TTIP Update X

Last week I wrote about an attack on Corporate Europe Observatory (CEO) by the European Commission over a leak concerning TAFTA/TTIP, which the former had obtained and published.  As my lengthy analysis indicated, what was most remarkable about that response is that it failed to answer the points made by CEO.  That naturally begs the question: so why did the European Commssion bother?

I think the answer is clear.  It was rattled that CEO had revealed its emerging plans to use a new supranational regulatory body to gradually replace the European precautionary system with one that is optimised for profits.  That meant it needed to try to "prove" it wasn't really happening – something it signally failed to do.  More generally, its extremely rapid response shows that the European Commission fears that it is losing control of the TAFTA/TTIP narrative, which is supposed to be all about growth, jobs, profits and happiness sempiternal.

That view is bolstered by the fact that no less a personnage than Karel De Gucht, the European Commissioner for trade, and the person with overall responsibility for the TTIP negotiations, entered into battle himself to rebut an article by George Monbiot in the Guardian.  Monbiot's piece was entitled "The lies behind this transatlantic trade deal", and it rightly concentrates on the threat posed to national and European sovereignty by investor-state dispute resolution (ISDS), and on the extraordinary and unnecessary secrecy:

Panic spreads through the European commission like ferrets in a rabbit warren. Its plans to create a single market incorporating Europe and the United States, progressing so nicely when hardly anyone knew, have been blown wide open. All over Europe people are asking why this is happening; why we were not consulted; for whom it is being done.

De Gucht did not like this:

George Monbiot, in his article on the negotiations for a Transatlantic Trade and Investment Partnership, claims the European commission has tried to "keep this process quiet" (Chickens in chlorine? It's what free trade's about, 3 December). This is laughable. Every step of these negotiations has been publicly announced and widely reported in the press. The commission has regularly consulted a broad range of civil society organisations in writing and in person, and our most recent meeting had 350 participants from trade unions, NGOs and business.

Well, I suppose you have to admire the bare-faced cheek of denying reality.  As far as I can tell – and I do follow this area pretty closely - there have been no "regular" consultations with civil society organisations; in fact there have been vanishingly small meetings with them on any basis.  As CEO found out (but only by demanding the information under a FOI request), of 130 "meetings with stakeholders" that took place earlier this year, 119 of them were with large corporates and their lobbyists.

And note the clever phrasing: "Every step of these negotiations has been publicly announced and widely reported in the press."  That's true – the *steps* have been announced, but we have been told nothing about what was discussed.  That's like claiming that people have been able to read books even if all they were told were the titles.

Interestingly, the evidence that ISDS is a real danger to democracy is now so strong, that even De Gucht is forced to admit it:

We do understand some of the concerns Monbiot and others have about investor-state dispute settlement. We are well aware of the cases he cites, including the "nuclear company contesting Germany's decision to switch off atomic power" and the fact that "the tobacco company Philip Morris is currently suing Australia [which introduced plain packaging for cigarettes] through the same mechanism in another treaty". That is why we want the EU-US trade deal to fully enshrine democratic prerogatives.

That's a pretty big admission, and shows the power of facts to combat empty rhetoric.  Alas, the "solution" offered is the usual one:

EU investment agreements will explicitly state that legitimate government public policy decisions – on issues such as the balance between public and private provision of healthcare or "the European ban on chicken carcasses washed with chlorine" – cannot be over-ridden. We will crack down on companies using legal technicalities to build frivolous cases against governments. We will open up investment tribunals to public scrutiny – documents will be public and interested parties, including NGOs, will be able to make submissions. Finally, we will eliminate any conflicts of interest – the arbitrators who decide on EU cases must be above suspicion.

Notice the verb here: "will" – designed to convey absolute certainty.  Except that TAFTA/TTIP is a two-sided agreement, and the EU is in no position to demand anything.  I don't doubt that it will indeed ask for all the things listed above in an attempt to address the criticisms of ISDS (not that it will, but at least it is trying); however, I also don't doubt that the US negotiators will simply refuse, since overcoming "the European ban on chicken carcasses washed with chlorine" is one of their stated aims in TAFTA/TTIP.  That's precisely why they want ISDS in the agreement, and precisely why the European Commission would be insane to agree to its presence.

Despite admitting that ISDS is inherently problematic, De Gucht goes on to say:

But we do not take Monbiot's extreme view that investment protection agreements (IPAs) are "toxic" attempts to put monster corporations in charge of our destinies. His exaggerated fears are no reason to abandon a deal with the US that could create £100bn in new growth for Europe. (Contrary to Monbiot's claims, the economic impact of free trade agreements has been positive. For example, Europe's agreement with South Korea has seen our exports rise by 24% in its first two years.)

Readers of this blog will recall my earlier analysis of that £100bn, which is the 119 billion euros that appears in the research carried out for the European Commission.  In any case, it represents the best-case  outcome of TAFTA/TTIP, and this will only be achieved through massive deregulation, with a concomitant lowering of health, food and environmental standards, despite what the Commission claims.  So even if TAFTA/TTIP "could" create £100bn in new growth for Europe, that would only be in 2027, and at huge social cost – something that De Gucht naturally omits to mention.

He also fails to note another salient fact when he writes that Europe's free trade agreement with South Korea saw a 24% rise in exports in its first two years.  According to the European Commission's own Web pages on the agreement:

European companies are the largest investors in South Korea.

That's relevant to TAFTA/TTIP, because the key argument for including ISDS in the transatlantic deal is that such investor protection is vital if companies are going to invest in Europe and thus create jobs.  The interesting thing is that the trade agreement between Europeand South Korea does not have an ISDS chapter, and yet Europeans are happy to invest massively in the latter country.  Why on earth would they risk doing that? Simple: because they trust the legal and political systems to act fairly in the case of any disputes over investments.

It is the height of ridiculousness to assert that ISDS is needed in TAFTA/TTIP in order to provide the same guarantees: the legal and political systems in both the EU and US are certainly as well developed as those in South Korea, and so ISDS is completely unnecessary.  As George Monbiot in his Guardian article quotes me as saying on the subject: "The benefits are slight and illusory, while the risks are very real."  Accepting large risks for small benefits shows appalling business judgement: if De Gucht can't see that, and won't drop ISDS in order to protect Europe from those dangers, perhaps he should hand the job on to someone who does and will.

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TTIP Update VI

In my previous TTIP update, I reported on an extremely important leak about the Trans-Pacific Partnership agreement (TPP), which is the other half of the US attempt to stitch up world trade through supranational agreements.

It's still too early to hope for something similar on the TAFTA/TTIP front – but rest assured, it's only a matter of time (another reason why the insistence on secrecy is not just anti-democratic and insulting, but stupid, too.)  However, Corporate Europe Observatory (CEO), one of the key sites dealing with transparency (and lack of it) in Europe has come into the possession of a TTIP document that is very interesting:

CEO has today published a leaked version of the European Commission's communication strategy for overcoming public skepticism about the controversial EU-US trade negotiations, the so-called Transatlantic Trade and Investment Partnership (TTIP). The document was discussed at a meeting with EU member states on Friday 22 November. In order to "reduce fears and avoid a mushrooming of doubts", the Commission proposes to "further localise our communication effort at Member State level in a radically different way to what has been done for past trade initiatives".

It's not very long, so I recommend reading the whole thing on CEO's site; here I'd like to pick out a key passage.  The leaked document spells out what it sees as the three main communication challenges, the first of which is the following:

Making sure that the broad public in each of the EU Member States has a general understanding of what TTIP is (i.e. an initiative that aims at delivering growth and jobs) and what it is not (i.e. an effort to undermine regulation and existing levels of protection in areas like health, safety and the environment).

TAFTA/TTIP may "aim" at delivering growth and jobs, but what exactly does that mean?  The European Commission's own research predicts a range of possible outcomes:

Under a comprehensive agreement, GDP is estimated to increase by between 68.2 and 119.2 billion euros for the EU and between 49.5 and 94.9 billion euros for the US (under the less ambitious and more ambitious scenarios). However, if the FTA would be limited to tariff liberalisation only, or services or procurement liberalisation only, the estimated gains would be significantly lower. For example, an FTA limited to tariff liberalisation would lead to a lower (23.7 billion euro) increase in GDP for the EU and a 9.4 billion euros increase for the US.

There's a big difference between the 119 billion euros – the figure routinely quoted by the European Commission, even though it is only one extreme case – and the 23.7 billion at the other end, for estimates of the boost to the EU's GDP.  From the research document again:

The comprehensive option includes two scenarios: a less ambitious agreement that includes a 10 per cent reduction in trade costs from NTBs and nearly full tariff removal (98 per cent of tariffs) and an ambitious scenario that includes the elimination of 25 per cent of NTB related costs and 100 per cent of tariffs.

NTB refers to "non-tariff-barriers, and basically means things like health and safety regulations, environmental protection, employment rules and financial rules.  In other words, most of the things that make Europe what it is today: an extremely safe and pleasant place to live.  The 119 billion euro figure always quoted by the European Commission refers to "the elimination of 25 per cent of NTB related costs".  If we don't get rid of those, the predicted GDP boost is a much more modest 24 billion euros – hardly worth bothering about, given that the EU's GDP in 2012 was 12,900 billion euros (indeed, even the massively-improbable 119 billion euro figure is still less than 1% of GDP.)

In some cases, it may be possible to remove those non-tariff barriers that without compromising on health and safety standards, but in others, it is clearly impossible.  A symptomatic case in point is the famous chlorine-washed chicken.  In the US, it is permitted to wash chicken carcases in chlorine water, whereas this is not regarded as safe in the EU.  These positions are not compatible.  So how will this "non-tariff barrier" be dealt with?

The European Commission has said that health standards will not be compromised, which suggests that the EU will not accept chlorine-soaked chickens; but the senior vice president of America's National Chicken Council has a different view of what will happen in TAFTA/TTIP [pdf]:

We have been assured on a number of occasions by our trade negotiators that our industry's issues will not be traded-off for some other issue on the EU side.  We trust our negotiators will secure the most favorable outcome possible, but at the risk of being redundant, we will want to be doubly-assured that the end product is worthy of our support.

That certainly sounds like they think that chickens washed with chlorine water will soon be winging their way to European plates, whether Europeans want them or not.  The same confidence that the EU public's wishes will be swept away during the TAFTA/TTIP negotiations can be found in other food safety areas, such as bringing US beef produced with growth hormones to Europe, and the contentious area of GMOs, as well as the EU's rigorous chemical safety framework REACH - another target of US industry.

This exposes the central dilemma at the heart of TTIP: either the European Commission abandons the precautionary principle – something that is actually enshrined in the Lisbon Treaty – in a desperate attempt to realise some of the over-promised financial gains, or it gives up the big numbers and settles for a mere 0.2% GDP growth in order to preserve European health and safety regulations: it can't in general have both.

In fact, even if the European Union *did* deregulate massively – something that industry on both sides of the Atlantic is pushing hard for [.pdf] - with who knows what consequences for public health and safety, it might all be in vain anyway.  It's obviously hard making prediction (especially about the future, as they say), but luckily we do have the past as a guide. 

TTIP (and TPP) are actually part of a series of major trade agreements that the US has been signing  in order to impose its laws and economic philosophy around the world.  The two most important ones prior to TPP and TTIP are the North American Free Trade Agreement (NAFTA) and the South Korea-US Free Trade Agreement (KORUS).  Here's what happened with NAFTA:

The United States ran a $1.6 billion trade surplus ($2.6 billion in today's dollars) with Mexico in 1993, the year before NAFTA. Last year [2011], the United States ran a $64.5 billion deficit.

And here's KORUS:

In the year after the agreement took effect (April 2012 to March 2013), U.S. domestic exports to South Korea (of goods made in the United States) fell $3.5 billion, compared with the same period in the previous year, a decline of 8.3 percent. In the same 12-month period, imports from South Korea (which the administration consistently declines to discuss) increased $2.3 billion, an increase of 4.0 percent, and the bilateral U.S. trade deficit with South Korea increased $5.8 billion, a whopping 39.8 percent.

But maybe the trade agreements are generating jobs at least – that's one of the things that the European Commission says TAFTA/TTIP will do. Here's what happened with NAFTA:

Bill Clinton (1993) and his supporters claimed in the early 1990s that the North American Free Trade Agreement would create 200,000 new jobs through increased exports to Mexico. In fact, by 2010, growing trade deficits with Mexico had eliminated 682,900 U.S. jobs

Well, what about KORUS?

When the U.S.-Korea Free Trade Agreement was completed in 2010, President Obama said that it would increase U.S. goods exports by "$10 billion to $11 billion," supporting "70,000 American jobs from increased goods exports alone"

Here's what actually happened:

Using the president's own formula relating changes in trade to jobs, the growth in the trade deficit with South Korea in the first year since KORUS took effect likely cost more than 40,000 U.S. jobs

So if you were willing to water down health and safety in the hope that you will be recompensed with that 119 billion euros GDP gain, every indication from the past suggests that you are a mug, because the claimed benefits would not flow. 

Actually, that's not entirely true: some companies would indeed save money by being able to dump today's EU environmental, labour, health and safety regulations.  But those savings certainly wouldn't "trickle down" to the public, not even as more (lower-paid) jobs – because, don't forget: one consequence of trade agreements is that companies tend to move their production to the country with the lowest costs.  One way of reducing costs is to reduce wages, and so TAFTA/TTIP may well actually see working people in the EU worse off than the current situation.  And if you think that's just my ill-informed opinion, you might like to read what the Economic Policy Institute has to say on TAFTA/TTIP:

A much more likely outcome [than the European Commission's rosy projections], based on North American experience under NAFTA, is that production workers in all the member countries will suffer falling wages and job losses (Scott et al. 2006), while U.S. and EU investors will profit handsomely, reinforcing the rapidly rising share of profits in corporate and national income that has taken place over the last decade in the United States (Mishel 2013).

Given these incontrovertible facts about past trade agreements, and the fundamental contradiction in the European Commission's stated aim of achieving large GDP gains by abolishing non-tariff barriers while preserving the precautionary principle and maintaining the European Union's uniquely high health and safety standards, you can see why its communication department has a big job on its hands.

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TTIP Update IV

One of the key issues during the ACTA negotiations was transparency – or rather the lack of it.  Despite a few token gestures from the European Commission initially, TAFTA/TTIP looks like it will be just as bad. Here's a rather nice trick the negotiators have just played:

Surprise!  The second round of negotiations for the massive Trans-Atlantic Free Trade Agreement (TAFTA) won’t be happening in Washington, DC in December as planned.  It will be happening in six days.  In Belgium.

…

USTR’s email yesterday invited “stakeholders” to a “briefing session” next Friday where “non-governmental organizations, consumer groups, trade unions, professional organizations, business and other civil society organizations will have the opportunity to exchange views with U.S. and EU chief negotiators.” It just happens to be taking place on the other side of the Atlantic Ocean.

This may well be the most expensive “stakeholder engagement” opportunity presented by the Obama administration for one of its sweeping “trade” deals. At current prices, the cheapest last-minute flight to “exchange views” with TAFTA negotiators in Brussels would set you back $1977. That may not be a problem for the approximately 600 corporate trade “advisors” who are already deeply involved in helping USTR craft TAFTA negotiating positions. For the rest of us, it’s a bit like getting an email invitation to your friend’s destination wedding in Cancun a week before the ceremony (psst...I don’t really want you to come).

That act of petty spitefulness is indicative of a deep and crucial asymmetry in the TAFTA/TTIP negotiations.  Whereas some of the world's largest companies are given privileged information about what is happening – not least *where* things are happening – the public, which is poorly represented anyway, finds itself cut out from that insider knowledge, and therefore lacks the ability to follow the negotiations properly, let alone give any input to them.

That's obviously disgraceful for something that is supposedly being negotiated in their name – and which is certainly being negotiated using their taxes, which pay the European Commission negotiators their not inconsiderable salaries, and the cost of their plane tickets as they jet to and fro across the Atlantic – first class, no doubt.

But there is an even deeper, more troubling asymmetry at the heart of these talks that concerns the investor-state dispute settlement (ISDS) element I've written about in my last two TTIP Updates.  That's probably the most problematic and worrying area of the whole agreement, because the core idea of ISDS is that any laws or court decisions that cause even the "expectation" of future profits of companies to be diminished in some way can potentially be litigated before a secret, supranational tribunal able to impose unlimited fines on entire nations.

The subtle implication of this is that legislative changes must tend to increase corporate profits.  So, for example, improved health and safety laws would be stymied by this, as would enhanced environmental protection where it causes a company's profits to be reduced (as is likely, since better protection usually means more costs for the polluters.)

In other words, ISDS introduces exactly the same kind of upward ratchet that copyright laws have produced for the last three hundred years.  Just as copyright laws only ever make copyright longer, broader and deeper – to the benefit of companies and disbenefit of the public -  so ISDS will put huge pressure on the EU and member states only to pass legislation that improves the outlook for corporate profitability.  The fact that these kind of moves may well cause huge social damage – greater health or environmental problems – is completely overlooked, because the framing does not allow the social costs to be taken into account, only private profits.

That makes this proposal in South Korea particularly interesting:

Evaluation of trade agreements have been made in economic terms. But the impact of trade agreements is not limited to economic life. They have human rights dimensions in many aspects. For instance, trade agreements containing the TRIPS-plus provisions may affect the right to access to essential medicine, the right to food and more broadly the right to science and culture, which is protected by the Article 27(1) of the Universal Declaration of Human Rights. So the UN human rights bodies have tried to develop and propose human rights impact assessments (HRIA) of trade agreements (See The Future of Human RightsImpact Assessments of Trade Agreements).

The recent move of the National Assembly of South Korea to mandate the HRIA was influenced by the efforts of the UN human rights bodies. The lawmaker, Mr. Buh, proposed a bill to amend the Law on the Treaty-Making Process and Implementation of Trade Agreements (Trade Process Act), which includes an amendment making compulsory the HRIA on every trade pacts that are likely to be agreed upon with trade partners.

This is an important move, because it begins the long journey of re-balancing trade agreements around the world so that they take in account human rights and therefore, by implication, the public interest as well as corporate profit.  Although it's not clear whether the Korean initiative will succeed, it does at least raise the issue in a political context.  We now need to start similar conversations here in the EU and in the US regarding TAFTA/TTIP if that agreement is to have any claim to fairness and legitimacy.

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TTIP Update III

It's been fairly quiet on the TAFTA/TTIP front recently.  That's largely because Europe shuts down for its summer hols during August, and has only just got going again.  Unfortunately (for TAFTA/TTIP), the next round of negotiations has just been cancelled because the US administrations was busy being, er, not busy.  But as a consolation prize, we have a couple of documents from the European Commission on the subject of Investor-State Dispute Settlement (ISDS), which by a happy coincidence was the subject of my previous TTIP Update.

In fact, those two documents turns out to be pretty much the same, just re-worded slightly.  Both seek to defend the indefensible – that is, to convince people that ISDS is totally harmless, and nothing to worry our pretty heads about.  Above all, they want to reassure us that ISDS is definitely not this years' ACTA....

This comes through most clearly in the document entitled "Incorrect claims about investor-state dispute settlement" [pdf].  So let's have a look at some of the claims about the claims:

Claim: Investor-state dispute settlement subverts democracy by allowing companies to go outside national legal systems.

Response: Untrue! To get a sense of perspective on this question it is important to remember that the EU itself, as well as all but one of our Member States, Switzerland, the United States, Canada, Japan, South Korea and India - to name just a few - are all party to many agreements which provide for investor-state dispute settlement. These countries, and many more that also allow investor state dispute settlement, have healthy, vibrant democracies.

More specifically, relying on the national courts of the host country to enforce obligations in an investment agreement is not always easy.

Firstly, the investor may not want to bring an action against the host country in that country's courts because they might be biased or lack independence.

Secondly, investors might not be able to access the local courts in the host country. There are examples of cases where countries have expropriated foreign investors, not paid compensation and denied them access to local courts. In such situations, investors have nowhere to bring a claim, unless there is an investor-state dispute settlement provision in the investment agreement.

Thirdly, countries do not always incorporate the rules they sign up to in an investment agreement into their national laws. When this happens, even if investors have access to local courts, they may not be able to rely on the obligations the government has committed itself to in the agreement.

All that sounds plausible, until you remember that TTIP is an agreement between the EU and US, nobody else.  So let's look at the above "explanation" in that light:

"Firstly, the investor may not want to bring an action against the host country in that country's courts because they might be biased or lack independence. "

So the European Commission is saying that the US courts are biased or lack independence?  I do hope Karel de Gucht explains why when negotiating with his US counterparts.

"Secondly, investors might not be able to access the local courts in the host country. "

So here the European Commission is saying that investor might not be able to access local courts in the US? Sure, that happens all the time....

"Thirdly, countries do not always incorporate the rules they sign up to in an investment agreement into their national laws."

So now the Commission thinks that the US will go to the trouble of negotiating this huge treaty – and then just ignore its provisions?  Again, how plausible is that as an answer? 

And notice that none of the three points actually addresses the key issue, which is that ISDS does indeed allow companies to go outside national legal systems, and thus subvert established democratic institutions like the local courts. Basically, ISDS is inappropriate for developed nations like the EU and US.  Introducing it does one thing, and one thing only: provides foreign investors with extra rights over and above what ordinary citizens and domestic companies enjoy.

So let's look at another:

Claim: Investor-state allows companies to sue just because they might lose profits.

Response: Wrong! Companies cannot sue successfully just because their profits might be affected. They need to have a case. That means they need to prove that one or more of the investment protection standards, such as non-discrimination or protection against unlawful expropriation have not been respected. The fact that a government changes a law, which increases the costs for a given company, is not on its own, sufficient to bring a successful case in investor-state dispute settlement.

Although it's strictly speaking true that companies cannot sue *just* because they might lose profits, in practice that's pretty much what happens, because the so-called "investment protection standards" are so vague and easy to invoke.  Here's a good explanation from Public Citizen:

Investors and corporations can demand taxpayer compensation for policies that they allege as violating special “rights” granted to foreign investors by NAFTA-style FTAs. These “rights” are phrased in vague, broad language. Tribunals have increasingly interpreted these foreign investor “rights” to be far more expansive than those afforded to domestic firms, such as the “right” to a regulatory framework that conforms to a corporation’s “expectations.” This “right” has been interpreted to mean that governments should make no changes to regulatory policies once a foreign investment has been established.

Claim: Investor-state dispute settlement cases take place behind closed doors

Response: Many existing agreements do indeed provide, by default, that investment disputes are heard behind closed doors. The EU does not believe that is appropriate. We have championed transparency in international dispute settlement in general and in investor-state dispute settlement in particular. In future EU agreements, all submissions will be public, all hearings will be open, all decisions of the tribunal shall be public and interested parties will be able to make their views known.

So the response here is more along the lines of "well, yes, that's true, but we'd really like to change it."  Unfortunately, that overlooks the fact that it can't do that unilaterally: it needs to get the US to agree, and the current administration has shown itself a bigger enemy of transparency than any predecessor.  Bottom line: it's not going to happen.

Claim: Investor-state dispute settlement undermines public choices (e.g. Vattenfall challenging the German moratorium on nuclear power, Philip Morris challenging Australia’s plain packaging regime for cigarettes)

Response: It is important to note that only well-founded cases have a chance of being successful. The fact that a policy has been challenged does not mean that the challenge will be successful. The EU will negotiate in such a way so as to ensure that legislation reflecting legitimate public choices e.g. on the environment, cannot be undermined through investor-state dispute settlement.

Well, see comment above: the EU can negotiate until it's blue in the face, but if the US refuses to go along with the plan, then the situation remains the same.  And here's what currently happening: a wide range of health, safety and environmental regulations are being challenged through the ISDS mechanism:

foreign corporations have launched investor-state challenges against a wide array of consumer health and safety policies, environmental and land-use laws, government procurement decisions, regulatory permits, financial regulations and other public interest polices that they allege as undermining “expected future profits.”

Claim: Investor-state dispute settlement is biased in favour of investors – they can threaten to bring expensive cases against governments and so scare them away from policies that the investors do not like.

Response: There is little real world evidence that this is the case. UN statistics on investor state dispute settlement cases show that a majority of cases are decided in favour of the government (Of all the cases concluded by 2012, 42% found in favour of the State, 31% in favour of the investor and 27% were settled).

This is an absolutely key issue.  ISDS actions threaten to become the global version of patent trolls: by merely threatening to sue they can cause cautious governments to change their plans.  Notice how the European Commission quotes the figures for "all the cases concluded by 2012".  That conveniently bundles together all the early cases where tribunals did, indeed, tend to find for the State more often.  But unfortunately for the European Commission's argument, that's no longer the case.  Here's what the UN statistics have to say about 2012:

In 70% of the public decisions addressing the merits of the dispute, investors’ claims were accepted, at least in part.

Next:

Claim: Investor-state dispute settlement cases are decided by a small clique of lawyers, with considerable conflicts of interest, who seek to cream off public money.

Response: Like in any area of national or international law the number of true specialist lawyers in the field is not large. Some of these lawyers do combine roles as arbitrators in some disputes and advocates in others. This crossing over may create the risk of conflicts of interest.

In other words, this is also true, but we would like to change it (see above).

Finally, we have:

Claim: Investors should not be allowed to challenge governments directly in international law. Only governments should be able to act against each other, via state-to-state dispute settlement.

Response: It is investors who actually suffer the financial losses. Governments (including the EU) need to pursue the general interest, and that means that they have neither the time nor the resources to follow-up each individual alleged breach of the agreement.

The fact that governments (including the EU) have neither the time nor resources to deal with each alleged breach is precisely why ISDS is so pernicious: it forces governments (or the EU) to spend huge amounts of time and money dealing with claims made under it.  The fact that tribunals are finding increasingly often in favour of companies means that more cases will be brought, because the odds of succeeding are going up, especially if speculative funding is available.

And here's another reason why that growth in ISDS trolling is likely to happen: last year saw the largest award made by an ISDS tribunal – a cool $1.77 billion in damages.  And remember, that's money that the government concerned has to pay.  If ISDS is included in TAFTA/TTIP, the people who will end up footing the not inconsiderable bills will be you and me.

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Huawei's Global Head Of Cyber Security Wants The Government 'To Have As Much Data As Possible'

In Der Spiegel's recent revelations about the far-reaching nature of the NSA's spykit, it mentions several US companies, Samsung from South Korea, and one from China -- Huawei. Like the others, Huawei denied any knowledge of the modifications to its products that Der Spiegel claims are used by the NSA to break into systems. This isn't the first time that the finger has been pointed at Huawei. Some years back, Huawei was accused of facilitating spying for the Chinese government, but after an 18-month investigation, no evidence was found of this. That fact allowed John Suffolk, Global Head of Cyber Security for Huawei and the former UK Government CIO, to enjoy the irony of Snowden's leaks about backdoors in US products: 

On Techdirt.

South Korean Spy Agency Allegedly Tried To Influence Presidential Vote - By Posting 1.2 Million Tweets

Twitter is still a young medium, and it's interesting to see yet more uses being found for it. Here's a rather dubious one from South Korea: 

On Techdirt.

US Free Trade Agreements Are Bad Not Just For The Economy, But For The Environment, Too

A couple of months ago, we reported on some interesting research into the reality of US trade agreements, in contrast to the rosy pictures always painted when they are being sold to the public by politicians. In particular, it turned out that far from boosting US exports and creating more jobs, both the North American Free Trade Agreement (NAFTA) and KORUS, the free trade agreement with South Korea, actually did the opposite -- increasing the US trade deficit with those countries, and destroying hundreds of thousands of American jobs. 

On Techdirt.

Does The 'Three Strikes' Approach Work, In Any Sense? Here's The Evidence

Last week we reported on the suspension of Hadopi's one and only suspension, as France moved away from using Internet disconnection as a punishment. That manifest failure of the scheme that pioneered the three strikes approach makes a new paper from the Australian scholar Rebecca Giblin, called "Evaluating graduated response", particularly timely. As its title suggests, this is a review of the three strikes approach in the light of the experiences in the five countries that have adopted it: France, New Zealand, Taiwan, South Korea and the UK -- even though the latter has still not put it into practice. 

On Techdirt.

Trade Agreements With Mexico And South Korea Turned Out To Be Disasters For US: So Why Pursue TPP And TAFTA/TTIP?

Two massive trade agreements currently being negotiated -- TPP and TAFTA/TTIP -- could potentially affect most people on this planet, either directly or indirectly through the knock-on effects. Like all such agreements, they have been justified on the grounds that everyone wins: trade is boosted, prices drop, profits rise and jobs are created. That's why it's been hard to argue against TPP or TAFTA -- after all, who doesn't want all those things? 

On Techdirt.

Clueless Spanish Politicians Want To Join The Government Malware Club

As we've noted before, when it comes to the Internet, governments around the world have an unfortunate habit of copying each other's worst ideas. Thus the punitive three-strikes approach based on accusations, not proof, was pioneered by France, and then spread to the UK, South Korea, New Zealand and finally the US (where, naturally, it became the bigger and better "six strikes" scheme). France appears to be about to abandon this unworkable and ineffective approach, leaving other countries to deal with all the problems it has since discovered. 

On Techdirt.

South Korea Considers Dumping Draconian Copyright Law Forced On It By The US

As Mike noted a couple of days ago, international trade agreements often have the effect of constraining the power of national legislatures. Indeed, that's doubtless one of the reasons why they have become so popular in recent years: they allow backroom deals between politicians and lobbyists to set the agenda for law-making around the world, without the need for any of that pesky democratic oversight nonsense. In particular, the trade agreement between South Korea and the US is turning out to be a key limiting factor for both TPP and what US politicians might try to do about phone unlocking. This makes two recent moves to loosen South Korea's harsh copyright laws potentially important far beyond that country's borders. 

On Techdirt.

Early-Morning Raid Sent To Confiscate 9-Year-Old's Winnie The Pooh Laptop For Downloading Music

One of the biggest problems with the current approach to dealing with alleged copyright infringement is the totally disproportionate nature of the action undertaken in response to it. The "three strikes" collective punishment of households that is available in France, New Zealand and South Korea is one example of this. From Finland, we learn about another completely over-the-top action: 

On Techdirt.

South Korea Gives Mobile Operators Permission To Ignore Net Neutrality By Surcharging Or Blocking VOIP Services

Net neutrality arguments are often couched in rather theoretical terms, and many people can't really see what all the fuss is about. A recent decision in South Korea gives a handy example of what the loss of net neutrality means in practice: 

On Techdirt.

North Korean Study Confirms It: People Will Share, Whatever The Risks

A couple of weeks ago, I wrote about how the ever-increasing storage capacity of portable hard drives made it unlikely that the sharing of music could ever be stopped. That was a somewhat theoretical piece based on general trends in technology; but here's some supporting data from a rather unusual source: North Korea (aka the "Democratic People's Republic of Korea" - DPRK). 

On Techdirt.

South Korea Still Paying The Price For Embracing Internet Explorer A Decade Ago

The problems of monopolies arising through network effects, and the negative effects of the lock-in that results, are familiar enough. But it's rare to come across an entire nation suffering the consequences of both quite so clearly as South Korea, which finds itself in this situation thanks to a really unfortunate decision made by its government some years back: 

On Techdirt.

Why ACTA is Doomed (Part 2)

A couple of days ago I wrote that ACTA was doomed because its attempts to enforce copyright through even more punitive measures will simply alienate people, and cause more, not less, copyright infringement. Here's indirect support for that view from a rather surprising source: a paper [.pdf] published by WIPO (although it does emphasise "The views expressed in this document are those of the author and not necessarily those of the Secretariat or of the Member States of WIPO").

In the context of enforcement it has the following to say about the continued failure to "educate" (= indoctrinate) people about the sanctity of copyright, noting that it is a lost cause because piracy is so widely accepted today:

The most comprehensive comparative analysis of these issues to date is a 2009 Strategy One study commissioned by the International Chamber of Commerce. Strategy One examined some 176 consumer surveys and conducted new ones in Russia, India, Mexico, South Korea, and the UNITED KINGDOM. Like nearly all other surveys, Strategy One’s work showed high levels of acceptance of physical and digital piracy, with digital media practices among young adults always at the top of the distribution. The group concluded that “hear no evil, see no evil, speak no evil’ has become the norm” (ICC/BASCAP 2009). At this point, such findings should come as no surprise. In the contexts in which we worked, we can say with some confidence that efforts to stigmatize piracy have failed.

There is little room to maneuver here, we would argue, because consumer attitudes are, for the most part, not unformed — not awaiting definition by a clear antipiracy message. On the contrary, we consistently found strong views. The consumer surplus generated by piracy in middle-income countries is not just popular but also widely understood in economic justice terms, mapped to perceptions of greedy United States of America and multinational corporations and to the broader structural inequalities of globalization in which most developing-world consumers live. Enforcement efforts, in turn, are widely associated with the United States of America pressure on national governments, and are met with indifference or hostility by large majorities of respondents.

It also makes this rather interesting point about the changing nature of people's music collections:

The collector, our work suggests, is giving ground at both the high end and low end of the consumer income spectrum. Among privileged, technically-proficient consumers, the issue is one of manageable scale: the growing size of personal media libraries is disconnecting recorded media from traditional notions of the collection — and even from strong assumptions of intentionality in its acquisition. A 2009 survey of 1800 young people in the UNITED KINGDOM found that the average digital library contained 8000 songs, with 1800 on the average iPod (Bahanovich and Collopy 2009). Most of these songs — up to 2/3 in another recent study — have never been listened to (Lamer 2006). If IFPI’s figures are to be trusted, up to 95% are pirated (IFPI 2006).

Such numbers describe music and, increasingly, video communities that share content by the tens or hundreds of gigabytes — sizes that diminish consumers’ abilities to organize or even grasp the full extent of their collections. Community-based libraries, such as those constituted through invitation-only P2P sites, carry this reformulation of norms further, structured around still more diffuse principles of ownership and organization.

What's really fascinating for me here is that it clearly describes the trend towards owning *every* piece of music and *every* film ever recorded. The concept of owning a few songs or films will become meaningless as people have routine access to everything. Against that background, the idea of "stopping" filesharing just misses the point completely: few will be swapping files - they will be swapping an entire corpus.

The whole report is truly exciting, because it dares to say all those things that everyone knew but refused to admit. Here are few samples of its brutal honesty:

To be more explicit about these limitations, we have seen no evidence — and indeed no claims — that enforcement efforts to date have had any impact on the overall supply of pirated goods. Our work suggests, rather, that piracy has grown dramatically by most measures in the past decade, driven by the exogenous factors described above — high media prices, low local incomes, technological diffusion, and fast-changing consumer and cultural practices.

...

we see little connection between these efforts and the larger problem of how to foster rich, accessible, legal cultural markets in developing countries — the problem that motivates much of our work. The key question for media access and the legalization of media markets, in our view, has less to do with enforcement than with fostering competition at the low end of media markets — in the mass market that has been created through and largely left to piracy. We take it as self-evident, at this point, that US$15 DVDs, US$12 CDs, and US$150 copies of MS Office are not going to be part of broad-based legal solutions.

Fab stuff - even if it is not quite official WIPO policy (yet....) (Via P2Pnet.)

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South Korea: Super Fast, and Finally Free

Imagine a country that has one of the best Internet infrastructures in the world, and yet its government effectively forbids the use of GNU/Linux through a requirement that everyone employ a decade-old Windows-only technology for many key online transactions. That country is South Korea, where 1 Gbits/second Internet connections are planned for 2012; and that Windows-only technology is ActiveX.

On The H Open.

Is South Korea's Crazy Experiment Ending?

I've written a number of times about the curious experiment South Korea has been conducting: making its entire governmental and financial computing infrastructure dependent on Microsoft by requiring *all* users to install proprietary security software that is typically an ActiveX plugin (yes, one of *those*).

This is obviously insane, because it forces people to use a piece of technology that has been a major cause of security problems on the Windows platform, and it creates a monoculture, with all the weaknesses that implies.

Despite the manifest folly of this approach, changing it has been hard because of the total lock-in. But apparently change is finally coming, and for a couple of surprising reasons:

For those of you who have followed my blog, you know that it has been 3 years since I first reported on the fact that Korea does not use SSL for secure transactions over the Interent but instead a PKI mechanism that limits users to the Windows OS and Internet Explorer as a browser. Nothing fundamentally has changed but there are new pressures on the status quo that may break open South Korean for competition in the browser market in the future.

In fact, one of the new pressures on the status quo has been the popularity of the iPhone in South Korea, which wasn’t available officially until late 2009 due to a different Korean software middle-ware requirement, WIPI, which has since been deprecated. With WIPI dead and buried, Apple released the iPhone to great fanfare in the Korean market and Blackberry has also launched in the Korean market.

Another pressure on the status quo was a recent report out from 3 researchers (Hyoungshick Kim, Jun Ho Huh and Ross Anderson) from the University of Oxford’s Computing Laboratory, “On the Security of Internet Banking in South Korea.”

...

The popularity of the iPhone (the press claims 500,000 units sold in the few months since it was released) resurfaced the issue that only Windows and IE can be used to make secure transactions with Korean Internet services. iPhone/Blackberry/Android users in Korea (not to mention Firefox/Opera/Safari/Chrome users) cannot bank online or purchase items online or do any secure transaction with the smartphone browser because Korean services only support the PKI mechanism that only works with Active-X in IE and Windows.

This is a rather unlooked-for consequence of the arrival of smartphones in general, and of the iPhone in particular. Combined with pressure from the users of other browsers and other operating systems, we can hope that this will bring the South Korean government to its senses, and end this bizarre and unfortunate experiment in government-mandated monoculture.

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ACTA's All-out Assault on the Internet

Michael Geist has some deeply disturbing details about what may well be in the Internet section of ACTA:

1. Baseline obligations inspired by Article 41 of the TRIPs which focuses on the enforcement of intellectual property.

2. A requirement to establish third-party liability for copyright infringement.

3. Restrictions on limitations to 3rd party liability (ie. limited safe harbour rules for ISPs). For example, in order for ISPs to qualify for a safe harbour, they would be required establish policies to deter unauthorized storage and transmission of IP infringing content. Provisions are modeled under the U.S.-Korea Free Trade Agreement, namely Article 18.10.30. They include policies to terminate subscribers in appropriate circumstances. Notice-and-takedown, which is not currently the law in Canada nor a requirement under WIPO, would also be an ACTA requirement.

4. Anti-circumvention legislation that establishes a WIPO+ model by adopting both the WIPO Internet Treaties and the language currently found in U.S. free trade agreements that go beyond the WIPO treaty requirements. For example, the U.S.-South Korea free trade agreement specifies the permitted exceptions to anti-circumvention rules. These follow the DMCA model (reverse engineering, computer testing, privacy, etc.) and do not include a fair use/fair dealing exception. Moreover, the free trade agreement clauses also include a requirement to ban the distribution of circumvention devices. The current draft does not include any obligation to ensure interoperability of DRM.

5. Rights Management provisions, also modeled on U.S. free trade treaty language.

This is nothing less than the copyright cartel's last stand against the Internet - a desperate attempt to lock down everything. As Geist observes:

it provides firm confirmation that the treaty is not a counterfeiting trade, but a copyright treaty. These provisions involve copyright policy as no reasonable definition of counterfeiting would include these kinds of provisions.

That is, the Powers-that-Be *lied* to us, as usual. We must fight this, or we will be paying the consequences for years to come.

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Korea Cottons on to the Microsoft Monoculture

I've written several times about the extraordinary situation in South Korea - otherwise one of the most advanced technological nations - that maintains an almost total dependence on Microsoft's ActiveX technology for banking and government connections. Now it seems that the Koreans themselves are finally waking up to the disadvantages - and dangers - of that situation:

The bizarre coexistence of advanced hardware and an outdated user environment is a result of the country's overreliance on the technology of Microsoft, the U.S. software giant that owns the Korean computing experience like a fat kid does a cookie jar.

It is estimated that around 99 percent of Korean computers run on Microsoft's Windows operating system, and a similar rate of Internet users rely on the company's Internet Explorer (IE) Web browser to connect to cyberspace.

The article points out the obvious security issues with this approach:

This is a risky arrangement, since Active-X controls require full access to the Windows operating system and are often abused by cyber criminals who spread malicious programs to direct the browser to download files that compromise the user's control of the computer.

But it seems that the problem goes *much* deeper:

Even Microsoft seems ready to bail on Active-X, looking to phase out the program over security concerns and compatibility issues. However, in Korea, where most Web sites rely on Active-X to enable a variety of functions from online transactions to simple flash features, the program is abundant and critical as air.

This leads to awkwardness whenever Microsoft introduces a new product here. The release of Windows Vista caused massive disruption when Active-X used by banks and online shopping sites didn't function properly.

And the Korean Internet users sweated over Microsoft's initial plans to reduce its support for Active-X in IE8, the latest version of the company's Web browser. Although IE8 did end up backing Active-X, strengthened security features have made its use more complicated.

The reliance on Active-X has locked Korean computer users into a depressing cycle where they are prevented from venturing off to other operating systems and browsers, and stuck with an outdated technologies their creator can't wait to dispel.

That is, by instituting a monoculture, and becoming completely dependent not just on one manufacturer, but on one particular - and very unsatisfactory - technology used by that manufacturer, the Koreans find themselves trapped, left behind even by Microsoft, which wants to move on.

There could be no better demonstration of why mandating one proprietary technology in this way, rather than choosing an open standard with multiple implementations with the scope for future development, is folly.

Unfortunately, the article quoted above doesn't seem very optimistic on the chances of openness breaking out in South Korea any time soon, so it may well be that all its superb Internet infrastructure will go to waste as it remains locked into aging and increasingly obsolete technology on the software side. (Via Mozilla in Asia.)

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