Democracy for Sale: Stop Fast Track and TTIP!

DEMOCRACY FOR SALE – HOW CETA PRIVILEGES FOR INVESTORS THREATEN PUBLIC INTEREST IN CANADA AND THE EU

By Elisabeth Beer

[This article published on January 20, 2015 is translated from the German on the Internet, http://blog.arbeit-wirtschaft.at/ceta-privilegien/#more-8065.]

With the EU- Canada agreement, the risk increases that business will continue taking legal action against future regulations in the public interest. Basically the ISDS (Investor-State-Dispute-Settlement) can keep governments from carrying out policy in the public interest. This happens directly when a corporation sues a state or indirectly when new laws are not even introduced out of fear of a lawsuit (“regulatory chill”).

Pia Eberhardt, Blair Redlin and Cecile Toubeau presented the first comprehensive analysis of the investment protection chapter in the planned EU-Canada agreement CETA (Comprehensive Economic and Trade Agreement) with their study “Democracy for Sale.” This study concludes that rights to sue states granted foreign investors even surpass those rights in the North American NAFTA agreement.

NAFTA SHOWS THE DANGERS OF INVESTMENT ARBITRATION

NAFTA, the North American Free Trade Agreement, was concluded in 1994 between the US, Canada and Mexico and provided investor protection and ISDS in the so-called Chapter Eleven. The 20-year experience with privileged rights to sue for multinational businesses between developed legal states like the US and Canada reveals lawsuit risks that the European Union and its member states would take upon signing the CETA agreement.

Canada was already sued 35 times by investors on the basis of NAFTA. In the past, Canada either lost or settled six of these lawsuits and paid compensations amounting to 121 million E. In addition there were court- and lawyer costs in the millions for Canadian taxpayers. The lawsuits involved a broad palette of measures like lawsuits against the fracking moratorium, on pharmaceutical patents, prohibitions of toxic substances, environmental regulations and research conditions.

With a quote of a former colleague of the Canadian government, the authors give evidence that “regulatory chill” is also an important theme for Canada. “With nearly every new environmental measure, there were letters to the Canadian government from law offices in New York and Washington. […] Almost every new initiative was lined up in their sights and most never saw the light of the world.”

CETA GOES BEYOND NAFTA AND COULD BE AN ALL-PURPOSE WEAPON FOR CORPORATIONS

The investment-protection clauses of the CETA text grant investors special protection regarding their so-called “legitimate expectations.” Arbitration courts could consider the legitimate expectations at the moment of investment activity in weighing whether an indirect expropriation occurred and state compensation payments are due or not. This formulation amounts to a right of investors to a fixed regulatory framework. Businesses can sue when they feel restricted in their business activity by new laws in the public interest.

NEW LAWSUITS THREATEN CANADA, PARTICULARLY LAWSUITS AGAINST FINANCIAL MARKET REGULATION

The risk of being sued under CETA would be enormously increased for Canada in the banking, insurance and holding-company branches. Financial services are an important sector for EU investors and Canada now has a stricter regulation in this area than the EU. Investors in financial services prove to be litigious and will surely “discover” investment arbitration.

LAWSUITS IN MINING, OIL- AND GAS SECTOR THREATEN IN THE EU

For the EU, lawsuits by Canadian mining-, oil- and gas companies that are now planning or carrying out contested mining projects in several member states are now feared. The mining industry is the second most important Canadian investor in the EU. A third of all registered cases in business lawsuits involve this industrial branch which shows the industry actively uses its right to sue.


WITH CETA, MANY US CORPORATIONS COULD SUE EU GOVERNMENTS

40 percent of Canadian businesses have US-American parent companies. In other words, every US multinational has a subsidiary in Canada. If no privileged rights to sue are granted companies in the TTIP (the EU-US free trade and investment agreement under negotiation), a US-American corporation could sue the EU and its member states through their Canadian affiliate. Thus CETA is the “Trojan horse” for US-American firms in placing lawsuits against the public interest in Europe and demanding mammoth compensation payments.

Therefore the editors of the study, the AK-Vienna, the EGOD union alliance and many NGOs on this side and beyond the Atlantic appeal to the legislators in the EU and Canada to strictly reject investment protection in CETA and other agreements like TTIP.
FREE TRADE AGREEMENT: NGOS CRITICIZE TTIP AS A RULE INSTRUMENT

The ifo Institute says TTIP will bring prosperity to developing countries. Relief organizations are not dissecting the report

By Alexandra Endres

[This article published on February 25, 2015 is translated from the German on the Internet, http://www.zeit.de. Alexandra Endres is an economics editor for ZEIT ONLINE.]

The German economics minister Sigmar Gabriel and the EU Commission see the controversial free trade agreement TTIP as a new standard for international trade. TTIP could become the “gold standard,” a kind of ideal to which others must adjust, its defenders often argue. They repeat their interpretation against all criticism.

The problem is others are not asked. This may be sensible regarding those who represent a strong competition on the world market like China. However TTIP will also strike economically-weak developing countries – presumably not to their advantage, relief organizations fear. In a new paper, they break down their criticism in detail.

Bread for the World, Greenpeace and the Environment and Development Forum react to a study of the ifo Institute published in January and commissioned by the German Development ministry. At that time its author Gabriel Felbermayr concluded that TTIP will “have effects on developing- and threshold countries on account of the sheer size of the transatlantic economy.” He saw the chance “to make the group of winners as large as possible by skilful adjustment of many set-screws.”

That was a very vague prognosis. But a message came to the public since it was formulated positively: TTIP will bring prosperity to poor countries.

TTIP “SPECULATIVELY TWISTED IN THE POSITIVE”

This was completely wrong, development organizations now explain. “We consider the ifo study as a one-sided presentation that speculatively twists the possible effect of the planned TTIP agreement into the positive,” they write. Felbermayr also evaluated the effects of TTIP on developing countries very critically in an earlier study. In his new paper, he reverses his earlier conclusions. The earlier conclusions were more “wishful thinking than contemporary scholarship.”

Development organizations are very concrete in their criticism. For example, the ifo Institute completely ignores any effects of TTIP on agriculture. The agricultural sector is enormously important for the economy of many developing countries. Cancellation of tariffs could have serious consequences for developing countries, the NGOs fear.

If the tariffs for agricultural products fall, US farmers could sell their commodities to Europe more profitably than in the past – and displace products from the South from the market. A ruinous price competition could arise with the consequence that surpluses could be cheaply exported to developing countries and farmers there would not be equal to the competition.

This would not be a new phenomenon. Today for example exporting chicken from Europe to West Africa is so cheap that indigenous farmers go bankrupt.

PROSPERITY FOR THE “TINY ELITE”

The ifo Institute overrates the possible positive effects of trade liberalization in other branches, the development organizations criticize. In his study, Felbermayr starts from the growing revenue through TTIP. Europeans would then spend money for foreign travels, he predicts.

His critics contradict him. On the expected revenue growth, “a cheap vacation for four persons in Turkey could not be financed, much less a journey to Indonesia or Mexico.” If that were possible, only the tourism companies of industrial countries would profit, not the inhabitants of the host country.

However the crucial criticism of NGOs is even more basic. They doubt trade will automatically produce prosperity for the broad population. Quite the contrary, trade often only benefits a “tiny elite.” They reproach the ifo researchers for seeing developing countries only as raw material suppliers for the rich part of the world and denying them development chances.

NOT A TRACE OF PARTNERSHIP!

The criticism that the ifo paper completely ignores the framework of German development policy is very serious. “When the German economics ministry commissioned this study, it expected that the explicit goals (…) of the ministry would be its foundation.” However neither the millenium development goals, the goals for sustainable development, nor the initiative of minister Gerd Mueller for better working conditions in textile production played a part in the ifo paper.

How freer trade and stronger depletion of raw materials affect human rights in the concerned countries is completely faded out. “The study misses the `policy coherence’ for a sustainable development urged by the German ministry for economics.”

What TTIP advocates describe as the gold standard is a new rule instrument of industrialized states over poor countries. There is not even a trace of development partnership. Therefore the three organizations urge the ministry to commission a new, more comprehensive analysis.

The ministry did not want that. “We welcome the stimulation of civil society in the discussion of the TTIP,” a spokesperson said to a ZEIT ONLINE inquiry. With the presentation of the ifo study, a dialogue was opened up “with top flight representatives of our partner countries” that will continue in the coming weeks. “The debate with civil society is equally important for us.”

RELATED LINKS:

http://www.alternativetrademandate.org
https://vimeo.com/46908416

Ulrike Herrmann, Free Trade: Project of the Powerful
http://rosalux-europa.info/userfiles/file/FreeTrade_UHerrmann.pdf

Claudia von Werlhof, “The Globalization of Neoliberalism,” September 2008
http://www.skidmore.edu/~rscarce/Soc-Th-Env/Env%20Theory%20PDFs/vonWerlhof--Neolib.pdf


WORLD TRADE VS ENVIRONMENT PROTECTION – SEVERAL REFLECTIONS ON TTIP

By Helmut Bohacek

[This article published on January 26, 2015 is translated from the German on the Internet, http://blog.arbeit-wirtschaft.at.]

For more than a year, the term TTIP has frightened critical citizens and repackaged old fears. Dismantling tariff and non-tariff trade barriers through the transatlantic trade agreement should relieve trade and promote growth (economic growth). The questions who will profit and at whose expense were quickly raised.

Do you remember the beginning of the debate? What has changed since that time? you could ask. Unfortunately not much! On 1/11/2015, the EU Commission with the publication of data wanted to meet the demands for transparency but enthusiasm or passion for transparency was minimal.

There are many critical points and fears that standards will be lowered in the areas environment protection, consumer protection, health, labor and social with the signing of the agreement even if the EU side promises again and again that these interests will be defended.

IS THE EU A EUROPEAN ECONOMIC COMMUNITY OR A “EUROPEAN ENVIRONMENTAL UNION”?

With the 1987 change in the agreement, environmental protection is anchored in the EU in the form of an environmental chapter in the Uniform European Acts. The precautionary principle, the origin principle and the causal agent principle were codified as basic principles. The integration clause declared that the requirements of environmental protection are necessities in other policies.

In practice, environmental standards are often only prescribed in environmental legislation with the condition “as far as it is tolerable to the economy.”

For example, terms like “cost truth” disappear from usage with the general globalization and expansion of trade. So it is often incomprehensible why products that must travel a long way to our markets can be cheaper for consumers than local products.

The question is also posed why we need products from the US for example that we could make ourselves. These products often have a quality substantially worse than we expect.

WHAT CAN BE EXPECTED WITH THESE THEMES IF THE TTIP IS SIGNED?

Trade relief means primarily more transport apart from – largely justified – fears now addressed in all the media.

More transport from very remote countries means more air traffic and shipping. These are two fields for which the fewest environmental standards are codified and are determined by tax preferential treatment far removed from cost truth. More and more harbors in Europe refuse large ships near city centers since no catalysors are stipulated for ship motors, much less environmental norms as they exist for SUVs. That people can travel more cheaply by airplane from Vienna to Innsbruck than by train is due to a lack of an adequate taxation on kerosene. A greater distance almost always means a greater amount of transportation damage. Often there is a loss of quality – especially with food harvested early.

DEMANDS FOR REGIONALITY AND PEAK SEASON ACTIVITY

The demand for “regional and season” becomes louder and louder in the sense of an effective environmental protection, a high quality of food and protection from the consequences of climate change that cannot be prevented any more but at best only slowed down. Environmental- and consumer-protection associations expect shorter transport routes along with reduced emissions of air pollutants and greenhouse gases.

The anxiety about chlorinated chicken and genetically modified foods has a certain justification. However an expansion of transcontinental trade should be expected with TTIP that certainly will not lead to emitting fewer air pollutants and less carbon dioxide and other greenhouse gases into the atmosphere. These two facts – chlorinated chicken and genetically modified food – should be stressed and the rights to sue of investors against states should absolutely be criticized. How could this not be expected from a country that has still not ratified any climate protection agreement?

Perhaps an agreement between the EU and the US should be attacked that has the goal of adjusting the environmental- and social standards to prevent a worsening of these standards.