Bearder: Liberals must save the EU-US trade agreement, but we must ditch ISDS to do so

Writing for politics.co.uk, Lib Dem MEP Catherine Bearder writes a strong defence of the proposed free trade agreement between the US and EU, but takes the view that the now much-maligned Investor State Dispute Settlement proposal (which in any event has been temporarily abandoned) must be replaced with a much more accountable form of dispute resolution:

A trade deal with the US has the potential to bring major benefits to the UK economy. Currently the US is the biggest export destination for UK small businesses, with over half of all small exporting firms doing business there. But barriers to trade between the EU and the US, such as tariffs or different standards and regulations, can make it difficult for small companies to expand their businesses across the Atlantic.

Take Penny Seume, a textile designer based in Bristol. Due to slightly different flammability regulations in the EU and US, she currently has to fire-test all her fabrics twice, adding cost and time. The Liberal group in the European Parliament is pushing for a smart EU-US trade deal which will help thousands of small businesses like Penny’s, making it easier for them to export by simplifying customs procedures and matching up standards where possible. Overall, it is estimated that such a deal could boost the UK economy by £100 billion over a ten year period.

However, there are valid concerns over some aspects of the trade deal. Many people have contacted me about the proposed Investor-State Dispute Settlement (ISDS), and I agree with them that ISDS in its current form is seriously flawed. As has been seen in past agreements around the world, secretive tribunals using private arbitration often give too much power to multinational corporations and undermine the democratic process.

At the same time, UK businesses do need some form of protection from arbitrary decisions by foreign governments when they invest overseas, including in the US where legal systems are complex and vary from state to state.  That is why I’ll be voting to get rid of the flawed system of ISDS to replace it with a new form of investor protection – one that protects the investments of companies overseas but in a fair and transparent way.

You can read Catherine’s full piece here.

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18 Comments

  • “Overall, it is estimated that such a deal could boost the UK economy by £100 billion over a ten year period.” I would love to see the assumptions and calculations that support that! 🙂

    On a more practical note, the proposal to drop ISDS is essential. Whether in itself it is enough is a question I will leave to those more aware of the detail than I am.

  • The full article has just one further paragraph which outlines what that fair and transparent alternative is. A public, international investment court. Sounds like a very sensible idea.

  • Simon Gilbert 11th Jun '15 - 2:53pm

    ISDS is a golden goose for large corporations to target for regulatory capture. I would replace it with one agreement that states international companies operate under the same rights as domestic organisations. Attempting to set up a compensation or extra judice judicial structure to police this is meaningless unless a country is planning to go to war to punish infringements (which I wouldn’t support!)

  • Peter Bancroft 11th Jun '15 - 3:37pm

    This is the position which I think has the majority in the European Parliament and it seems a sensible enough compromise. Having seen ISDS in operation before I can’t get that worked up over what is a broadly functional technical dispute mechanism but it we can come up with something which is better than why not. Politically it’s also not a bad triangulation for us as Lib Dems to go with. Yes to free trade, but with a new and fairer dispute resolution system.

  • “Overall, it is estimated that such a deal could boost the UK economy by £100 billion over a ten year period.”

    Impressive! But wait – that’s only $10 billion a year which is important but not that huge and the claim is completely unsupported by any evidence or discussion of the accompanying risks. Please supply.

    Most, perhaps all, estimates of the benefits actually track back to a series of studies by the CEPR think tank commissioned by the EU so they’re hardly independent. Moreover the methodology they used has been widely debunked as being any use for studying trade effects. It is akin to NASA using a Ptolemaic Earth-centred model of the solar system for sending a probe to Jupiter. More credible studies predict huge job losses which is exactly what earlier trade treaties of this sort such as NAFTA have in fact delivered.

    The mechanism for such job losses is in fact obvious; it facilitates large corporations exporting jobs to countries where wages and standards are lower without risking losing their market access. Almost all the benefits accrues to those who control the corporations (directors rather than shareholders) that control the process. Few benefits if any accrue to the poorer countries involved or to the workers in any country. In short, the whole thing only benefits the 1%. Is that who the Lib Dems really represent?

    Nor is this about ‘Free Trade’. That’s straight Orwell. A big part of it is actually about protectionism for big corporations but it would never do to call it something more accurate; “neo-imperialism” would be far nearer the mark.

    http://ragingbullshit.com/2015/06/11/leaked-text-shows-big-pharma-bullies-using-tpp-to-undermine-global-health/

    (Note: although the link is about the trans-Pacific sibling of the TTIP, they both come from the same stable).

    Another part of it is based on the firm belief of market fundamentalists that unifying regulations at the lowest possible level by creating a race to the bottom is a good thing. Wrong! Why should fracking practices that may (arguably) be suitable in the empty prairie of North Dakota also be suitable for south east England where millions of people depend on the groundwater for drinking? One-size-fits-all does not always work.

    Also it’s all very well to talk of the advantages for small business but the average cost of bringing a case is close to $10 million so this really isn’t for them at all. Is there any evidence to the contrary from existing ISDS regimes or is it all just using selected small firms as propaganda props?

    When Sarah Ludford, then an MEP fist introduced the TTIP to the LDV readership two years ago there was no mention of ISDS or its immense constitutional implications which is a rather strange omission since it amounts to a repeal of Magna Carta for example by creating a separate court system they themselves control, not available to all and not subject to democratic control. The divine right of kings would be replaced by the divine right of corporation.

    https://www.libdemvoice.org/baroness-sarah-ludford-mep-writesan-euus-trade-deal-would-be-good-for-europe-and-for-britain-34623.html

    The swing against ISDS is purely a response to massive and sustained public opposition for which our elected representative apparently have a cloth ear.

    We already have a perfectly good system for handling this sort of thing – the ordinary law and courts. Does anyone have evidence that there is a problem that needs to be solved. (Hint: the US government says there isn’t.) It’ really quite simple. If companies want to invest here they should abide by our rules (which hopefully over time will become more co-ordinated with those on mainland Europe). If they don’t like those rules they can go elsewhere. It’s a big world.

  • Peter Bancroft 12th Jun '15 - 1:58am

    Gordon, you make some valid points about the £100B claim. Nobody knows the actual number at the moment as we don’t yet know what will finally be in the TTIP.

    You seem to be under the impression that this is in some way the world’s first free trade agreement though – TTIP is nothing really new, other than it potentially being more important than most others which have gone before it (which people attempt to demonstrate by throwing around numbers).

  • I feel a bit sorry for Catherine Bearder being the only UK Liberal Democrat elected to the EP.

    However, if what she says about shifting away from the ISDS is more than just window dressing it is good news.

    My difficulty at the moment is knowing if it is more than just window dressing.    Catherine’s article does not really help too much on that score.    I received a message from another source yesterday which including the following additional reports —

    Politico: Parliament postpones EU-U.S. trade vote:
    http://www.politico.eu/article/breaking-european-parliament-to-postpone-vote-on-ttip/

    The next meeting of the INTA (the trade committee) is on Monday:
    http://www.europarl.europa.eu/committees/en/inta/home.html

    Green Party: European Parliament TTIP vote cancelled because of “huge public pressure” say Green MEPs:
    http://mollymep.org.uk/2015/06/09/european-parliament-ttip-vote-cancelled-because-of-huge-public-pressure-say-green-meps/

    The Independent: TTIP vote postponed as European Parliament descends into panic over trade deal:
    http://www.independent.co.uk/news/business/news/ttip-vote-postponed-as-european-parliament-descends-into-panic-over-trade-deal-10310965.html

    TTIP “dirty deal” falls apart as EU debate and vote cancelled:
    http://arstechnica.co.uk/tech-policy/2015/06/ttip-dirty-deal-falls-apart-as-eu-debate-and-vote-cancelled/
     
    Is it true as some people report that shady corporate lobbyists were caught red-handed spreading lies about TTIP before the vote?
    Is it true that they had been e-mailing MEPs, making false claims about widespread support for TTIP?

    The more we know about this the better.   Can anyone else add to the information available?

  • ISDS is not needed – no, that is the understatement of the century No it is a terrible mechanism generating huge fees for the legal industry (whichever way a case goes, and makes the (UK or any other nation’s) taxpayers potential liable for massive compensation to private companies in a vary non-transparent way.

    Most of the criticism of the proposed ISDS has been based around potential challenges to the NHS, but this is merely the tip of the iceberg. Challenges could be mounted against any area of government policy – especially, but not limited to, the environment, human rights, health & safety, industrial policy, indeed any attempt whatsoever for any democratically elected government to regulate the market. ISDS is so seriously flawed that it verges on being evil!

  • Agree with Catherine, ISDS must be stopped so trade can grow without big business protectionism.

  • Jason J Hunter 12th Jun '15 - 11:01am

    A lot of people don’t realise that there are over 3,000 ISDS agreements in force around the world, and we are signed up to over 1,400 of them. By signing an agreeable final text of the TTIP it is a possibility that we could actually strengthen our position in ISDS cases with US corporations. The EU is already working with the UN to strengthen the ISDS process.

    “In TTIP the Commission wants to introduce a system of investment protection and a way for settling disputes between private companies and governments that is a real improvement on current practice. At the United Nations, the EU has successfully pushed for the first system of global rules to make ISDS more transparent.

    The Commission wants to anchor these same improvements in TTIP.
    It wants to:
    guarantee governments’ right to regulate
    make ISDS more transparent, for example by publishing proceedings
    introduce measures to make sure arbitrators are impartial
    oblige arbitrators to follow a code of conduct.
    clarify and limit investors’ rights
    allow interested parties, such as non-governmental organisations, to make their views heard and for their opinions to be published as part of the proceedings
    set up an appeals body to review ISDS tribunals’ decisions.

    Since the 1950s, EU member countries have signed some 1,400 bilateral trade and investment agreements, some with each other, the rest with countries outside the EU. These agreements include measures to protect investments and to settle disputes between private companies and governments (ISDS).

    The Commission’s proposals for TTIP are for a modern system for protecting investments and solving disputes that takes into account the public’s concerns.

    From 27 March-13 July 2014, the Commission organised an online public consultation to gather views on investment protection and ISDS in TTIP. In January 2015, the Commission published a report on the consultation. In the coming months, the Commission will discuss the results of the consultation with EU governments, the European Parliament and EU stakeholders.”

    So lets include ISDS in TTIP, but also ensure that it includes the added protections that we are already fighting for.

    Oh, and on the NHS, Labour MEPs claim to be ready to debate TTIP? And yet they say “We oppose the inclusion of ISDS (Investor-State Dispute Settlement) in TTIP, and have demanded security for our NHS and public services”.

    Clearly Labour MEPs do not know what they are talking about on either of these topics then. For starters on the NHS the agreement says as follows:

    “Neither TTIP nor any other EU trade agreement require countries to liberalise, deregulate or privatise public services at national or local level. This includes:
    public health
    state education
    public transport
    water collection, purification, distribution and management

    In its trade agreements, the EU always underlines its commitment to protecting public utilities at all levels of government, including the local level. Any decision to liberalise, deregulate or privatise such services is entirely up to national governments and local authorities. Trade agreements will not change that; TTIP will not change that.

    Nor will TTIP require EU governments or public health services to put anything out to private contract. Some EU countries have chosen to allow firms from countries outside the EU to provide private education and health services; others have not. This is entirely a choice of each national government.

    If an EU government decides to renationalise a service that it or a previous government had privatised or contracted out to a private company, it is free to do so. It would, of course have to respect its own national laws and EU law – for example, by paying compensation for expropriation. But TTIP will not allow US companies to sue the government for lost profits.”

  • John Ramsbottom 12th Jun '15 - 11:51am

    The only people that benefit from this type of agreement are the rich. I have heard all my life that making it easier for big business to make more profit (lower taxes, less red tape) will result in a trickle down making life better for the poor. All I see is the wealth gap between the rich and the poor getting larger.
    If the different standards between the EU and the US are causing a problem for our small businesses then negotiate a common standard on a case by case basis.
    When big business put a lot of money into lobbying and advisors, as they appear to be, you can be sure that it is only because they see it as a way to make themselves more money. It is not for the benefit of anyone else.
    The agreements that big business want would not be fair to all.

  • Simon Gilbert 12th Jun '15 - 11:53am

    ‘Good’ governments have no reason for ISDS in the first place as they will treat all companies equally under their law.

    ‘Bad’ governments will tear up ISDS if they wish to ignore it, and the other countries will then have to decide what to do about conviscated assets or debts – isolationism leading to regimes such as that in Cuba, or an acceptance by foreign business that the risk premium for doing business with the country has just risen.

    ‘Ugly’ governments will be good enough to avoid mass protest or uprising, yet will be week enough that large corporations will capture the regulation and the ISDS, such that being able to afford an ISDS claim is the price to enter that market, leading to failed markets with extremely high barries to entry, innovation and competition.

    Trading in other countries involves uncertainty, and it is foolish to believe words on paper can remove this if that is not the will of the other country.

  • Peter Bancroft,

    I don’t know why you think that I am under the impression TTIP is the world’s first “free trade” agreement since I explicitly refer to NAFTA which in many ways is the blueprint for it and which has been a disaster for US workers as explained in this link (and also for Mexicans and others but that’s another story).

    http://inthesetimes.com/working/entry/18016/trans_pacific_partnership_jobs_workers

    Although NAFTA is the blueprint I think there is also something new. We are seeing a salami-slicing strategy much as Thatcher deployed against the unions where each step was small enough not to cause a revolt but the cumulative effort was a profound change. That applies both to the legislation per se and also to its implementation as more and more extreme expectations and precedents are established. So, once the new rules are fully in place expect to see a upsurge in cases under ISDS and for them to be more and more offensive to common decency. Indeed we are already seeing that with oil and tobacco companies asserting that their “right” to profit is more important than the people that get killed in the process. Even in Europe we have already seen planned action on endocrine-disrupting pesticides implicated in male infertility and cancer shelved to facilitate the TTIP. And it’s not even agreed yet!

    The overall objective is for footloose international capital to free itself from all democratic control and regulation. And remember that it will not be for Parliament to decide when enough is enough or what constitutes a non-tariff barrier that can be struck down under the treaty; that power will be ceded to the lawyers employed by the large corporations. How do you imagine that will work out? And it’s not just annoying and petty regulations that are in the frame – so for instance if the lawyers so decide they could demand compensation for new taxes as impinging on the expected profits of international companies. In effect we would cede the power to govern to an unelected group of corporate employees with no accountability whatsoever. It’s quite astonishing that our elected representatives think that is a good idea. They just go all weak-kneed and starry-eyed at the mere mention of “free trade” however Orwellian the usage (and also appear to have zero knowledge of the history of free trade).

    Regarding the alleged benefits it’s not just that “we don’t yet know what will finally be in the TTIP”, it’s rather that the methodology used is laughable wrong and wrong moreover in a way that is guaranteed to wildly overstate the benefits. It’s propaganda forged from dodgy studies.

    Specifically the CEPR says they based their conclusions on a ‘general equilibrium’ model of the economy. In simple terms that’s one where all the individual markets that make up the economy as a whole are assumed to adjust rapidly back to equilibrium after any change so that, in the labour market for example, everyone who wants a job finds one! What that means in practice is that if XYZ PLC relocates an operation overseas making, say, 500 people redundant then a general equilibrium model assumes they all fairly quickly get new jobs. So, redundant oil platform builders become software engineers or something and any resulting unemployment must (by assumption) be ‘voluntary’; any unemployed former workers a presumed to either want an extended holiday or are simply be idle shirkers (you will recognise Tory propaganda memes in there). Good luck with selling that view on the doorstep at the same time as telling the voter you are on their side. And if the redundant workers don’t in fact get new jobs then the supposed benefits evaporate very fast as taxpayers become benefit claimants and demand is sucked out of the area round the now closed operation causing yet further losses and pushing more people into poverty. Studies built around more realistic assumptions do in fact project substantial falls in income in the UK which is, of course, exactly what NAFTA delivered in the USA. CEPR’s methodology will not capture those costs by assumption. How convenient for TTIP’s backers; anyone for evidence-led policy?

  • John Tilley,

    “I feel a bit sorry for Catherine Bearder being the only UK Liberal Democrat elected to the EP.”

    Official Lib Dem support for TTIP is part of the reason she is the only surviving MEP. I for one expect far less naivety and far more independent thought than our MEPs have displayed.

    If the party continues on this path then I confidently predict its final annihilation at the next election – in the US the Democrats paid a high price for passing NAFTA.

    http://www.alternet.org/economy/obama-twists-arms-tpp-lets-take-look-back-dems-who-sold-us-out-nafta

  • Denis Loretto 12th Jun '15 - 10:52pm

    On ISDS have people not seen the recent detailed Guardian article on the worldwide disaster that this procedure has turned out to be? There must be no question about it – the normal legal systems must apply to TTIP. Otherwise no TTIP.

  • The trouble is that ISDS et al will largely be too late in the day to offer any real protection to the general public. Remember ISDS only provides recompense to traders.

    Currently the real sticking points are around principles. So for example the EU in many areas adopts the “precautionary principle”, so a risk assessment isn’t wholly based on pre-existing scientific data, it can take into account doubt and uncertainty. Whereas the US stance is that a ban can only be imposed where there is scientific proof of harm; a very different position.

    In the case of cigarettes, we can see that scientific proof of harm was only put into the public domain several decades after it was known cigarettes were causing harm. So we can see straight away that the US threshold is much lower and protects the manufacturer and not the consumer. We can also see that ISDS in a treaty based on US standards, would actively prevent governments implementing preventative measures that were not supported by scientific proof…

    Hence we can say without any reservation that ANY trade treaty that does not uphold the EU precautionary principle has the very real potential to infringe the rights of EU citizens and hence has no place in a liberal society.

  • For those who think our MEP’s know what they are doing…

    The European Parliament this week made one of its strangest ever decisions, endorsing the replacement of the European cultural tradition namely, the French and German basis of European copyright with the very different Anglo-American concept.

    Things don’t bode well for them making a sensible decision over TTIP and ISDS…

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