Corporation Carte Blanche Will US-EU Trade Become Too Free?
Opposition to the planned new trans-Atlantic free trade agreement is growing. So far, criticism has focused on the fact that the deal seems directed exclusively at economic interests. Now fears are growing that corporations will be given too much power.
Lori Wallach had but 10 minutes to speak when she stepped up to podium inside Room 405 at George Washington University, located not too far away from the White House. Her audience was made up of delegates currently negotiating the trans-Atlantic free trade agreement between the United States and the European Union.
They had already spent hours listening to presentations by every possible lobbying group -- duty bound to hear myriad opinions. But when Wallach, a trade expert for the consumer protection group Public Citizen, took the stage, people suddenly started paying attention. The 49-year-old Harvard lawyer, after all, is a key figure in international trade debates.
Wallach has commanded respect and indeed established herself as economic liberals' worst nightmare since she pulled off the feat of launching mass protests at global trade talks in Seattle in 1999. Even today, the revolt at the World Trade Organization talks in Seattle is considered to be the initial spark of the anti-globalization movement. People tend to listen when Wallach speaks. "The planned deal will transfer power from elected governments and civil society to private corporations," she said, warning that the project presents a threat of entirely new dimensions.
Her listeners, who are negotiating the Trans-Atlantic Trade and Investment Partnership (TTIP), view things differently, of course. Their task is a massive one. The pact is to go far beyond merely eliminating tariffs. In addition, standards are to be aligned and technical regulations, norms and approval procedures are to be harmonized in order to ensure that both goods and services can be transported across the Atlantic as free from bureaucracy and barriers as possible.
A Briarpatch of Issues
Some aspects to be negotiated make a lot of sense -- ways of coming up with universal charger plugs for electric cars, for example. But other, more controversial issues, are also on the agenda, including whether the Americans will be allowed to sell genetically modified corn without labeling it as such in the EU. Or whether the US Food and Drug Administration will be allowed to continue its assault on raw milk cheeses, such as Roquefort from France.
The negotiating partners enthusiastically extol the increase in prosperity the trade agreement would create. The pact, which would be the world's largest, would cover 800 million people and almost one-third of global trade. US President Barack Obama has spoken of the creation "hundreds of thousands of jobs on both sides of the Atlantic." The European Commission has calculated it would spur the EU economy by 120 billion ($162.5 billion).
Nevertheless, there are plenty of skeptics to be found. After the third round of negotiations, an unusually broad alliance of anti-globalization groups, NGOs, environmental and consumer protection groups, civil rights groups and organized labor is joining forces to campaign against TTIP.
These critics have numerous concerns about the treaty -- including their collective fear that the convergence of standards will destroy important gains made over the years in health and nutrition policy, environmental protection and employee rights. They argue the treaty will make it easier for corporations to turn profits at the public's expense in areas like water supply, health or education. It would also clear the path for controversial technologies like fracking or for undesired food products like growth hormone-treated meat to make their way to Europe. Broadly worded copyrights would also restrict access to culture, education and science. They also believe it could open the door to comprehensive surveillance.
A Deal Too Focused on Business
Critics say that such concerns are justified because negotiators are hewing closely to the wishes of the business sector. "The aim of this deal is to secure and expand the privileges of companies and investors," railed Wallach.
That may at first sound a bit like a conspiracy theory. But there is something to it, particularly if you go by data obtained by the NGO Corporate Europe Observatory (CEO). Using the freedom of information act, the organization was granted access to a list of the institutions the European Commission held discussions with prior to negotiations on the trade agreement. The NGO found that 93 percent of those talks were held with groups representing industry. Industry associations ranging from the US Chamber of Commerce to shipping companies were given the chance to present their wish lists for a free trade agreement. Environmental and consumer protection organizations were excluded.
The business community's interest in further opening the market is hardly remarkable -- especially when it comes to German industry. Car-makers, for example, would save billions annually if differing regulations didn't force them to make different wing mirrors, turn signals and shock absorbers for the US and European markets. German chemical and pharmaceutical companies are also hoping for easier approval for the strict US market for their products. And the subsidized agricultural industry would like to have the right to unload its surpluses of milk and pork abroad.
A Class of Its Own
These are all factors that have led the German government to position itself as a key driving force behind TTIP thus far. Nevertheless, even the most ardent supporters of the agreement have serious doubts about one important point in the trade deal: its provisions for Investor-State Dispute Settlement (ISDS).
It may sound harmless, but it's not. The provisions would create a kind of special parallel legal system for corporations, essentially giving them carte blanche that would fall outside of national laws.
Here's how it would work: If a company felt somehow financially disadvantaged or its interests otherwise trod upon, it would have the right to submit a challenge to a three-judge arbitration court. The country in question gets one "judge," the company would be able to pick one and the third would either be agreed upon by the two parties or would be chosen from a list of qualified candidates. This private trade arbitration court would have the power to make rulings on huge damage payments if an investor believed its profits were reduced -- through a new national law, for example. The hurdles might be high for such a procedure, but the rulings would be final and not appealable.
Depriving Countries of Power
It would essentially deprive national justice systems of their power. And it could have dangerous side effects as well. Fears of large fines could considerably limit political maneuvering room for governments.
It is a lesson that Argentina learned in 2003. Following the country's currency reform, a US company filed a complaint for damages. The existence of bilateral investment treaties between the US and Argentina meant the company could sue in an arbitration court, which ultimately ordered the country to pay damages of $133 million.
Such dual-track legal systems are nothing new. EU member states have codified certain degrees of investor protection in 1,400 bilateral treaties implemented as early as the end of the 1980s. Germany alone has 136 treaties which were originally intended to secure investments in countries that didn't have reliable legal systems.
But such provisions have since become standard fare in almost all bilateral treaties -- even those between industrialized nations. They're effective, too. The increase in the number of arbitration proceedings has risen precipitously, and developed economies are targeted with increasing frequency.
- Part 1: Will US-EU Trade Become Too Free?
- Part 2: A Severe Lack of Transparency