The Sir John Monash Lecture Series 2016 at Monash University Malaysia (01/2016) – ‘Trans-Pacific Partnership: Winners and Losers” by Dr Jomo Kwame Sundaram
This lecture will consider the nature of the Trans-Pacific Partnership Agreement (TPPA). It is generally agreed that the gains from increased trade are very modest. Most of the purported benefits will come from so-called ‘non-trade measures’ including financial services liberalisation, strengthened intellectual property rights and the notorious investor-state dispute settlement provisions.
The TPPA also constitutes a major blow to trade multilateralism, ASEAN commitments and developing country solidarity at a time of likely protracted economic stagnation.
Dr Jomo Kwame Sundaram
Dr Jomo is the Tun Hussein Onn Chair in International Studies at Institute of Strategic and International Studies (ISIS) Malaysia. He was an Assistant Secretary-General working on economic development in the United Nations system during 2005 – 2015. During 2008-2009, Dr Jomo served as adviser to the President of the 63rd United Nations General Assembly, and as a member of the (Stiglitz) Commission of Experts on Reforms of the International Monetary and Financial System. Dr Jomo was a Professor in the Applied Economics Department in University of Malaya. He has received several honours and awards for his work including the 2007 Wassily Leontief Prize for Advancing the Frontiers of Economic Thought.
TPP Impacts: Governance (Workshop by Sanya Reid Smith)
Post
In this article we talk about how the TPP will affect state governance in member countries. Governance is the processes through which a country is run, and the interactions between different governmental and non-governmental entities to make decisions based on national interest. How will the TPPA work within the relationships between federal, state and local governments? What about issues of corruption and law breaking?
This series is brought to you by TPPDebate.org based on a recent NGO briefing on the Trans-Pacific Partnership (TPP) in Malaysia by Ms Sanya Reid Smith, an expert on Trade and Investment Rules. She has been monitoring the Trans-Pacific Partnership Agreement (TPPA) since 2011, and is also the resource expert for Bantah TPPA Malaysia. The entire talk is uploaded on YouTube in a seven part series and can be accessed here; this article is drawn mainly from Parts 2 and 5 of the talk. The index of the series is attached at the end of the article.
Video starts at 10:38
ISDS is binding across local, state, federal governments
With the Investor-to-State Dispute Settlement, to enforce the investment chapter, the US investor can sue the Malaysian government if they don’t comply. Remember that it is binding on all levels of government, so say the PJ Government doesn’t comply, and they ban something that is not allowed to be banned. The Malaysian national or federal government gets sued by the US company. The national government must defend itself, and sometimes it says, ‘I don’t want to defend very hard lah, this is some other political party’s policy in this state. It’s not my political party, why should I defend this action? Or they make them pay. They say to the state or local government, ‘It’s your fault, you pay my legal fees. Eight million US dollars, fifty million US dollars to defend – because it’s your fault, you broke the law.’
Then the national government defends the case, hard or not hard we don’t know, but let’s say they lose. And they have to pay the fifty billion US dollars to the foreign investor. If they don’t pay, under the TPP, the home country of the investor, the US government, can raise the tariffs, taxes on Malaysia’s exports until it pays the fifty US billion dollars to the American investor. So there’s a double enforcement. Then, say the Malaysian national government, the federal government pays the fifty billion, and they turn around and say to PJ ‘It was your fault, you banned this fellow.’ So, can he get the money back from the PJ local government, or in another case, the Penang state government? It depends on each country’s law.
Which government pays when investor sues because of a state government action?
In Canada, the provinces kept violating the US free trade agreement, and the national government kept getting sued, and kept paying, and they got sick of it. And they said, ‘Next time, provinces, you pay!’ So now the provinces are having to pay when they ban a mine, for example, when they get sued and if they lose, they settle, whatever, they pay.
But in Mexico, the same thing happened. The Mexican local government and state government banned a toxic waste dump because it was going to pollute the water supply, which people were drinking. The national government got sued. They lost. They had to pay sixteen million US dollars to the investor. The national governments sued the local and state governments in the Mexican Court, under Mexican law, saying ‘Give me back the US$16 million I paid because it was your fault.’ But under the Mexican Constitution they could not get their money back.
Federal government will be signing on behalf of local, state governments
So, it’s interesting consequences both ways, right? Because under the TPP, it’s the national government that is responsible for the state governments, which can be from a different political party and which under the Malaysian Constitution have some things that are state rights, right? The Malaysian Constitution has Federal list, state list, concurrent list… The national government cannot control the subnational governments but the national government would be liable for the subnational governments’ actions. That’s one option.
The other option is that maybe in Malaysia the federal government can withhold the allotments, or withhold the discretionary spending on highways that the federal government was going to give the state, and thus force them to pay back the compensation the federal government had to pay when it lost the ISDS case for a subnational government’s actions. If that’s the case, then the federal government on the 4th of February will be signing on behalf of all the state governments and all the local governments, including PJ, and binding them in those chapters and making them liable because the federal government can and will get the money back from them. So have all the subnational governments been informed? Have they all been consulted? Did they realize? Have they consented? Have they set aside in their budgets enough money to pay the legal fees, the damages, the compound interest?
Because they will all be on the hook once the TPP starts. Because the federal government is signing on their behalf on the 4th of February. And I understand in Malaysia there is some discretion whether the federal government can hold back money from, say, Penang, in the allotments or in the highway funding or something. So it looks like in Malaysia, politically, the federal government can say, ‘It’s your fault, I’m going to hold back your money,’ now the state doesn’t get the money or whatever.
Video starts at 9:17
Ecuador: Had to pay law-breaker
There was a famous case in Ecuador where the oil company broke the law. And when you break the law in Ecuador for this matter, the law says you can punish the company by canceling the permit. So Ecuador canceled the permit. The oil company sued the Ecuador Government under equivalent provisions that have been agreed in the TPP that Tok Pa will sign next month, and the oil company won. Ecuador must pay the law-breaker 2.4 billion US dollars. Because the investment chapter of the TPP is about the rights of the investor. It doesn’t matter if the investor has done something wrong. Not clean hands, broken the law, it doesn’t matter, the investor always has his rights. And if the rights of the investor are infringed, he can sue and he can win.
Ecuador again: ordered to interfere in its own court system
I don’t know if anyone’s interested in separation of powers, independent judiciary…? OK. The Chevron case. Again in Ecuador, Chevron polluted the rainforest, you probably remember, in the Amazon, 30 thousand indigenous people sued, in a class action. They sued Chevron in the Ecuador courts and they won, 18 billion US dollar fine on Chevron, to clean up. Chevron didn’t want to pay. They sued the Ecuador Government under the investment chapter, saying this court decision is expropriating their profits. Chevron was going to make profits and now it must pay the fine.
So that case is not decided yet, but along the way, the ISDS tribunal, the same kind that Malaysia can be sued at in the TPP, ordered the Ecuador Executive branch of Government, the president, to interfere with his courts, to stop the 18 billion US dollar fine on Chevron becoming final. Ecuador has separation of powers, like Malaysia. The Executive is not supposed to interfere with the courts. In Ecuador, if the president does it, he goes to jail. Never mind, the ISDS tribunal repeatedly ordered the president to put himself in jail by interfering in his own court system. There is no constitutional safeguard, or separation of powers in this system.
Video starts at 11:47
India: Had to pay the corruptor
And lastly, those of you who are interested in anti-corruption? There are a lot of ISDS cases, I’m just telling you about the cases that might be interesting for you. In India, I don’t know if you remember, they had a 2G phone licence scandal. Remember 2G, 3G, 4G, that mobile phone spectrum is limited, right? It’s a limited amount. All the phone companies want it. So you auction it, and you make a lot of revenue for the government, billions of dollars.
In India, for 2G, the Minister just gave out the licenses, there was no auction. He was tried for corruption, he went to jail for corruption, the Indian Government said, ‘We’ll cancel the licenses that were given corruptly, because of corruption we lost billions of dollars of potential revenue.’ The investors who corruptly got those licenses are suing the Indian Government, for the billions of dollars of lost profits they would have made if they could have kept their corrupt licenses. One has already won. The Indian Government must pay the corrupt fellow 672 million US dollars. Pay the corrupt fellow, pay the law breaker, pay the environmental polluter. The opposite of what you normally think: ‘don’t pay the polluter.’ This is the investment chapter.
Index of the Series
This series contains 20 articles on the TPP, and can be read in any order:
TPP Impacts: Sovereignty (Workshop by Sanya Reid Smith)
Post
This article explains how the TPPA can affect member countries’ ability to govern themselves. It focuses on the Malaysian perspective, and looks at why developing countries like Malaysia need to update laws constantly for new developments in current affairs, and how the TPPA might restrict that. There have been cases of the US interfering with law making in countries such as Peru and Australia.
This series is brought to you by TPPDebate.org based on a recent NGO briefing on the Trans-Pacific Partnership (TPP) in Malaysia by Ms Sanya Reid Smith, an expert on Trade and Investment Rules. She has been monitoring the Trans-Pacific Partnership Agreement (TPPA) since 2011, and is also the resource expert for Bantah TPPA Malaysia. The entire talk is uploaded on YouTube in a seven part series and can be accessed here; this article is drawn mainly from Parts 1, 2 and 4 of the talk. The index of the series is attached at the end of the article.
Video starts at 15:20
Governments restricted in ability to make laws that harm foreign investmentors
The TPP investment chapter protects the rights of investors from other TPP countries, eg “to be treated fairly and equitably”. What’s the problem, right? We must treat everybody fairly and equitably. But, recently, this has become widely interpreted by the international tribunals who decide the case. One of the ways that it can be interpreted, is that the government cannot change the laws and regulations, or have new laws and regulations, in a way that harms the foreign investor from the other TPP countries.
Eg because, when Philip Morris the tobacco company came to Malaysia 45 years ago, he expected constant laws and regulations until he leaves Malaysia in 99 years’ time. Never mind that along the way they found out that smoking kills people, and you want to ban tobacco advertising, and you want to have health warning labels, and you want to have a tobacco tax. Too bad. Unfair to the foreign investor. He must have a constant regulatory environment, otherwise it’s unfair to him.
If that is the case, then parliament close shop lah, what’s the point? The parliament’s job is to make laws, change laws, amend laws – often in response to new circumstances.
Video starts at 0:00
We need to update laws due to new circumstances
I don’t know if you remember the plastic in baby bottles – the BPA in baby bottles right? We banned the BPA in baby bottles. Ten years ago we didn’t know. We found that it was a newly dangerous chemical and it was banned. Banning is a problem under this fair and equitable treatment obligation. It’s been a problem in many of the cases we can look at, when governments ban a dangerous chemical and they get in trouble.
Or you have a financial crisis, so you have to re-regulate, tighten the regulations on the banks so you don’t have another one, and each time the crisis is for a different reason, right? You have to close a new loophole. And the same for climate change. Now we know about climate change, we want to restrict the emissions of the factories, so they don’t put out too much carbon dioxide.
Developing countries in particular change their regulations more
So these kinds of reasons for changing – especially in developing countries, often we need to change our laws more, because we might not yet have all the laws. Does Malaysia have a noise pollution law, that says no construction in a residential area after midnight? If we don’t have yet, then we need to introduce. As we are developing, we need to change our laws and regulations. As the economy changes, society changes, the ability of the government to regulate changes, then laws need to be changed.
So usually developing countries need to change their laws more than the developed countries. So this fair and equitable treatment standstill provision can be even more of a problem for developing countries if they cannot change their laws and regulations. You could even think about making anti-corruption laws tougher, raising the minimum wage… we’ll come to those cases.
Video starts at 8:06
(This is a continuation of what has been discussed in another article on what happens after we sign the TPP. Within the certification process that comes after ratification, the US government can make further demands on TPP member countries, as part of their certification process. The letter of certification comes after the US is satisfied with the implementing laws in these countries, thus setting the TPP in motion.)
Peru: US wrote their environmental law
What they do for some countries is, they write your implementing law. This happened to Peru. Their whole environmental law was written by the US government. The US government gave it to the Peru parliament, and said, ‘you pass this with no changes. Cannot change one letter, otherwise the US free trade agreement won’t come into force.’ So the Peru parliament is a rubber stamp for the US government, and the Peru parliament said ‘yes sir America, we passed it, with no changes, please let it come into force.’ So it did.
So with this certification process for the TPP, what is the role of the Malaysian parliament? The Malaysian parliament is supposed to do the least worst implementation of this problematic agreement, but the US Government can write the implementing law in the way that favours the US, add a few extra things that are good for the US, and the Malaysian Parliament may have to say ‘Yes sir, I’ll pass it with no changes.’
Australia: Forced to narrow its exception to copyright
This doesn’t just happen to developing countries. Even Australia went through this. In the Australia-US free trade agreement, the Australian Government had to give an extra twenty years in copyright, like Malaysia in the TPP. They didn’t want to. They are a net importer of intellectual property. They wanted affordable textbooks for their students, but they had to give a copyright period of ‘life plus 70 years’. So they said ‘okay, we’ll have a broad exception to copyright for our students, and fair use in this law.’ So that’s what the Australian Parliament passed as the implementing law. It had a big exception to copyright.
The US government looked at what came out of the Australian Parliament, they said, ‘That is unacceptable. You failed. Go back and do it again. Narrow the exception for copyright, otherwise we won’t let the FTA come into force.’ So the Australian Parliament had to have an emergency overnight sitting with three hours’ notice, passed a narrow exception for copyright that cannot be used and has not been changed, and then the US government said, ‘Ok now it is acceptable. Now we will let it come into force.’ So this even happens to the developed countries.
Index of the Series
This series contains 20 articles on the TPP, and can be read in any order:
TPP Impacts: On Society (Workshop by Sanya Reid Smith)
Post
In this article, we cover the impacts of the TPP on societal issues, namely health and environment, human rights, labour rights, and privacy. The TPP has an exceptions chapter which covers health, environment and privacy issues but does not apply to all chapters, such as investment and intellectual property rights chapters. An overall assessment reveals that the TPP can weaken human rights, labour rights and privacy rights in Malaysia. This article can be read together with the other TPP impacts on sustainable development, on the Malaysian environment and economy.
This series is brought to you by TPPDebate.org based on a recent NGO briefing on the Trans-Pacific Partnership (TPP) in Malaysia by Ms Sanya Reid Smith, an expert on Trade and Investment Rules. She has been monitoring the Trans-Pacific Partnership Agreement (TPPA) since 2011, and is also the resource expert for Bantah TPPA Malaysia. The entire talk is uploaded on YouTube in a seven part series and can be accessed here; this article is drawn mainly from Parts 2, 3, 4 and 5 of the talk. The index of the series is attached at the end of the article.
The investment chapter can override effectively the TPP’s labour and environment chapters, because even when you comply with them you can be sued by a foreign investor for money, plus compound interest and so on. In the TPP generally, there is an exceptions chapter. The exceptions chapter covers health and environment, I think also privacy, but not women, not culture, not indigenous people, not children. Basically health, environment and kind of privacy.
Those exceptions, health, environment and privacy, do not apply to all the TPP chapters. They do not apply to the investment chapter, which causes all those problems for the environment and health. They do not apply to the intellectual property chapter, with all the problems of medicine prices, because the rights of the foreign investor and the patent owner are more important than the human rights for health and protecting the environment.
Exceptions chapter is very difficult to use
And even in the chapters that it applies to, it is very difficult to use. The TPP imports/ copies the exceptions from the World Trade Organization rules. Countries have tried to use the exceptions 44 times since 1995 when the WTO started. How many times do you think they’ve succeeded? Once. 43 out of 44 times they could not meet the 5 steps needed to pass it, to use that exception. So it’s a very difficult to use exception, even in the chapters that it applies to, even for the things that it applies to, like health, privacy and the environment. So you have a partial exception to some chapters that is so hard to use, you almost cannot use it. Also, the exception is not for human rights generally, of course not, certainly not civil and political rights.
Video starts at 10:19
Thailand: FTA with US is like a tsunami on human rights
We come to the question of human rights impact assessments. The UN Special Rapporteurs for different human rights issues have said that, before countries agree to these things, they should do a human rights impact assessment to see what the human rights impacts are, and if they should sign or not, given the human rights impacts.
Has Malaysia done a human rights impact assessment? We haven’t seen lah. Thailand did. When Thailand was negotiating the US free trade agreement, which they didn’t sign, their National Commission for Human Rights, like SUHAKAM, did a very comprehensive study of all the different chapters of the US free trade agreement, and they came to the conclusion that it would be like a tsunami coming to wash over Thailand and destroying it. That was the Human Rights Commission of Thailand’s conclusion. But SUHAKAM, to our knowledge, has not yet done a human rights impact assessment.
Video starts at 12:46
Labour rights are only enforceable if US government sues Malaysia
For those of you who might have noticed that in the TPP there is an environment chapter, there is a labour chapter, we think that’s very nice, right? Well, the labour chapter does have some labour rights in it. The labour chapter itself is quite vague, but in the side letter, the Labour Consistency Plan between Malaysia and the US gets a bit more specific about human trafficking and so on. And it’s enforceable by governments suing each other.
The problem is, number 1, it is only between Malaysia and the US. The Australian Government cannot sue Malaysia because of Malaysia’s violation of labour rights, only the US Government can sue, because it’s bilateral, right? However, the US Government doesn’t sue about these labour rights. It has sued once, Guatemala, after all the trade unions lobbied and lobbied.
US government is unlikely to sue Malaysia for labour rights violations
You might know that there is a US-Colombia free trade agreement. Colombia murders its trade unionists regularly. Even though they murder their trade unionists, the US hasn’t sued, under the US-Colombia free trade agreement labour chapter. Even though murdering your trade unionists is a clear violation of labour rights – it doesn’t get any clearer than that – you killed the fellow. Still the US Government decides not to sue.
So this is even under a Democrat president, can you imagine if the Republicans get into power in the USA? They hate labour rights, there is no way they are going to sue Malaysia to enforce the labour chapter or the labour side letter. So even though it’s there, it’s basically on paper, because only governments can sue. The trade unions cannot sue, the trafficked worker cannot sue. Not like the investor, he can sue. But the labour rights are only enforceable between Governments. And if the US Government chooses not to sue… Nothing we can do to enforce it.
Egypt: Got sued for raising minimum wage
In addition, the investment chapter can effectively override the labour chapter. There was a case after the Arab Spring in Egypt where the government said, ‘The people have spoken. We are going to raise the minimum wage. Let’s go for democracy, and you know, power to the people.’ They raised the minimum wage, they got sued by a foreign investor. He said, ‘You are reducing my profits, now I must pay these workers more money.’ That case is not yet decided, but it has made the trade unions so upset that now they’re really really campaigning against the Investor-to-State Dispute Settlement.
Video starts at 14:56
Cross-border movement of labour is minimal under TPP provisions
One of the things that, by the way, that is in the investment chapter, is free movement of capital. The money can come and go, and you can only have restrictions in emergencies, threat of emergency, and so on. But the people don’t move so easily. In trade law we call it movement of people – the ‘people’ becomes like a ‘thing’. Typically the developed countries do not want to lock themselves open to allow foreign workers in. They want to take them when they need them, brain drain the nurses when they need them, and kick them out when they don’t need them.
They don’t want to be forced to be locked open in the event of a recession with high unemployment, that they must take how many foreign workers a year. So they don’t like to lock themselves open to allow foreign workers in a trade agreement. Even when it’s not a recession. If they do allow movement of people, it’s usually corporate transferees. Citibank’s manager can work in Malaysia. Fly-in-fly-out lawyers from Australia can work in Malaysia. Accountants can come in, technicians… it’s not your unskilled farmers and construction workers.
US did not open border at all in TPP to workers
And in the TPPA, I haven’t read it all yet, within the section that is about movement of people, eleven countries allowed some high-level corporate people to go backwards and forwards. US did not open at all. Not one single Malaysian can go to work in the US under the provisions of TPP. And even if they had opened, for instance, if you are a lawyer and you want to work in the US, you must get your law degree recognised by the Bar Council, which is a private body. The government cannot force them to recognise it. And it’s state by state, one for New York State, one for Oregon and so on. Same for doctors.
So even if it’s open to people, you don’t get your qualifications recognised automatically. You don’t get a visa, the visa is not part of it. You have a right to work with no visa or qualifications… So it’s not a very good way for Malaysians who think they’re gonna get jobs overseas. The question about the migrant workers’ rights comes in under the Labor Consistency Plan.
In the US, one of the reasons they do not open to foreign workers is because in the US constitution it is the Congress, the Parliament, who has the right to do immigration, not the trade ministry, who negotiates the TPP. And when the US trade ministry tried to give visas in the Chile and Singapore US FTAs, they got a tight slap from Congress. ‘You must not do this, it’s unconstitutional, never do it again,’ so they cannot lah, and they have not.
Video starts at 1:01
Cross-border flow of personal data is mandatory
So there’s a whole chapter called E-commerce, which has various things in it, in the TPP. But one of the things that the US cloud computing companies, your Google, your Dropbox, your iTunes… who store your data in the cloud, they want to have one server storing all your data in the whole world in the cheapest place for electricity. They don’t have to have one in every country, right? Very troublesome for them.
So, in the TPP, in the e-commerce chapter, the general rule is: you must allow cross-border data flows; you must allow the sensitive health, finance, tax records of Malaysian citizens to go out of Malaysia to be stored anywhere in the world. Even if those countries have no privacy laws, even if they sell your private data to insurers and advertisers, and even if the US Government can walk in and take it like Snowden showed us happens in the US. Too bad. You have to let it go out. Today in Malaysia there is a PDPA, a Personal Data Protection Act, right? Which says that Malaysian personal data must be stored in Malaysia or basically Singapore lah. In the TPP you have to let it go out, even to the US.
Malaysia did not get an exception on privacy protection
Now there are some attempted exceptions on privacy, but again it uses that wording they borrowed from the WTO that makes it so hard to use – it has a success rate of one out of 44. You could schedule exceptions. You could try and ask for exceptions if all the other countries agree. But, from memory, Malaysia doesn’t have any of those exceptions, so I don’t know what happened to the PDPA, I think it’s gone already. It basically locks in the ability for the US government to spy on Malaysian data. The Australian Government tried to get an exception to this. In TTIP, the transatlantic free trade agreement being negotiated between the EU and the USA, the EU is very privacy minded. The Australians think that maybe the EU will get an exception, and the Australians want the same exception as the EU. But Malaysia didn’t ask for that or didn’t get that.
So, basically, the e-commerce chapter also prevents you from requiring the data to be stored locally. For example in Australia, if you go to your doctor, your general practitioner, and he takes down your health records, and he stores them on the cloud electronically, that cloud must be in Australia. To make sure that Australian privacy laws apply to your health data. It cannot be stored in a cloud somewhere in some country with no privacy laws.
That requirement for local storage is not allowed. No local storage requirement for data unless you got the exception. If not, you have to trust that one out of 44 success rate for privacy exception. So the e-commerce chapter locks in the right for the US Government to keep doing spying the way Edward Snowden showed us the NSA is doing. So that’s also going to be part of what Malaysia signs on the 4th of February 2016 and what goes to the Malaysian Parliament on the 26th of January 2016.
Index of the Series
This series contains 20 articles on the TPP, and can be read in any order:
What if we don’t sign? What if we don’t comply? What if we want to withdraw? In this article we address the commonly heard concerns on the TPP from the Malaysian perspective.
This series is brought to you by TPPDebate.org based on a recent NGO briefing on the Trans-Pacific Partnership (TPP) in Malaysia by Ms Sanya Reid Smith, an expert on Trade and Investment Rules. She has been monitoring the Trans-Pacific Partnership Agreement (TPPA) since 2011, and is also the resource expert for Bantah TPPA Malaysia. The entire talk is uploaded on YouTube in a seven part series and can be accessed here; this article is drawn mainly from Parts 5 and 7 of the talk. The index of the series is attached at the end of the article.
1. What if we don’t sign?
Video starts at 3:02
We already have a good baseline with existing treaties and WTO
One thing you might hear a lot about with the TPP is that these countries have 40% of gross domestic product, 800 million people, we must be in it to win it, we have to be in the market. But remember the baseline today: all the 12 TPP countries are in the World Trade Organization (WTO) already, where the US is not allowed to raise their tariffs above the level that they are bound at at the WTO, even on Malaysia’s products, even if Malaysia doesn’t sign the TPP. They are locked in. They cannot go above to punish Malaysia. And the locked tariff rate, on average, is 3 percent in the USA. It’s pretty low, because remember, when you go to zero tariffs, it costs you five percent in costs of compliance with the rules of origin to get to the zero tariffs.
So, we’re all in the WTO already to start with. Furthermore, Malaysia already has free trade agreements with low or zero tariffs with all the TPP countries except four. Of those four it’s the US, who already has low bound average tariffs at the WTO, 3 percent, so not much difference going to 0% in the TPP. Canada, has low average bound tariffs at the WTO of 6%, and that leaves Mexico and Peru. If it is really such an important thing to get Malaysian exports into Mexico and Peru, then you have a free trade agreement lah with Mexico and Peru, where we just have six chapters about removing tariffs and none of these chapters on intellectual property, ISDS and these other things.
Video starts at 8:03
Most countries in the world do not have an FTA with the US
I counted, and there are about sixty countries who started negotiating a free trade agreement with the US. Always very optimistic. ‘I will get a good deal, my prime minister is special friends with the US president, he goes to his ranch for BBQ. I will get a special deal,’ that’s what the Australians thought for their prime minister. He got the same deal as everybody else, the same text because the US has a template: ‘you sign here.’
So a lot of countries, after twenty five rounds of negotiations, where they had not succeeded in making any significant change to the initial US template that came, they looked at the final version and said ‘you know what, this doesn’t suit my country’s national interest, thank you, but no thank you, I won’t sign.’
40 out of 60 countries walk away from a US FTA
And this is what Switzerland did. Switzerland was negotiating a US free trade agreement, they looked at it after two or three rounds, they said to the US: ‘Must you have this on intellectual property and agriculture?’ US said, ‘We must. It’s our red line.’ Switzerland then said, ‘Thanks but no thanks, let’s stay friends but we don’t need this free trade agreement. We can continue to trade with each other under the World Trade Organization where we all have low tariffs. Let’s just carry on without it.’
So out of the sixty countries it started negotiating with, 20 signed. Two-thirds walked away, because it didn’t suit them. So the majority don’t start negotiating, and from all those who negotiate, two-thirds don’t sign because it’s so bad for them. Very few sign, very few can cope with the substance of what the US insists on.
2. What if we don’t comply?
Video starts from 9:26
Economic sanctions make TPPA very enforceable
Once you sign, and it comes into force – what happens if you don’t comply? So, remember that it is state-to-state dispute settlement for most of the chapters. Say you don’t give the longer patents or the longer copyrights. The US government can sue the Malaysian government at an international tribunal. Malaysia would lose. The US tariffs, or the taxes, on Malaysian exports would be raised until Malaysia changes its law to comply. So the palm oil lah, the electronics, the baju, everything… pays a higher tariff in the US, and they lose market share there. Until Malaysia changes its law, its Constitution, whatever that is violating.
So it is very enforceable, and most countries cannot withstand that pressure. Once there are tariff sanctions they say, ‘Ok ok. I do. I agree.’ The EU and the US actually can withstand the sanctions. There are some famous cases where, I think, the US sued the EU, because of the EU’s regulations on GMOs or beef hormones, and the EU lost. But the EU said ‘never mind, this is so important for my health, I don’t care lah. America, you keep your 100%, 1000% tariffs on French cheese, never mind, I keep my laws.
They could tahan because they are rich lah, but can Malaysia tahan if its exporters are screaming – the palm oil, the electronics, all facing tariffs? Most countries say, ‘Ok ok, I change my law to comply.’
In the TPP, you can withdraw with six months’ notice in writing. So Malaysia just writes a letter, six months later it takes effect, and you are out. But, there has never been a country that has withdrawn from a US free trade agreement once it takes effect, because politically it might look a bit unfriendly, ‘I’m not friending you anymore, right? I’m withdrawing.’
Certain effects of TPP are irreversible even after withdrawal
Also, some things are irreversible, if your patients have died with no medicines, you can’t bring them back to life. If your farmers have been pushed off the land, can they go back to the land? Like in NAFTA, the North American Free Trade Agreement with Canada, Mexico and the US. Remember that you have to remove your tariffs, on the US farm products. But the US keeps their domestic subsidies. So Mexico removed their tariffs on US corn under NAFTA. But the US kept their subsidies to their corn farmers. The US corn was so cheap into Mexico, that one-third of the Mexican farmers went bankrupt. They lost their land, could not compete with the subsidised US corn, it was so cheap.
So sure, you can withdraw from NAFTA, but what happens to all the farmers who lost their jobs? What happens to the industries that collapsed? What happens to the patients who died with no medicine? Some things are very hard to reverse. So yes, in theory you can. But we don’t see it in practice. We see a lot of countries decide not to sign, but once they are in you don’t see them get out. Malaysia could always be the first, but hasn’t happened so far. Malaysia boleh, kan?
Can you be sued for leaving the TPP?
I think, from memory, in the investment chapter they have a six-month waiting period, before they can sue and they are supposed to consult and negotiate before the actual suing takes effect. I think they’d be one day late if they did it the next day (after the country’s notice to leave the TPP).
Malaysia’s existing investment treaties often have what we call survival clauses, that even when you withdraw they can still sue for another 5, 10, 15, 20 years. That’s what happened to some of the Latin American countries. Thank goodness that the survival clause is not in the TPP.
Lawsuit risks still there even after withdrawal from TPP
But, for example say Malaysia opens certain sectors in the TPP, right? We open mining, bauxite mining, uranium mining, etc, because of the forced opening to foreign investors in the TPP. Say we have a new bauxite mine license given to an Australian. Malaysia then withdraws from the TPP and says, ‘now that we have withdrawn, we are cancelling all those licenses we were forced to give. We cancel that bauxite mine, we don’t want it anymore.’ Or a new government says ‘we don’t want bauxite mining anymore.’
Even though you cancel the license after you have left the TPP, foreign investors could still sue under other treaties that have ISDS. For example, Australia and Malaysia already have investment protection through the ASEAN-Australia-New Zealand free trade agreement. The Australian shareholder in the bauxite mine could still sue under the existing investment protection provisions in some of Malaysia’s other 74 treaties with countries concerned for the lost profits he would have made if he could have kept his bauxite license. So, even though he can’t sue under the TPP anymore, remember Malaysia still has all those other treaties it has signed, so it could still be sued under those ones.
Index of the Series
This series contains 20 articles on the TPP, and can be read in any order:
TPPDebate.org is a crowd-sourced platform to debate the Trans-Pacific Partnership Agreement (TPP). What does everyone think about the TPP? What is your stance?
Loading
Loading
Loading
Share by email:
Loading
Sending...
It seems you are offline.Ops, there was a connection problem.Retry
Embed:
Loading
Loading
It seems you are offline.Ops, there was a connection problem.Retry
Please copy/paste the html code below into your website.
Preview:
API Data:
Loading
Loading
It seems you are offline.Ops, there was a connection problem.Retry
Please select and copy (Ctrl + C) the URL below.
Preview:
Copy Search URL:
Loading
Loading
It seems you are offline.Ops, there was a connection problem.Retry
Please select and copy (Ctrl + C) the URL below.
Layouts
Loading
Loading
It seems you are offline.Ops, there was a connection problem.Retry
