TTIP Update XXXV

According to the publication "Inside US Trade", which tends to be pretty good when it comes to sourcing its information, the next round of TTIP talks won't take place until the end of  September - obviously the negotiators felt they needed a holiday after all the excitement of the last year.  But even if TTIP news is thin on the ground, there have been a couple of big stories recently with major impacts for the negotiations.

The first concerns the following news:

Philip Morris International, the world's largest tobacco company, is prepared to sue the British government should it implement a law requiring plain packaging of cigarettes, a document seen by Reuters on Tuesday showed.

Another report claims that the tobacco company will be demanding exceptionally high "damages" - £11 billion.  Unfortunately, it doesn't provide any source for that figure, so I think it needs to be treated with caution.  However, we do know that Philip Morris (PMI) is also suing Uruguay over plain packs, and in that case is demanding $2 billion.  Given the greatly differently size of their respective economies - Uruguay's GDP is around $50 billion, while the UK's is about sixty times as great - it's quite plausible that PMI would want an even more outrageous figure.

The company has used ISDS provisions in an obscure treaty between Uruguay and Switzerland to sue the former.  Unfortunately the articles about the new threat to sue the UK don't say how PMI aims to do this; as far as I am aware, there aren't any treaties where it could invoke ISDS clauses in the same way, so presumably it will just be trying to do so under UK law.  That's interesting, because it is how the company also tried to sue Norway over its own moves to discourage smoking.  Here's what happened:

PMI tried similar bully tactics against Norway when it banned the display of tobacco products in 2010. Crucially the case was tried in an Oslo District Court because the treaty through which PMI sued Norway – the European Economic Area agreement – had no ISDS. Norway made a public health defence. Norway won.

Now imagine a situation in which either CETA or TTIP (or both) had ISDS chapters.  This would then allow PMI to sue the UK (and any other EU country) directly, using secret tribunals, rather than national courts.  Not only that, ISDS would allow any of the tens of thousands of US companies with subsidiaries in Europe to do the same.  The latest threat of PMI shows that the will is there, even if the easy means to do so are currently lacking.  Let's hope this action will cause the British government to wake up to the dangers of ISDS, just as the Germany government did when the Swedish company sued Germany in 2012 for €3.7 billion using ISDS clauses in the Energy Charter Treaty.

The other news is very different.  It comes from Professor Jane Kelsey of the Faculty of Law, University of Auckland, whom I mentioned last week for her insightful analysis of the leaked financial annex of TISA.  She's put together a hugely-important new site with the slightly odd name of "TPP: No Certification".  Here's what thte certification refers to:

The US withholds the final steps that are necessary to bring a trade and investment treaty into force until the other party has changed its relevant domestic laws and regulations to meet US expectations of its obligations under the agreement. In the past, US ‘expectations’ have gone beyond what is in the actual text, and even included matters that were rejected in negotiations.

US officials can define another country’s obligations; become directly involved in drafting that country’s relevant law and regulations; demand to review and approve proposed laws before they are presented to the other country’s legislature; and delay certification until the US is satisfied the new laws meet its requirements.

There are already moves to apply a new and extended version of certification to the Trans-Pacific Partnership Agreement (TPPA).

The [US] Bipartisan Trade Priorities Act of 2014, which seeks to establish Fast Track authority for the TPPA, contains Sec. 4(a)(2):

"CONSULTATIONS PRIOR TO ENTRY INTO FORCE – Prior to exchanging notes providing for the entry into force of a trade agreement, the United States Trade Representative shall consult closely and on a timely basis with Members of Congress and committees as specified in paragraph (1), and keep them fully apprised of the measures a trading partner has taken to comply with those provisions of the agreement that are to take effect on the date that the agreement enters into force."

Although the new site's main focus is on the TransPacific Partnership agreement (TPP), that paragraph from the proposed Bipartisan Trade Priorities Act makes it clear that the certification requirement is general: "Prior to exchanging notes providing for the entry into force of a trade agreement" - that is, *any* trade agreement.  As a result, the new site's analysis applies equally to TTIP.

There is a detailed Q&A [.pdf], which is well-worth reading (not least for the appalling saga of how the US insisted on vetting the news laws that Peru had to bring in), as well as a condensed explanation of what this is likely to mean in practice:

Certification is a legally binding obligation on the US President. The President withholds formal written notification to another party to a trade agreement that the US has satisfied its domestic approval processes until the US certifies the other party has altered that party’s domestic laws and policies to satisfy US expectations of what is needed to comply with the TPPA [and also TTIP].

The US officials transmit a list of the changes to the other country’s domestic laws and policies that the US government requires before it will allow the pact to go into force. US government officials then monitor compliance, and pressure the government of the trade partner country to alter its laws and policies until they satisfy the US view of the changes required.

Even if the US Congress passed the Trans-Pacific Partnership Agreement (TPPA) [or TTIP], the pact would only go into effect in relation to each party when the US certified that party had satisfied US notions of compliance. Certification therefore provides additional leverage to the US Congress and US industry to impose its interpretation on a party’s obligations under the TPPA [and TTIP].

That last part is particularly worrying.  For example, the European Commission has been adamant that certain things like chlorine-washed chicken meat or hormone beef will not be part of TTIP.  Let's assume that is true.  We know that some of the most powerful US farming groups have said that they will not support TTIP without Europe opening its doors and plates to chlorine-washed chicken and hormone beef, among other things.  So one possibility is that the European Commission might refuse to allow either *in the agreement* as signed, but that under the influence of US lobbyists, the US government would refuse to certify TTIP unless they were added *afterwards*. 

In this way, the European Commission would be able to say truthfully that it managed to keep out chlorine-washed chickens and hormone beef from TTIP's text, but that it now had "no choice" but to add it in (and maybe change the relevant EU laws), otherwise all that hard work on the agreement would be wasted, and all those supposed "benefits" lost.  And so, at the twelfth hour, chlorine chickens, hormone beef, GMOs, etc. etc. would be permitted in the EU so as to obtain final certification.

Of course, it may well not come to that.  The resistance to TTIP is growing, and it may be that the whole thing - not just ISDS - collapses as people become aware of the reality of what is being planned.  But what this valuable new site from Kelsey makes clear is that even if we manage to keep out the worst demands of the US side from the "final" text, it may not actually be final.  Assuming certification is required for TTIP as for TPP, it would give one last chance for the US to try to bully the EU into accepting its demands - and one last chance for the European Commission to capitulate.

Full list of previous TTIP Updates.

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TTIP Update XXXIV

The previous update detailed the massive rejection of ISDSin TTIP, even at the highest political levels in Europe.  That refusal to allow corporations to be placed above national law has now spread to the other major trade agreement that the European Commission is currently negotiating, the one with Canada, known as CETA.  Here's the bombshell that the German newspaper Süddeutsche Zeitung dropped over the weekend (original in German):

German EU diplomats confirmed in Brussels on Friday that the [German] federal government could not sign the agreement with Canada "as it is now negotiated." Although Germany was, in principle, ready to initial the agreement in September, the chapter on the legal protection of investors is however 'problematic' and currently not acceptable.

Now, it's important to emphasise that this is not saying that Germany will *not* sign CETA, as some have reported.  What it does indicate is that the current text is problematic.  That leaves open the possibility for modifications to be made that would make it acceptable.  But as we've noted before, Germany has already expressed its view that ISDS should not be in TTIP, and presumably feels the same way about CETA. 

Thus the new battle over CETA not only provides important hints about what will happen with TTIP, but will have a direct influence on it.  If CETA includes ISDS it will enable US companies to sue the EU through Canadian subsidiaries, thus making its presence or absence in TTIP somewhat moot.  Equally, if ISDS is dropped from CETA, it is likely to be dropped from TTIP.

That has become even more likely in the wake of this new statement by the S&D Group in the European Parliament:

Following reports in the press that the German government is reluctant to sign the EU-Canada Comprehensive Economic Trade Agreement (CETA) as it currently stands, the S&D Group calls for further efforts to conclude this agreement but invites the Commission to seriously consider withdrawing the investor-state dispute settlement clause from the final text. The inclusion of this clause seems to be the main controversial point in the CETA text for the German government.

That's significant, because the S&D Group is the second-largest in the European Parliament: TTIP will not be ratified there unless it's MEPs support it, and this is therefore a further signal that they won't support it if it includes an ISDS chapter.  The wisdom of that position was underlined just yesterday with the annoncement of the biggest award ever made by a tribunal of the kind that lie at the heart of ISDS:

In an historic arbitral award rendered on July 18, 2014, an Arbitral Tribunal sitting in The Hague under the auspices of the Permanent Court of Arbitration (PCA) held unanimously that the Russian Federation breached its international obligations under the Energy Charter Treaty (ECT) by destroying Yukos Oil Company and appropriating its assets. The Tribunal ordered the Russian Federation to pay damages in excess of USD 50 billion to our clients who were the majority shareholders of Yukos Oil Company.

Yes, you read that correctly: a tribunal of lawyers has decided that Russia ought to pay $50 billion damages (although whether it will is quite another matter.)  This is a useful reminder that there is literally no limit on the awards that these tribunals can make: the ISDS system is not just undemocratic, it is completely outside anyone's control - a recipe for disaster.

The other big TTIP news is the leak of one the key chapters, on "sanitary and phyto-sanitary measures" (SPS) - basically food safety and related areas.  Here's a summary of what it reveals:

The Institute for Agriculture and Trade Policy released the draft version of the central text of the TTIP chapter on sanitary and phyto-sanitary measures; this chapter imposes restrictions on government regulations related to food safety and animal and plant health. Among the many provisional threats to public health safeguards are:

A form of mutual recognition of the safety of imported food from Europe in the U.S. and vice versa that reduces standards to the lowest levels;

 An objective that food safety safeguards should generally be enforced in the least trade restrictive manner, rather than the manner that is most protective of public health and the environment; and

 A system of “exporter country certification” that would  sharply reduce food safety inspections at ports of entry.

That same Institute for Agriculture and Trade Policy (IATP) has also provided a detailed and illuminating analysis of what the dry text will mean in practice.  Here's the key section that describes the overall intent of the SPS chapter in TTIP:

trade agreement SPS language about food safety, animal health and plant health outlines the general terms for enabling trade while complying with “the importing Party’s appropriate level of protection.” So, for example, unless the European negotiators object to the use of Maximum Residue Level (MRL) of a specific pesticide on imported grain or a specific veterinary drug in the production of imported meat, without creating “unjustified barriers to trade” (Article 2, paragraph 2), the TTIP regards that product as having an “appropriate level of protection” to enable importation and consumption of the product. Determination of MRLs and other metrics of what is “appropriate” happens in a domestic regulatory process, in which, at least in the U.S., much of the relevant data is classified as Confidential Business Information.

This is the key change proposed by the TTIP draft: "mutual recognistion" would mean that US standards for pesticides or veterinary drugs would be regarded as acceptable in the EU, even when they are manifestly lower than those currently in place here.  As that paragraph also hints, the US regulatory process is pretty much a part of the US agricultural industry, which provides most of the data used for making regulatory decisions.

Not  only that, industry generally won't even provide the "scientific" data on which government decisions are based, since it is "Confidential Business Information."  Of course, when companies won't release data it's a clear sign that they have something to hide, as the experience with clinical trials data has shown.  When it comes to health and safety, open data is even more critical than elsewhere, but the US approach is diametrically opposed to this, with secrecy as the default.  This means that European efforts to make the regulatory process more open would be undermined by the US demand for business confidentiality for their standards, which would also apply in the EU.

In fact, the SPS chapter in the TTIP draft is even worse.  Not content with allowing food that meets US standards to be imported freely into Europe, it would stop checks being carried out on that produce as it enters the EU:

industry has long sought to replace verification of food safety management performance by port of entry inspection of products with export food facility certification, by governments or third parties, verified by audits of facilities. The terms of certification and auditing to verify SPS system equivalence are outlined in Article 12 of the draft. In Article 9, paragraph 1, industry, and particularly the Grocery Manufacturers Association, has gotten its wish to eliminate port of entry inspection and testing results as a factor in the SPS systems equivalence determination. According to the draft text, recognition of SPS systems as “equivalent” by TTIP Parties will occur “without a need for individual re-inspection [of products] or other additional guarantees.

There's an interesting consequence of removing the entry inspection:

The industry rationale for eliminating re-inspection and testing is not just to expedite more food trade more quickly. Detaching re-inspection and testing from SPS systems equivalence determination provides a layer of government verified and certified food safety management insulation from liability for exporting or importing contaminated products.

This means that the kind of food scandals we have seen recently - notably of horsemeat - would be much harder to investigate.  It would also remove incentives for US food companies to worry too much about the issue, since it would be much easier for them to escape any liability.

Finally, many in Europe will doubtless be worried by this aspect of the leadked SPS chapter:

“Prominent coverage of animal welfare” refers to “best endeavor” (we will try), not binding (“shall”) measures to prevent trade in livestock products from animals that have been abused. For example, Article 11, paragraph 1, states “The Parties recognize that animals are sentient beings. They undertake to respect trade conditions for live animals and animal products that are aimed to protect their welfare.” So, while this aspirational language is perhaps new in a trade agreement, it is designed to be unenforceable. There will be no requirements that Parties mandate compliance with animal welfare laws as a condition of being able to trade in animal agriculture products.

That means the opportunity to use TTIP to export Europe's higher animal protection laws to the US in order to mitigate some of the worst horrors of that country's "mega-farms" is being lost.  As a result, European farmers will be at big economic disadvantage compared to their US rivals, since they will be required to spend more money taking better care of their animals. 

This is likely to lead to European farms losing market share, as cheaper US food enters the EU, with no indication that it was produced in inhumane conditions, or that it contains pesticide levels that were previously unacceptable in the EU.  In the face of this unfair competition, the agricultural industry will inevitably push for EU standards for food safety and animal welfare to be lowered to those of the US in order to "level the playing field."  Moreover, whenever the US lowers them yet further - as it is currently doing for chickens - this will have a knock-on effect of pushing EU standards down too.  TTIP not only leads to a race to the bottom on food and health standards, it leads to that bottom being excavated to new depths.

As this indicates, the leak of the SPS chapter is extremely important, because it reveals in detail for the first time just how our food standards will decline, and that the repeated assurances from the European Commission that they will not, are worthless.  It's probably safe to assume that the same will prove to be true of the chapter dealing with intellectual monopolies like copyright and patents, which is likely to turn out to be ACTA 2.0.

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TTIP Update XXXIII

My last two updates concentrated on ISDS, and on the European Commission's consultation, such as it was.  Flawed though it may have been, it did at least give people a rare - no, unique - opportunity to express their views on this aspect of TTIP. And express it they did: although we have no official figures, I'm consistently hearing that well over 100,000 submissions were made.  That's an astonishing number for such an apparently obscure aspect of a trade agreement, and a clear reflection of how strongly people feel about this. 

That's surely not something the European Commission ever expected when they announced the consultation, and means that it can have no doubt about the public's views on this matter.  And yet, with typical contempt for democracy, Karel De Gucht, the commissioner handling the TTIP negotiations, called this massive demonstration of citizen engagement an "attack" (original in German.)

Nor is it just the public that is expressing itself forcefully on ISDS.  Criticism of the idea has come from just about every quarter.  Here's what happened on the No2ISDS site that I wrote about:

Friends of the Earth Europe, AK Europa and ÖGB Europabüro, set up an online platform to allow citizens to voice their concerns about ISDS. The website www.no2isds.eu has collected over 23,000 contributions from people across Europe and the US who fundamentally oppose the harmful investor-state arbitration system. Combined with initiatives from groups including 38degrees and SumofUs, this has contributed to a record number of over 100,000 contributions to the Commission's public consultation.

European Trade unionists are against ISDS:

In a letter to European Trade Commissioner Karel de Gucht, Bernadette Ségol the General Secretary of the European Trade Union Confederation (ETUC) says trade unionists are “particularly concerned at statements from DG Trade implying that the consultation is about a reform of the ISDS system and is not open to a decisive rejection.”

The letter tells De Gucht very clearly “the ETUC is fundamentally opposed to the inclusion of ISDS in the Transatlantic Trade and Investment Partnership.”

In its formal response to the consultation the ETUC points out that “ISDS establishes a system of judicial protection which is only available for foreign investors. By definition, this additional system awards benefits to foreign companies which are not given to domestic companies. This discriminates against domestic companies. ISDS destabilises the domestic judicial system because public measures can be subject to two diverging legal assessments.”

It also calls for ISDS in the EU-Canada Trade Agreement to be frozen at least until it is resolved in TTIP.

So are health organisations [.pdf]:

Health Action International (HAI) Europe, the Common s Net work, Knowledge Ecology International (KEI) Europe, Health GAP (Global Access Project), Salud por Derecho, the International Society of Dr ug Bulletins (ISDB), the Medicines in Europe Forum (MiEF) and Universities Allied for Essential Medicines (UAEM) welcome the opportunity to submit a response to this consultation . We believe, however, that this consultation, which aims to improve ISDS, is asking the wrong questions. ISDS cannot be improved. The real question is whether ISDS should be included in TTIP at all. The answer, very simply, is no.

As are leading members of the European Commission's own TTIP advisory group:

Following the end of the public consultation on investor-state dispute settlement (ISDS) in the EU-US free trade negotiations (known as TTIP), the European Environmental Bureau, the European Public Health Alliance (EPHA) and Transport & Environment call on the European Commission to exclude ISDS from TTIP and to publish all contributions.

The EEB, EPHA and T&E are members of the EU’s TTIP advisory group representing civil society.

One of the most devastating analyses I have seen comes from over 100 leading academics:

In our view, the logical implication of the Commission’s stance [that ISDS is flawed and needs fixing] is to raise the key question that is not asked in the consultation document: why consider including investor-state arbitration in the TTIP at all? The rationale for bilateral investment treaties was traditionally linked to views about the potential impact on foreign investment of uncertainty caused by weak legal and judicial systems in host countries. While such a vision of failed statehood should in itself be examined further, it suffices to point out, in the context of the relationship between the US and the EU, that it is difficult to argue realistically that investors have cause to worry about domestic legal systems on either side of the Atlantic. Above all, with FDI [foreign direct investment] stocks of over €1,5 trillion either way, it is implausible to claim that investors in fact have been deterred. It is true, as the Commission points out, that nine Member States already have BITs in place with the US. It may also be true that, for these nine Member States, the new arrangement might be a better alternative than ‘doing nothing.’ That, however, hardly seems enough reason to impose on the other two thirds of Member States a Treaty that profoundly challenges their judicial, legal and regulatory systems. The consultation document comes up with one additional argument: that the rights each party grants to its own citizens and companies ‘are not always guaranteed to foreigners and foreign investors.’ The claim is unsubstantiated. Even if it is accepted, there is no obvious reason why the incorporation in TTIP of a simple norm of non discriminatory legal protection and equal access to domestic courts could not address the problem perfectly adequately.

You might predict criticism from many of these groups, especially those associated with green and left-wing groups, as here:

During Tuesday's plenary session [of the European Parliament] GUE/NGL deputy Helmut Scholz addressed De Gucht, saying, "You carried out a public consultation on the inclusion of an investor state dispute settlement (ISDS) clause which received over 115,000 responses.

"Citizens don't want ISDS; neither in TTIP nor in the agreement with Canada," the German deputy argued.

What you probably would not expect is that some of the most senior European politicians are also clearly turning against ISDS.  Here, for example, is the MEP David Martin, whom some may remember as the rapporteur (Parliamentary expert) who helped kill ACTA:

The Socialists were proud to be at the birth of TTIP, and we do not want to be its assassins, and I want to tell the Commission clearly now, though, that if we have to be, we will be. And that's why we want the Commission to listen carefully to our concerns.

This is the chairman of the European Parliament's influential international trade (INTA) committee, which will give the main advice on whether or not to ratify TTIP:

German Socialist Bernd Lange, who said procedural rules would stop [right-wing MEP] Le Pen grandstanding or using sessions for publicity, also warned that an investor-state dispute settlement mechanism should be dropped from TTIP. If it wasn't, he said, the Parliament’s next resolution on TTIP could be negative.

Finally, and perhaps most strikingly, this is what Jean-Claude Juncker, the President-elect of the European Commission, writing in his "Political Guidelines for the next European Commission" [.pdf], published earlier this week:

As Commission President, I will also be very clear that I will not sacrifice Europe's safety, health, social and data protection standards or our cultural diversity on the altar of free trade. Notably, the safety of the food we eat and the protection of Europeans' personal data will be non-negotiable for me as Commission President. Nor will I accept that the jurisdiction of courts in the EU Member States is limited by special regimes for investor disputes. The rule of law and the principle of equality before the law must also apply in this context.

The plenary session of the European Parliament at which some of these comments were made included a rather lack-lustre speech by De Gucht on TTIP, which was met with a silent protest against TTIP from some MEPs.  Rather less silent was a protest by activists during the TTIP stakeholder meeting for this latest round of negotiations:




Here in the UK, resistance to ISDS is centred around concerns that it could lock in the current rounds of NHS privatisation.  This has become enough of a problem that the EU's chief negotiator, Ignacio Garcia Bercero, has written a letter [.pdf] to one of the UK supporters of TTIP, John Healey, trying to assuage those fears.  War on Want's John Hilary has put together a Twitter or identi.ca, and +glynmoody on Google+