Opinion: TTIP: What could possibly go wrong?

The Transatlantic Trade and Investment Partnership is an agreement currently being negotiated between the EU and the USA to allow for freer trade between the two. We received an upbeat assessment of its progress and potential from Nick Thornsby a couple of weeks ago. It is currently Liberal Democrat policy to support it, but I have serious reservations about whether we are doing either liberalism or democracy any favours in this instance.

A trade agreement that reduced barriers and increased access to markets, thus lowering prices for customers, and increasing quality would be a great thing. However, this is not that animal. The negotiating is being done largely in secret, and is being heavily influenced by lobbyists for the corporations with consumer organisations nowhere. The biggest beneficiaries from any deal are going to be the large corporations.

Here is one small part of the agenda, further privatisation of the NHS, dismissively noted by Nick as a bit of an issue. TTIP incorporates and furthers the powers of international companies to sue governments for loss of opportunities. If, for instance a future government decided not to open NHS contracts to tender, a US based company could sue the UK government for loss of its opportunity to make a profit. See Patients4NHS and John Hilary in open Democracy

How does it sue? You may not believe this next bit but it is what is already happening, and will happen more under TTIP. It will be done in secret in front of a tribunal chosen from a small clique of lawyers, and subject to the most minimal scrutiny. It’s called ISDS – “investor-State dispute settlement”. Arbitration panels of this kind are already making more decisions than you might think and TTIP is set to expand their scope immensely. They work – for the companies that use them. That is why companies are setting up foreign subsidiaries – so that they can sue their own governments if they want to. 

Canada had to pay out $122 million to the Canadian paper company AbitibiBowater, which was using NAFTA rules to sue its own government from out of its office in the USA.

If you think it doesn’t happen here, get wise. You, the taxpayer, are shelling out £700 million to Fujitsu in a case so egregious that even the BBC reported it.

TTIP started out as a free trade arrangement. It has ceased to be that and is fast becoming a cowboy corporations arrangement. It is time supporting it ceased to be Liberal Democrat policy. At the very least we need to exclude the NHS from any provisions under this agreement, and we need to go right back to the drawing board with ISDS to replace it with a transparent and democratic alternative.

 

* Rob Parsons is a Lib Dem member in Lewes. He blogs at http://acomfortableplace.blogspot.co.uk

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33 Comments

  • ISDS is out. Canada will agree on a CETA without ISDS. The EU lacks political support get it into TTIP. NHS was not even the subject of TTIP.

    But: why should europe-28 open up their rules for a single player? Europe has its followers all around the world, most nations, for reasons of colonial ties or pragmatism, copy European laws. European nations have harmonised their rules. The US is completely out of touch with regulatory leadership, they have economic power, military power, cultural power but that does not extend to the regulatory domain. In a multipolar world EU-28 would continue to dominate the regulatory world and challenge Us exceptionalism.

    Mutual recognition is the trick to avoid the Brussels gravity center. Instead of reforming their 1974 Privacy Act and harmonise their laws with EU standards they torpedo the current reform of European data protection laws and seek a Safe Harbour exemption. The same in TTIP, mutual recognition, which means that lower standards prevail and regulatory flexibility is lost. But the truth is, the United States would have to adapt in a multipolar world order and TTIP would be a means to delay that. They need TTIP, but it is not essential for Europe in mere strategic terms.

    What else is there at stake? Buy America and Berry Amendment for instance. Protectionist policies of the US. The EU cannot hope to revoke them now but while negotiations are ongoing, the current trend in Us administration to expand their protectionist policies may come to a halt. US energy companies are challenging the US export ban on oil and gasoline products and use TTIP and the Ukraine crisis as a pretext. Europe can benefit a lot from a wait and see attitude. Time is on our side.

  • What could possibly go right?!

  • Simon McGrath 1st Aug '14 - 3:50pm

    Oh dear. Almost everything in this piece is wrong. The benefits of free trade are pretty well know and it is absurd to say that they only accrue to large companies.
    To pick up on a couple of the more egregious factual errors:
    “You, the taxpayer, are shelling out £700 million to Fujitsu in a case so egregious that even the BBC reported it.”
    The Government is in dispute with Fujitsu and in common with many other commercial disputes
    it has gone to arbitration rather than the Courts. Saves legal costs and gets a quicker hearing. What is wrong with this ?

    “Canada had to pay out $122 million to the Canadian paper company AbitibiBowater, which was using NAFTA rules to sue its own government from out of its office in the USA.” The Govt of Newfoundland expropriated the assets of the company over a weekend and passed a law which blocked its access to the Newfoundland Courts. It was a particularly outrageous use of state power. http://www.thecourt.ca/2010/08/27/canada-settles-abitibibowaters-nafta-claim/

  • Dave Eastham 1st Aug '14 - 5:24pm

    It might also be worth a look at the material the TUC have been putting out on this subject (see http://touchstoneblog.org.uk/2014/07/europes-people-speak-on-corporate-courts-in-ttip-politicians-must-choose-between-them/)
    The EU Commission has been consulting (a first apparently), on the issue of ISDS and received nearly 150,000 responses, mostly unfavourable.

    As has been said many times, as Liberal Democrats we are of course in favour of Free Trade. However, just because it is being presented as a Free Trade agreement. does not mean we should not look at the small print very closely.

  • As I understand it, TTIP is still very much in the negotiation phase, with many European member states now expressing serious concern about both the investor-state disputes rules and the cloak of secrecy that’s been drawn around the whole thing.

    Ironically enough, the European Commission is doing a much better job of placing its documentation, negotiating position and interests in the public sphere. http://ec.europa.eu/trade/policy/in-focus/ttip/ has a lot of stuff, much of it of course very much pro-free trade and laden with point of view specific stuff, but its better than the wall of silence we’ve been getting used to.

    The TTIP negotiations run parallel with CETA, a similar deal with Canada, which recently itself hit the rocks over the very same investor-state dispute rules that TTIP proposes. Again, the Canadian government has been very reluctant to say anything about what’s going on inside the negotiation room, but it was apparently European member states putting the pen down and refusing to sign into treaty the creation of an independent arbitrator that would bypass countries’ own courts. Canadian commentators were responding to this with the obsevation that Canada already has agreements with several EU members on how to process disputes between their governments and its companies, and that it would just have to create more of those bilateral relationships as necessary. We shall see whether they’ll have to in the end.

    Final completion of CETA is expected in September, and I suspect that what we see in that deal will be pretty much what the Commission wants to get the US to agree to as well.

  • Indeed, what could possibly go wrong?

    Well, for one thing this really isn’t about “freer trade”. Even the backers of the proposals admit that the possible benefits from lower tariffs are negligible. Of course they don’t say ‘negligible’ but they are when seen in context. And then too one should remember that economics isn’t physics; you can get almost any answer you want by subtly tweaking assumptions so what’s the betting that, under strong pressure from above, the evidence isn’t being “fitted around the policy” (as was infamously done to manufacture a reason to go to war in Iraq)?

    Then too it’s all very well to talk of the gain to the average person – presumably someone with precisely 2.4 children. What we should know by now from bitter experience is that economic gains are not delivered averagely or equitably by neoliberal policies like this one. It’s a racing certainty that a tiny handful will do extraordinarily well while a much larger number loose their jobs or have to take a pay cut.

    And again it’s part of the game plan of the TTIP and its companion agreement the TPP (for Pacific countries) that China is excluded. So, clearly free trade is NOT what this is about in any ordinary sense. What this is really about is achieving an end run around all those pesky regulations that defend citizens’ rights or the environment or whatever and which neoliberals so hate. It’s a way of watering down or abolishing any inconvenient regulation – not necessarily in one go, but over time.

    When politicians use language in an Orwellian way like this it should ring a very loud alarm. The Orwellian trick in this case is to obscure who the supposed freedom is for. For Lib Dems until recently this was always the people; for neoliberals it is corporations and that’s the sense in which it’s used here.

    We are supposed to think that somehow, by the magic of markets perhaps, anything good for corporations is automatically good for the people. That’s nonsense of course; responsible companies welcome rules that prevent them being competitively driven into a race to the bottom or to ripping off their customers to keep the City happy in the short term or destroying the environment. If you slide quickly past the key distinction between the freedom for people and freedom for corporations it’s amazing how few notice the logical fallacy involved.

    Not surprisingly, none of this would stand up to sunlight and transparency and the extraordinary secrecy involved suggests the TTIP’s backers know this. It took a case in the ECJ brought by the Dutch Social Liberal (D66) MEP Sophie in’t Veld against the EU Council to prise open negotiations to some scrutiny. Perhaps not entirely coincidentally D66 were big winners in the recent euro elections in sharp contrast to the dismal outcome here.

    http://occupylondon.org.uk/what-the-recent-ecj-ruling-means-for-transparency-in-the-ttip-negotiations/

  • Stephen Donnelly 1st Aug '14 - 8:10pm

    The TTIP is not just about reducing tariff barriers. A successful deal would reduce the regulatory barriers that exist between the the USA and Europe. That would reducing costs for consumers and provide a big open market accessible to all. The deal would be particularly good for small and medium sized businesses. I would hire new staff (living wage employer incidentally) immediately.

    It is quite reasonable for Rob to raise concerns, and nothing will stop liberals looking at the fine print, but let’s not throw the baby out with the bathwater.

  • Stephen Donnelly 1st Aug '14 - 9:43pm

    Rob. You highlight the fact that the issues are not clear cut. The elimination of regulatory barriers do not always work in favour of individuals, but that does not mean we should automatically resist them.

  • It’s Rob’s failure to read the big print rather than the fine print that concerns me. He says the TTIP “incorporates and furthers the powers of international companies” to sue the government if it does not open NHS tenders to private companies.

    The EU’s Trade Commissioner Karel De Gucht and his chief negotiator Ignacio Garcia Bercero have both clearly stated: “There will be an exemption for public services, we’ve made that very clear in our discussions with the US. That would cover the NHS, because that’s the most sensitive issue in Great Britain. That will be covered by the public services exemption.”

    See http://www.ibtimes.co.uk/eu-trade-commissioner-karel-de-gucht-confirms-nhs-exemption-ttip-1456538

  • Mark Inskip 1st Aug '14 - 10:38pm

    It’s Rob’s failure to read the big print rather than the fine print that concerns me. He says the TTIP “incorporates and furthers the powers of international companies” to sue the government if it does not open NHS tenders to private companies.

    The EU’s Trade Commissioner Karel De Gucht and his chief negotiator Ignacio Garcia Bercero have both clearly stated: “There will be an exemption for public services, we’ve made that very clear in our discussions with the US. That would cover the NHS, because that’s the most sensitive issue in Great Britain. That will be covered by the public services exemption.”

    See http://www.ibtimes.co.uk/eu-trade-commissioner-karel-de-gucht-confirms-nhs-exemption-ttip-1456538

  • Alex Macfie 1st Aug '14 - 11:34pm

    And we are supposed to take the EU Commissioner’s assurances at face value? Just remember that the only reason De Gucht has spoken out is the public outcry over ISDS. If this provision had not been exposed, both the EU and US negotiators would have quietly agreed to it. This is the chap who tried to railroad ACTA through the EU.
    And the question should not be what is to exempt from ISDS, but whether we have it at all. Secret tribunals overturning democratically formulated laws are simply not acceptable.

  • Rob

    “I’m told the UK government is in there lobbying for banking regulations to be relaxed – the very regulations which were put in place to prevent another 2008 crisis”

    Errr, Unless you know what regulations are planning on being lowered that claim is pointless. There are huge numbers of regulations (the FS handbook printed is over 6 feet tall) much of it dating back years. One regulation the treasury wanted abolished is the restriction on the UK applying HIGHER capital requirements than the EU minimum,

    Some regulations imposed may have been introduced by politicians because they were thought they would help but are pointless or worse like AIFMD.

  • Mark Inskip 2nd Aug '14 - 11:14am

    @Rob Paraons
    “Alex notes de Gucht is only responding to public outcry”

    No, he is simply repeating and confirming earlier statements made by his chief negotiator. See for example this letter written in early July to the Chair of the All Party Parliamentary group on TTIP;
    http://trade.ec.europa.eu/doclib/docs/2014/july/tradoc_152665.pdf

    Either you are unfamiliar with the details of the public information on the TTIP, or you are choosing to ignore or misrepresent it.

  • Alex Macfie 2nd Aug '14 - 12:28pm

    @Simon McGrath: What is wrong is when arbitration happens in secret, such that “the parties are even prevented from revealing where the hearings were held”. How do we know it is a genuine impartial forum? How is this appropriate when public money is at stake? It looks like a secret deal to hand taxpayer money to a private corporation, and that is not acceptable. Court hearings are transparent. These arbitration panels are not.
    Regarding the AbitibiBowater dispute, if the Newfoundland government has acted unlawfully, then why couldn’t its action be challenged in court? Of course, Newfoundland “passed a law which blocked its access to the Newfoundland Courts. ” Well if this happened the way you suggest, then it seems likely that such a law could be vulnerable to a constitutional challenge, either provincially or federally (you do realise that Canada has a constitution, as do each of its constitutent federal states?). Canada is not some banana republic with a reputation for political interference in the judiciary, it is a mature democracy that observes the rule of law. And I’m sure that a company AbitibiBowater would have the resources to mount a proper legal challenge. After all it seems able to set up a US subsidiary for the purpose of bypassing its own country’s legal system through a secret tribunal of biased hand-picked judges.

  • @ Simon McGrath – But which of the two completely opposite interpretations of ‘free trade’ are we talking about? The traditional liberal interpretation of ‘free’ in this context was where markets are open to new entrants and where the extraction of economic rent is reduced as far as possible by rules that enforce fair competition. The conservative view is the polar opposite, namely that no-one should challenge the ‘rights’ of incumbents and that they should be free from pesky regulations including any that might hinder rent extraction, for instance by gaining monopoly or oligopoly control over a market or other more devious methods. The TTIP is clearly cut from Conservative cloth. So do you favour the Liberal or the Conservative interpretation?

    Also it’s wrong to believe that free trade is always and invariably a Good Thing (which is what I take it you mean when you write “The benefits of free trade are pretty well known”). Free trade (of the liberal sort) can indeed be a good thing but, like anything else, it has its limits so we should not automatically give anything labelled ‘free trade’ a pass and assume it’s a Good Thing. Specifically, I don’t know of any example where a country (other than resource dominated ones) has got rich without some degree of protection for infant industries. The US in the late nineteenth century and China over the last few years are a classic examples. On the other hand if the dominant power of each age can use its muscle to enforce free trade (especially of the Conservative sort) then it expands its markets and more especially the profit potential for its elites. That is what the TTIP is all about. Why else do you suppose China is excluded?

    I also disagree with you about arbitration. Again, it can be a Good Thing but it can also be abused just like every other human invention or institution. See, for example, this case where an arbitration process was captured to became a tool for practicing fraud and deceptive trade practices.

    http://www.martinandjones.com/lawsuit-shines-light-on-biased-arbitration-forum

    In the specific case of the TTIP there is absolutely NO legitimate case for turning over arbitration to an entirely non-transparent ‘dark pool’ process that sits outside the established courts and legal system. (Whatever happened to those oft-repeated claims that Lib Dems stand for transparency?) It turns out that a tightly knit group of just 15 arbitrators have captured 55% of known Investor-State cases. Even worse these arbitrators move between the companies they represent and law firms and both prosecute cases and hear them. This is an almost perfect recipe for moral hazard and not surprisingly it has driven an epidemic of Investor-State attacks on national regulations. For graphical representation of this follow this link then go to page 11 then page 10.

    http://www.citizenstrade.org/ctc/wp-content/uploads/2013/07/GlobalTradeWatch_TAFTAslides_070913.pdf

  • Richard Easter 2nd Aug '14 - 1:43pm

    French multinational Veolia are suing the Egyptian government over rises to the minimum wage. Swedish Vattenfall are suing Germany over phasing out nuclear power.

    Labour are talking about renationalising railways. Should Virgin be allowed to sue the UK if a Labour government enact this. UKIP are against privatisation of prisons. Should G4S be allowed to sue the UK if a UKIP government scraps outsourcing?

  • TTIP is the antithesis of *free trade*.
    What TTIP means, is ~ you and your sovereign country, are ALLOWED to buy what goods and services WE the corporations, SAY you can buy, in order to boost our profits, and simultaneously close you off from a REAL free market, where you as a consumer might get better value, but lose us our profits and market control, and we reserve the right to sue your SOVEREIGN GOVERNMENT for any losses we make as a result of its democratically mandated action.
    And that is Free Trade ?

  • Mark Inskip 2nd Aug '14 - 3:34pm

    @Richard Easter
    “French multinational Veolia are suing the Egyptian government over rises to the minimum wage. ”
    They are doing this under existing provisions.

    The EU Commission has made subsequent changes to the investment protection and ISDS system in the . EU provisions which would apply TTIP under would not allow an investor to successfully challenge a non-discriminatory regulatory measure, such as the introduction or increase of a minimum wage.

  • Mark Inskip 2nd Aug '14 - 3:42pm

    @Robert Parsons
    I suggest you also read http://trade.ec.europa.eu/doclib/press/index.cfm?id=1115

  • Little Jackie Paper 2nd Aug '14 - 4:38pm

    Mark Inskip – I think that the heathcare stuff is a response to the case concerning Slovakia recently, unfortunately I can’t seem to find a working link. Whether this has any read-across to the UK (or indeed the US) I really don’t know. Maybe it is overbaked as a concern.

    I think that the concern with ISDS is essentially that this is coming dangerously close to binding future parliaments. Looking at PFI in the UK, the potential is for timescales in the decades. That concern seems to me to be rather more than theoretical. I know that in Germany there are problems with the energiewende removal of nuclear power and ISDS implications. Whether the policy of the German government or trade rules should prevail I will leave to your value judgment.

    Arguably if big multinationals are so concerned about the risks posed by foreign governments then they should look to the private insurance market and price the risk in to any investment rather than place reliance on these agreements. Equally one could say that if governments wish to outsource and privatise everything and be hollow states then they need to understand the need for firms to have some surety going forward.

    One example I can think of would be fracking. Would local rules preventing fracking be seen as a restraint of trade?

  • peter tyzack 2nd Aug '14 - 5:03pm

    we should not be doing any sort of deal with a country that has so much behind the scenes lobbying and funding of their politicians.. and they call themselves a democracy.. pah! Any deal they come up with can only be one way, like their extradition deal.. we should not discuss any new deals until we get that one sorted out first.

  • I forgot to include in my last comment that adjudication by a secret and unaccountable panel of lawyers completely overturns one of the most ancient and cherished principles of British justice, namely that justice should not only be done but be seen to be done in open court. I am astonished that a government containing Liberal Democrats has so little regard for our ancient liberties that it’s prepared to sell them out for the highly dubious promise of a small profit.

    Also, as LJP says, this comes dangerous close to binding future Parliaments. It doesn’t say so in so many words of course but the penalties include trade sanctions that could make it prohibitive to do so because the TTIP is intended to be very difficult to challenge or change unilaterally. This is tantamount to binding future parliaments via the back door. So do Lib Dems believe Parliament should be sovereign or not? (Hint: our ancestors spilt much blood to say it should be).

    Mark Inskip (at 3:42 pm today) links to a European Commission webpage that tells us it’s all perfectly fine. Well maybe, but they had to be dragged to court (see link in my first comment above) to force a bit of transparency on them. I’m sorry to say that in the circumstances a few honeyed words from bureaucrats skilled in such things do not fill me with any confidence.

    For instance we are told (guarantee 1) that ” if they wish, EU governments can organise public services so that just one supplier provides the service” and that this might be either a publically owned body or a private supplier with an exclusive right to offer a particular service. No doubt this is all precisely true (but possibly only on the narrowest parsing of its meaning). For instance, it is consistent with the possibility of a ratchet process whereby a government can’t take services back into the public sector once they have been contracted out – or at least only after paying compensation for loss of anticipated future profits. My understanding is that this is precisely what some participants are trying to negotiate but of course we don’t know when the draft texts are secret (except to corporate lobbyists). Again: where is that Lib Dem commitment to transparency?

    That we should be having to debate the ‘rights’ of multinational corporations as if they were some sort of endangered species illustrates is just how far to the right the Overton Window has been dragged over the last 35 years. It’s time to pull it back to where people and the planet matter and where corporations are servants not masters.

    http://en.wikipedia.org/wiki/Overton_window

  • Mark Inskip 3rd Aug '14 - 10:27pm

    @GF I find it rather irony that someone who doesn’t use their name in posts complains about transparency

  • Richard Dean 4th Aug '14 - 4:13am

    A pseudonym does not invalidate the arguments presented under that name. It can even be helpful to present them that way, so that the reader is freed to focus on the arguments rather than the name.

    How can anyone know anyway that a name is a valid name anyway? Mark Inskip, for example, might be a corporation for all most readers can tell. Richard Dean might include a whole family of Deans!

  • Richard Dean 4th Aug '14 - 4:45am

    Returning to the actual issue, is it ultimately the electorate that would either pay the taxes to pay the damages to the international corporation under ISDS, or suffer under an unsuitable policy in order to avoid paying the likely damages? Is it ultimately the citizens and their descendants that are being bound?

    Contract law already exists, and companies can sue for breach of contract, which seems to be what is happening in the Fujitsu and other examples so far cited. While there are major issues about transparency – the reputational damage argument looks weak to the point of irrelevance to me – but the process seems to work after a fashion. So why have ISDS?

    My guess is that ISDS will reduce the risk perceived by an international company at the time that it is making investment decisions, and will therefore increase the chance that the international company will invest. Put another way, it’s transferring the risk from the international company to the citizenry. Is that really a good deal?

    Maybe the alternative is that international companies will invest more in the third world, where the higher political risks can be offset against the lower wages? Is that what ISDS is attempting to avoid? Is ISDS just protectionism? Investment seems to be just what the third world needs!

  • TTIP is a potential dangerous step too far and the potential disadvantages could threaten the very essence of democratic power to govern in the interests of the people without the exertion of commercial interests by multi national companies. This needs more public debate and engagement before we agree to this….sign nothing agree to nothing without proper and meaningful clarity and understanding of the effect and consequences of such far reaching agreements…….

  • Martin Wilson 2nd Jan '15 - 3:55pm

    This proposal is so potentially damaging to National Sovereignty that Lib Dems should not even consider anything but opposition. UKIP jokers claim that the EU is a threat to our national sovereignty, but how much more so is this The current ISDS provisions have revealed how unscruplous companies (Montsanto and Cargill to name but 2) will behave to achieve their own ends. I understand (not personally verified) that the US state of Vermont want GM ingredients to be labelled and this would make them the first US state to do so. What happens? They get sued by Montsanto, the company which produces GM foods in the US but will not serve it in its own staff canteens.

    I intend to be active in next May, but unless the LIB Dems start voicing opinion firmly against it, it will be for the Green Party, not the Lib Dems. They are able to see the potential perils.

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