Trans Pacific Pillaging: the investments chapter

Assuming the long-standing long-winded discussions for the Trans Pacific Partnership is a bus, based on what we know, surely it's time Australian negotiators rang the bell and got off.

From an Australian consumer's point of view, the secrecy surrounding the negotiations of the TPP project is more than a touch fetid. With both Coalition and Labor politicians remaining silent on the matter, it's been left to Wikileaks to fill the chasm, pierce the veil of the negotiations and share the umbrage with Joe Public. The releases to date include: TPP Intellectual Property Chapter, an overview of the TPP Agreement, TPP Environment Chapter Consolidated Text and the TPP Environment Chapter Working Group Chairs' Report.

They make for dispiriting reading.

Separate to the secrecy, equally offensive is the exclusion of our largest trading partner and the world's second largest economy, China from the scandalously misnamed "partnership".

And the absence of key emerging economies: Brazil, Russia, India and South Africa that with China make up the so-called BRICS must be to some nation's (or nations') advantage, because it sure isn't in Australia's interest.

While Beijing has long complained that Washington opposes its membership, to be fair, it should be remembered that China's initial exclusion was not a result of American design to "contain" the Middle Kingdom. The fact is that back in 2002, when the TPP balloon was first floated by Singapore, New Zealand and Chile, it had nothing to do with China. That idea then grew to include some others, initially Brunei, then Peru and Australia. It now includes a dozen countries. America's involvement dates from 2008, in the last months of Bush 43.

That said, since president Obama moved into 1600 Pennsylvania Avenue, many of the TPP's provisions started to acquire a distinctly American flavour. Take textiles for instance. TPP provisions such as mandating that yarn used in the manufacturing of clothing (in TPP member nations) comes only from TPP member nations, explicitly excludes the "world's factory", China.

In case anyone missed the news, "O" is championing the lopsided so-called "Partnership".

We shouldn't be surprised "O" is on the wrong side of history. Heck, this is the same guy who championed the Muslim Brotherhood in Egypt and only last week, championed Iran's mullahs in their determination to get the bomb. And the very same guy who arm-twisted Australian Prime Minister Tony Abbott not to join the Asian Infrastructure Investment Bank, China's answer to the International Monetary Fund.

Arm-twisted and lost that is.

But Abbott need not worry. He is in fine company. "O's" pleas not to join the bank were spectacularly rebuffed by nearly every single US ally. It was a colossal loss of face for "O".

Apart from "O", only Japan is sitting at the Lilliput anti-China table.

The former community organiser understands very well what's at stake at the intersection of foreign policy and foreign trade. He is doing what he can through the TPP to "contain" China. He freely said so in his recent State of the Union address to Congress:

China wants to write the rules for the world's fastest growing region. That would put our workers and businesses at a disadvantage. Why would we let that happen? We should write those rules. That's why I am asking both parties to give me trade promotion authority to protect American workers with strong trade deals….

Pretty clear you must admit.

Only a few days ago, Wikileaks made available the hitherto secret Chapter II – Investments. The chapter's focus is the rights of investors from say Country "X" when they engage in commercial activities in another country, say Country "Y".

So what's in this chapter for us, the mug punters?

For one thing, utilising a provision called the Investor-State Dispute Settlement, a brand spanking new supranational court for multinationals to seek financial redress from states when they allege their rights have been trampled upon will come into existence. This legal innovation is a direct challenge to parliamentary and judicial sovereignty of the respective member states.

Julian Assange explains that the purpose of the supranational court is to bulk up the power of global corporations vis à vis independent states by creating a court or tribunal, where foreign firms can "sue" states and obtain taxpayer compensation for "expected future profits" if the court agrees that changes in a nation's laws or policies are financially detrimental to the corporation in question. Even if those changes are in the public interest.

Emphysema International has already got its solicitors into gear. Using an earlier but similar legal instrument, US tobacco giant Phillip Morris is suing the Commonwealth of Australia. This action began in June 2011 and is still under foot.

It is challenging former Attorney General Nicola Roxon's mandating of plain packaging of tobacco products on public health grounds. It managed to do this by reorganising its corporate structure and hauling its operations to the Chinese port city of Hong Kong.

Philip Morris Asia is drawing a long bow by relying on the 1993 Agreement between the Government of Australia and the Government of Hong Kong for the Promotion and Protection of Investments (Hong Kong Agreement).

Separately, Wikileaks notes that oil giant Chevron has taken action against Ecuador in an attempt to escape a multi-billion-dollar compensation ruling for polluting the environment. The implication from the chapter's release is that TPP members will find it even more difficult over time to apply their laws as their electorates expect them to be applied. And making lawbreakers liable for their wickedness will be like pushing porridge uphill with a stick.

So what's in the Investments Chapter? Let's look at a handful of issues.

Preamble

Capital is a means to encourage and promote the flow of investment between the Parties on a mutually advantageous basis …while recognizing the rights of Parties to regulate and the responsibility of governments to protect legitimate public welfare, including public health, safety and the environment.

Lawyers will have a field day.

This raises a few questions:

How will such terms be defined? For instance, where does "public" health start and "private" health (for the many) finish? For instance, are PSA tests or mammograms examples of "public health"?

Can "public welfare" in such diverse economies such as Australia and Vietnam possibly allow for a universal definition?

What exactly is "legitimate" public welfare? And how does it differ from "illegitimate" public welfare?

Article II.1: Definitions

Among the forms that an investment may take, the following are listed:

(f) Intellectual property rights;

(g) Licenses, authorizations, permits, and similar rights conferred pursuant to domestic law; and

(h) Other tangible or intangible, movable or immovable property, and related property rights, such as leases, mortgages, liens and pledges.

Question: To what extent do these provisions disarm the Commonwealth Treasury in its battle against alleged multinational companies dodging paying their fair share of Australian taxes?

Question: Just how deleterious are the IP provisions to Australian industries? How many industries have a target on their backs?

Special mention is made of the rules that will govern foreign investments in industries or resources that are under the control of government authorities:

(a) With respect to natural resources that a national authority controls, such as for their exploration, extraction, refining, transportation, distribution, or sale;

(b) To supply services to the public on behalf of the Party, such as power generation or distribution, water treatment or distribution, or telecommunications; or

(c) To undertake infrastructure projects, such as the construction of roads, bridges, canals, dams, or pipelines, that are not for the exclusive or predominant use and benefit of the government.

Question: does this forecast a legislated advantage for TPP members (e.g. the United States) over non-members (say China) when it comes to investing in Australian infrastructure? And if so, just what are our politicians thinking?

Article II.4: National Treatment

1. Each Party shall accord to investors of another Party treatment no less favourable than that it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its territory.

2. Each Party shall accord to covered investments treatment no less favourable than that it accords, in like circumstances, to investments in its territory of its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.

Questions: Does this mean if an Australian government when privatising a utility, for an array of reasons wants to sell it to an Australian superannuation fund for less money than a corporation in a TPP member country is prepared to pay, that the said Australian government's decision will be in violation of the TPP and found to be null and void by an ISDS court?

Article II.6: Minimum Standard of Treatment

1. Each Party shall accord to covered investments treatment in accordance with applicable customary international law principles, including fair and equitable treatment and full protection and security.

2. For greater certainty, paragraph 1 prescribes the customary international law minimum standard of treatment of aliens as the standard of treatment to be afforded to covered investments.

Question: Should Canberra agree to a situation where "international law" will trump domestic law? And if so, whose interest is Canberra serving?

Article II.9: Performance Requirements

1. No Party may, in connection with the establishment, acquisition, expansion, management, conduct, operation, or sale or other disposition of an investment of an investor of a Party or of a non-Party in its territory, impose or enforce any requirement or enforce any commitment or undertaking:

(a) To export a given level or percentage of goods or services;

(b) To achieve a given level or percentage of domestic content;

(c) To purchase, use, or accord a preference to goods produced in its territory, or to purchase goods from persons in its territory; and

(d) To relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with such investment.

Question: If say, an oil company from a TPP member state discovers great reserves of natural gas in northern NSW and believes, no, let's say can prove that Japan or China is happy to pay far more than domestic Australian consumers, will the NSW or Commonwealth governments be unable to direct the oil company to reserve a stipulated share of production for local consumption?

Article II.10: Senior Management and Boards of Directors

1. No Party may require that an enterprise of that Party that is a covered investment appoint to senior management positions natural persons of any particular nationality.

This one's cut and dried. And there are other worrying issues in the 55-page draft chapter.

Our negotiators should pause and reflect on at least five issues.

First, China, our biggest trading partner remains outside the tent. Put bluntly, the absence of the very nation that saved the Australian economy over the last decade from the economic toilet should be called for what it is: an affront to Australia's interests. An affront weshould make clear to Washington D.C.

Second, while on the topic of the Middle Kingdom, what are the ramifications for Australia when elements of our FTA with China conflict with elements in the TPP? Which trumps which?

Third, what does Australia gain by having the economic engines of Brazil, India and Russia be denied admission into this club?

Fourth, in whose interest other than Big Business (both foreign and domestic) is it for domestic legislation to be usurped by T & C's very agreeable to Big Business.

Fifth, why has the TPP not been subject to a public national interest test?

Something is very, very diseased in the Australian body politic when both Coalition supporters and Labor voters have to rely on third parties such as Senator Peter Whish-Wilson (Greens-TAS) to give voice to our concerns.

I for one hope he doesn't develop laryngitis any time soon.