agreements. The U.S. shares some of those concerns, and agrees with the need for new, higher standards, stronger safeguards and better transparency provisions. Through TPP and other agreements, that is exactly what we are putting in place.

There are two massive problems with that assurance. First, the extreme secrecy of the TPP negotiations means that we have no idea just how strong those "safeguards" are. And secondly, in some sense it doesn't even matter: companies can use the mere threat of an ISDS action to cast a chill over future regulatory action. That's why the following comment is true but misses the point:

The reality is that ISDS does not and cannot require countries to change any law or regulation.

The ability to use ISDS to discourage governments from introducing inconvenient laws or regulations is no mere theoretical fear. As this important 2001 article in The Nation explains:

Carla Hills, the US Trade Representative who oversaw the NAFTA negotiations for Bush I and now heads her own trade-consulting firm, was among the very first to play this game of bump-and-run intimidation. Her corporate clients include big tobacco -- R.J. Reynolds and Philip Morris. Sixteen months after leaving office, Hills dispatched Julius Katz, her former chief deputy at USTR, to warn Ottawa to back off its proposed law to require plain packaging for cigarettes. If it didn't, Katz said, Canada would have to compensate his clients under NAFTA and the new legal doctrine he and Hills had helped create [ISDS]. "No US multinational tobacco manufacturer or its lobbyists are going to dictate health policy in this country," the Canadian health minister vowed. Canada backed off, nevertheless.

Nor was that an isolated incident:

A former government official in Ottawa told me: "I've seen the letters from the New York and DC law firms coming up to the Canadian government on virtually every new environmental regulation and proposition in the last five years. They involved dry-cleaning chemicals, pharmaceuticals, pesticides, patent law.Virtually all of the new initiatives were targeted and most of them never saw the light of day."

Zients goes on to say that corporate sovereignty chapters are needed because foreign courts can't be trusted to provide justice:

U.S. investors often face a heightened risk of bias or discrimination when abroad.

But Warren already answered that with several extremely powerful points:

Countries in the TPP are hardly emerging economies with weak legal systems. Australia and Japan have well-developed, well-respected legal systems, and multinational corporations navigate those systems every day, but ISDS would preempt their courts too. And to the extent there are countries that are riskier politically, market competition can solve the problem. Countries that respect property rights and the rule of law — such as the United States — should be more competitive, and if a company wants to invest in a country with a weak legal system, then it should buy political-risk insurance.

Zients also tries to argue that since the US hasn't suffered as a result of ISDS cases in the past, it'll be fine in the future:

There have only been 13 cases brought to judgment against the United States in the three decades since we’ve been party to these agreements. By contrast, during the same period of time in our domestic system, individual and companies have brought hundreds of thousands of challenges against Federal, state, and local governments in U.S. courts under U.S. law.

We have never lost an ISDS case because of the strong safeguards in the U.S. approach. And because we have continued to raise standards through each agreement, in recent years we have seen a drop in ISDS claims, despite increased levels of investment.

But that line of reasoning ignores why there have been so few cases in the past: because corporate sovereignty provisions were mainly included to protect US investments in developing countries with weaker legal systems. By definition, such nations are unlikely to have the resources to make many or significant investments in the US, and therefore have few opportunities to use the ISDS system. That is what will change dramatically with TAFTA/TTIP, as this analysis by Public Citizen explains:

TAFTA would vastly expand the investor-state threat, given the thousands of corporations doing business in both the United States and EU that would be newly empowered to attack public interest policies. More than 3,400 EU parent corporations own more than 24,200 subsidiaries in the United States, any one of which could provide the basis for an investor-state claim. This exposure to investor-state attacks far exceeds that associated with all other U.S. "free trade" agreement partners.

In fact, the US may be about to find out about the modern reality of billion-dollar corporate sovereignty lawsuits, thanks to the 21-year-old NAFTA agreement, and the controversial Keystone XL project, which President Obama recently vetoed. Here's Politico's explanation of how corporate sovereignty could enter the equation:

President Barack Obama may decide to kill Keystone XL for good, but that could be no easy task -- thanks in part to the North American Free Trade Agreement.

The 21-year-old free-trade pact allows foreign companies or governments to haul the U.S. in front of an international tribunal to face accusations of putting their investments at risk through regulations or other decisions. The CEO of Keystone developer TransCanada has raised the prospect as a potential last resort if Obama rejects the $8 billion project, although for now the company is focused on getting him to say yes.

Administration officials involved in reviewing the proposed Canada-to-Texas pipeline are aware of the potential for a NAFTA challenge and the importance of minimizing that risk in the event the president rejects Keystone.

So even though the President retains full powers to reject Keystone, it’s easy to see how the threat of a billion-dollar ISDS lawsuit might encourage him to approve it anyway. That would offer the perfect demonstration of how corporate sovereignty chapters can interfere with democratic decision-making -- at even the highest levels.

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Filed Under: corporate sovereignty, elizabeth warren, isds, jeff zients, lawsuits, tafta, tpp, trade agreements, ttip, ustr

Does Angela Merkel Want To Renegotiate The Corporate Sovereignty Chapter In EU-Canada Trade Agreement?

from the that-would-be-big dept

Techdirt hasn't written much recently about the trade agreement between the EU and Canada, generally known as CETA. That's because it is "finished" -- at least, in theory. It is now undergoing what is known as the "legal scrub" to prepare it for the final ratification on both sides. One story we did write concerned questions about the agreement's compatibility with EU law, largely because of the corporate sovereignty provisions in CETA. Things have been fairly quiet since then, which makes the following story in the Canadian edition of Huffington Post, on a related aspect, particularly intriguing:

German chancellor Angela Merkel will be in Ottawa for a visit on Monday, but she may not be bringing the news [Canadian Prime Minister] Stephen Harper wants to hear when it comes to the Canada-European Union Comprehensive Economic and Trade Agreement (CETA).

That's because the German government wants to reopen CETA and amend the investor-state dispute settlement [ISDS] mechanism.

No source is given for that claim, but the following explanation is offered:

Merkel likely does not have an ideological problem with bestowing corporations with the hammer of the investor-state provision, but the political reality is that her Christian Democrats have 311 seats in the Bundestag and need the support of the 193 Social Democrats in that legislature to maintain her 'grand coalition' government. Her minister of economy is a Social Democrat and that party is very clear in its opposition to investor-state. Last year, that party's convention passed a resolution against investor-state.

In other words, Merkel needs to keep her Social Democrat coalition partners happy if CETA and TTIP are to pass in the national vote that will be held at some point. That impacts CETA, because last month the same Social Democrat Minister of the Economy and Energy made a joint declaration with his French counterpart in which they said they wished to examine "all the options for changing" the ISDS chapter in CETA (original in French). The Huffington Post article also notes that what happens with CETA has big implications for TAFTA/TTIP:

Beyond the challenge of coalition politics for Merkel, she also needs to contend with an electorate that may not have paid too much attention to a 'free trade' agreement with Canada, but is very attentive -- and critical -- of the European Union's current negotiations with the United States on another 'free trade' deal called the Transatlantic Trade and Investment Partnership (TTIP). If Merkel agrees to a corporate rights provision in CETA, voters in Germany know that the same powers would be extended to U.S. corporations too.

If Merkel is indeed beginning to worry about the huge backlash in Germany against TTIP thanks to the corporate sovereignty provision it contains -- the main bone of contention for many people -- she knows that she must also deal with it in CETA, too. That would make a request to open up the ISDS section at least plausible, even if it would be pretty dramatic at this late stage, especially given statements by the Canadian Prime Minister that CETA's ISDS is non-negotiable. However, Harper has a general election coming up in October this year, and might prefer to accept CETA without corporate sovereignty rather than risk losing the political prize of a trade agreement with Europe altogether by refusing to renegotiate on this critical point.

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Filed Under: angel merkel, canada, ceta, corporate sovereignty, eu, germany, isds, tafta, tpp, ttip