The Trans-Pacific Partnership, a potentially historic trade agreement being aggressively pursued by the Obama administration, represents a cornerstone in its strategic pivot to Asia. If ratified by all 12 Pacific Rim countries currently engaged in the negotiations, it would create the largest free-trade zone in the world, accounting for some 40% of global GDP and a third of global trade.
President Obama’s trade representative (and Harvard Law classmate) Michael Froman is aligned with pro-free-trade ideologues on both sides of the aisle and much of the Republican-controlled Congress in his desire to “fast-track” the partnership. This would reduce Congress’ role to an up-or-down vote on the pact without the possibility of amendments or even debate on the floor.
What few seem to realize is that this agreement, if approved as is, could make it virtually impossible for the United States to meet its current and future climate pledges – including those made in its historic climate accord with China last month – without exposing the nation to unprecedented legal and financial risks.
How about a “not-so-fast” track instead?
Trade agreements are largely negotiated behind closed doors, and this one is no exception. While very limited information about its terms have been shared with the public, the media or policymakers so far, it’s concerning – though unsurprising – that some 600 corporate trade advisers, with names like Halliburton and Caterpillar, are listed on leaked drafts published by WikiLeaks earlier this month.
Based on those drafts, we also know that the draft agreement includes a provision for what’s called “investor-state dispute settlement.”
This little-known mechanism was initially created to protect corporate investments in countries where the rule of law is immature or at risk. In reality, it often empowers corporations to sue sovereign nations over any policies that conflict with their supposed right to the profits of free trade – including health and environmental policies designed to serve the democratically determined public interest.
If that sounds far-fetched, one need look no further than the Lone Pine Resources Inc v The Government of Canada lawsuit, filed in 2013, which arose out of Quebec’s moratorium on hydraulic fracking. Lone Pine claims that the moratorium is “in violation of Canada’s obligations under Chapter 11 of the Nafta”. The case is under arbitration.
Or consider Phillip Morris’ multibillion-dollar lawsuit against the Australian government over cigarette-packaging regulation, which uses an investor-state-dispute-settlement clause established in a 1993 free-trade agreement between Australia and Hong Kong.
These corporate-friendly provisions in trade agreements can and have been used on far-ranging issues, from minimum wage laws in Egypt to environmental remediation in developing countries. The troubling, explosive growth of such cases point to a litigious future where corporate interests increasingly appear to trump national sovereignty with billions of dollars at stake.
That’s not to say that those business interests aren’t legitimate. Trade can only flourish where the rule of law cannot be compromised by capricious actions of sovereign states when the political winds shift.
Global trade is a complex subject where economics and geopolitics converge. When managed thoughtfully, expanded markets for producers and enhanced choice for consumers on each side are achievable, but not inevitable, as some free-trade ideologues would like us to believe.
Unfortunately, as Nobel laureate Joseph Stiglitz explains in Globalization and Its Discontents, powerful corporations have been the primary beneficiaries of global trade, often at the expense of society at large and the environment.
US secretary of state John Kerry appears to live in an airplane shuttling from crisis to crisis. He may have missed the legal and financial quagmire risk the Trans-Pacific Partnership poses to his hard-won vital progress towards a comprehensive climate treaty, intended to be signed in Paris next year, which would put stringent carbon emission restrictions in place.
To avoid unintended policy conflict, here are some scenarios Kerry should urgently discuss with US trade representative Froman:
- The US may need to impose sharply escalating mileage standards on automobiles and trucks that all but make combustion engines a relic of history. Would the trade agreement – with the settlement provision – give Toyota and other companies the legal standing to claim that such mileage standards breach their right to sell gas-powered cars in the US?
- The US may decide to place an outright prohibition on dirty tar sands oil being used in any US refinery. In that case, would the trade agreement enable Suncor or other Canadian tar sands operators to sue the US government for unfair trade practices?
- The stranded-asset issue is perhaps the largest geopolitical challenge of all time. I’m referring to our need, according to the International Energy Agency, to leave the majority of existing fossil fuel reserves “stranded” or unburned if we are to avoid catastrophic consequences from climate change. I call the decision our “$20tn Big Choice.” How might this and other trade agreements compromise our ability to tackle this unprecedented challenge?
Can Americans fully appreciate the irony that our president and many parts of the Republican-controlled Congress appear finally to agree on one thing: fast-tracking the Trans-Pacific Partnership with no open debate on its threat to our sovereignty and to our democracy?
Against these threats, it would seem that the only clear beneficiaries of this ideologically driven brand of “free trade” are the corporate influencers with an inside seat at the table, and the Harvard lawyers that craft them.
Doesn’t sound “free” to me.