Sanya Reid Smith

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on 24 Jan, 19:20

TPP Miscellaneous: The Yarn Forward Rule

TPP Miscellaneous: The Yarn Forward Rule
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In this article, we explain the Yarn Forward Rule as a case of how in certain cases, the benefits of zero tariffs on exports provided by the TPP are negated because of other imposed rules in certain industries. The Yarn Forward Rule is a rule that forces the textile industries in TPP countries to buy yarn from within the TPP. The rule favours the US yarn industry, and limits TPP countries’ ability to buy cheap yarn (for instance, from China) to make their textiles. As such, the end price in the USA of the zero-tariff Malaysian product is likely to be higher than the taxed products from competing non-TPP countries such as China, which will restrict the expected increase in Malaysian textile and clothing exports to the USA under the TPP.

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 Part 6 of the talk. The index of the series is attached at the end of the article.

Video starts at 3:53

TPP is only useful for products with high tariffs, e.g. clothing

We are supposed to increase Malaysian exports to other TPP countries, that’s the purpose of a free trade agreement, right? To increase our exports. Remember that all the 12 TPP countries are in the World Trade Organization, which already sets a maximum for their tariffs. It locks the tariffs in. So for the US, its tariffs on imports from Malaysia etc are already locked, on average, at 3%. They cannot go above that. In the TPP the 3% will go to zero, but to get to zero you need to prove that this is made in Malaysia, and the cost of doing that goes back up to 5%.

So, the TPP is only really useful for the tariff peaks, the few things that have high tariffs left in the US, like clothing. But for clothing, we have the ‘yarn forward rule’. For clothing, the US says that, to prove this shirt is made in Malaysia, the thread onwards, the benang, from the benang onwards, must be from a TPP country. And this is, basically, to artificially support their benang industry, because it’s expensive, it’s dying, and nobody wants to buy their yarn.

TPP countries have to buy costlier US thread

In Malaysia, like most countries, we import the yarn from China. It’s cheaper. So today, the textile and clothing factories in Malaysia import the thread, the benang, from China, sew it here, send it to the US, with some high tariff, I don’t know what it is, 20% or something. In the TPP, to get the tariff to zero, you have to buy the benang, the thread, from some TPP country. But, for this benang industry, you have to have a big population, to have economies of scale: cotton, rayon, polyester, nylon, silk… Basically, the only country in the TPP with a big enough population for a yarn industry is the US.

So, their rule says: you must buy the US thread, which is more expensive, import it to Malaysia, sew it here into a shirt, send it back to the US, to get the zero tariff. But, if you do that, you are more expensive than the Chinese shirt made in China with Chinese yarn, even though tariffs have to be paid on the Chinese shirt entering the US. They start with the thread that is cheaper, so they are cheaper than the Malaysian one. So even the Vietnamese Chamber of Commerce and Industry, like the Federation of Malaysian Manufacturers (FMM) in Vietnam, said that with this rule, the yarn forward rule, that you must use the benang from America, they get nothing from the TPP.

As a result: yarn exports will not increase

Because you’re supposed to be able to export cheap textiles and clothing, but if you start with the more expensive US thread, you cannot increase your exports anyway. So Vietnam is a cheaper textile manufacturer than Malaysia, right? Lower costs of production, lower wages. So if they can’t make it, how can Malaysia? You also cannot gain from that sector. So because of rules like that, even the PricewaterhouseCoopers and the United Nations don’t expect Malaysia’s exports to increase by much in the TPP.

Everybody is already in the WTO, and the US is already locked at the WTO at an average of three percent tariffs, the maximum the US can impose. So even if Malaysia doesn’t join the TPP, the US cannot raise its tariffs above 3 percent on average on Malaysian products.

 


Index of the Series

This series contains 20 articles on the TPP, and can be read in any order:

Transcriptions are kept chiefly ad verbatim, with some minor edits for readability. The text has also been checked by Ms Smith for accuracy.

on 24 Jan, 19:11

TPP Miscellaneous: Corporate dominance in the US (Workshop by Sanya Reid Smith)

TPP Miscellaneous: Corporate dominance in the US (Workshop by Sanya Reid Smith)
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In this article, we answer a question from the public: “Why is the US pushing to protect the private sector?” In sum, the US government answers to their campaign financiers, and they also respond to their cleared advisor committees within the TPPA negotiations, composed mostly of multinational company representatives. Lastly, we learn that the Americans are not united in their opinions on some provisions of the TPP either. Where there are winners, there will be losers – even within the US itself.

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 Part 7 of the talk. The index of the series is attached at the end of the article.

Video starts from 7:21

(Question from the public: “Moral question. Why is the US pushing to protect the private sector?”)

Campaign financing in the US ensures corporate interests

There are a lot of answers to this question. (laughs) In the US, they have campaign financing, right? Their presidential campaigns cost how many billions of dollars in advertising. They get that money from donations from companies. If the companies give the donations, they expect something in return. They want the policies. So, for example, Big Pharma, the patent owning medicine companies, they donate to both sides; tobacco companies, donate to everybody. And then, when they are elected, they want their money’s worth, right? That’s number one, the money. Next year, the US politicians want to get the donations from the same companies, so they’d better do what they want.

MNCs dominate the cleared advisor committee

The second thing is, the US has system of what we call ‘cleared advisors’. They are about 800 people who can see the negotiating text during the negotiations and give comments about what they want in it etc. And, I think, almost all of them are multinational companies. On the labour committee they have trade unions lah, but not on the other committees. On the medicines committee, they have one generic company and I think one public health group, the rest are Big Pharma, the patent owners. So the generic companies/health advocates are always voted down. So those guys are the ones who give advice to the US Government.

And you can see how influential they are in another report that the US Government puts out every year called ‘Special 301′, and this is about how much the US government’ doesn’t like other countries’ intellectual property standards. So, even when countries are already complying with what the World Trade Organization (WTO) requires, the US says ‘this is not enough, I want you to give more. More protection for my medicines and so on, my Hollywood movies…’ So every year they put out a report: how such countries are not doing the extra that the US wants them to do. And you see that, in the US, they have a process: the Big Pharma, the patent owning pharmaceutical companies, they give a submission for this report.

Every year some university law professors in the US perform an academic exercise, looking at what the demands were of the pharmaceutical companies, and how close the US Government’s Special 301 report is to their demands. And depending on the year, 90 to 95% of what the pharmaceutical companies demanded is what is the US government’s position becomes! It’s almost an exact copy.

Video starts at 13:10

NGO had to sue to get into cleared advisor committee

The other part of the story is that, the public health NGOs, representing the patients, they sued the US government to get themselves onto the cleared advisor committee, and they got one spot, out of what, twenty people on the committee? So that when they come to vote, Big Pharma always votes for longer intellectual property, stronger intellectual property, and the NGO got voted down. But they had to sue their own government, even to get one person on, plus one generic company, the rest are Big Pharma. Certainly no human rights groups or anything, no human rights committee…

Video starts at 9:28

Americans are also split in opinion

But the funny thing is that within the US, there is a split. So the US has both Big Pharma, the patent owning pharmaceutical companies, and also a generic industry. But they only choose to listen to Big Pharma, they don’t listen to the generic companies, who are being screwed over by their own government.

And this plays out in different ways, like the US car companies, which manufacture cars – Ford and GM and whoever. They have to pay the health insurance in the US. When medicine prices are high, the have to pay more for the health insurance for their workers, so they actually don’t like the medicine companies getting longer patents, more patents, more monopolies. And so they fight with the medicine companies and say, ‘We don’t want you to get these longer patents’, because, I think they told me, it’s like 1000 or 1500 US dollars extra cost per car in paying the health insurance. Which means, they are not competitive with the Japanese cars and so on, and they lose business.

Even Obama’s White House cannot afford biologics’ exclusivity

So there is a split within the US. There are US patients who need medicines. It is also unaffordable for US patients. So the American Association of Retired Persons (AARP) which is very famous in the US, it is a very big powerful NGO of retired people – they came out against their own government’s proposal in the TPP of biologics’ exclusivity, saying even 8 years of exclusivity is too long, because in the USA the current law is a twelve-year monopoly on these biologic medicines, even when they’re not patented and this is causing problems for access to affordable medicines.

Obama’s White House budget says every year, ‘We cannot afford our current 12 year biologic exclusivity monopoly, we want it to go down to seven years.’ But they can’t get it through their Congress, because their Congress is paid for by Big Pharma, so they go for the longer monopoly. So even the Obama White House cannot afford it. The executive branch cannot afford their own twelve-year monopoly and want to bring it down to seven. So they didn’t want to lock it into more than seven years in the TPP, or they could never make it come down.

The US State Parliaments don’t want ISDS

The other funny one is, the US state parliaments, the 50 states in the US, each has their own parliament. Every two years they pass a resolution saying, ‘No Investor-to-State Dispute Settlement in US free trade agreements because we want to regulate.’ Because even though the US government has never lost, they often challenge state government laws, for example California has tough environmental laws, which are often challenged. And so, even though they’ve never lost, every year the US state parliaments say, ‘We don’t want ISDS, please don’t put ISDS in.’ And yet the US Trade Ministry keeps negotiating ISDS in agreements like the TPP.

So who does the US Government listen to? it’s a mixed bag. It’s not their own state parliaments, it’s not the generic industry, it’s not their patients. It’s not the car companies on medicines. They listen to the car companies about tariffs and about currency, but they don’t listen to them on medicine. So it’s a bit of a mixture, who they listen to. And a lot of it is from the campaign financing for the presidential and other US elections.


Index of the Series

This series contains 20 articles on the TPP, and can be read in any order:

Transcriptions are kept chiefly ad verbatim, with some minor edits for readability. The text has also been checked by Ms Smith for accuracy.

on 24 Jan, 18:38

TPP Miscellaneous: Geopolitics (Workshop by Sanya Reid Smith)

TPP Miscellaneous: Geopolitics (Workshop by Sanya Reid Smith)
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What happens if we sign or don’t sign, from a geopolitical point of view? What is the TPP’s connection with China, and the Regional Comprehensive Economic Partnership (RCEP), the other FTA currently being negotiated between China, ASEAN, and 5 other countries? What about other countries who have expressed interest to join the TPP? Could the TPPA be used as a political tool by the US towards other countries?

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 4 and 6 of the talk. The index of the series is attached at the end of the article.

Video starts at 10:38

TPP can be seen as anti-China

So then we come to the geopolitics of it. So what happens if we sign, or not sign? Remember, China is not in the TPP. And actually, the TPP can be seen as an anti-China agreement. The US has said, ‘We want to encircle China. We want to keep China out of this agreement. This is to restrict China. We are setting the rules of the road, not China.’ And in fact, in most of the chapters, you can see specific anti-China provisions, aimed at Chinese current policies and laws, that are there just in case China ever joins the TPP.

And along the way everybody else has to comply. Too bad, you are collateral damage. China so far has not joined. I think they’re still figuring out if it’s good for them or not. But in some countries, like New Zealand, who are very dependent on the Chinese market for exports, the government of New Zealand has said ‘If the TPP is anti-China, we will not sign, because we need to preserve our relationship with China.’ So then it depends on your assessment on how anti-Chinese it is or not, and how much it has to be before you don’t sign.

TPPA vs RCEP: Which will be the APEC model?

But alongside the TPP, China is also negotiating a free trade agreement, called the Regional Comprehensive Economic Partnership (RCEP). So that is ASEAN plus six: Japan, Korea, China, India, Australia, New Zealand. So Malaysia is in that one as well. So some countries are hedging their bets, they are having it both ways, right? Malaysia is in the TPP, the US model, and it is also in the RCEP.

Both of the agreements are racing to be the model for the APEC free trade agreement, the Asia-Pacific free trade agreement. Do we take the US model, with their 30 chapters, and stronger intellectual property and ISDS? Or do we take the Chinese model? And the Chinese model, generally, has been about trade in goods: let’s just remove the tariffs on our exports between each other, we don’t have the other 24 chapters that the developed countries want.

But we don’t know this time in RCEP because it is also negotiated in secret. And we know what leaked, for example, was that Japan and Korea were proposing stronger intellectual property on medicines and copyright, but hopefully it won’t be in RCEP because India will know to resist, and ASEAN includes least developed countries: Cambodia, Laos, Myanmar. They are so poor… and they don’t have to do any intellectual property protection at the World Trade Organization as long as they are least developed. So it would be very mean for them to have to agree to the Japan/Korea proposals in RCEP.

Countries that want to join: Korea, Indonesia, Philippines…

So the rest of the geopolitics… I’m not an expert on geopolitics, but this is the part that I know. And so, some countries who are thinking of joining the TPP, like Korea, they already have a US free trade agreement, so they’ve already done about 95% of the difficult parts of the TPP, so it’s not very hard for them to join. Indonesia, the president said he wanted to join, but actually it is against many of his own policies, so I’m not sure he knows what the substance of the TPP is when he made the decision to join, and we’ll see if they still join. Philippines has said it wants to join, but its constitution may have to be changed to allow foreigners to own land. The current Philippines Constitution was written by the mother of the current President of the Philippines. So it’s a bit tricky lah, for him to change his mother’s Constitution.

Thailand’s story, which warrants its own subsection

Thailand, under Thaksin the brother, they wanted a Thai-US FTA, then they had tens of thousands of patients and bankers demonstrating on the streets in the negotiations, so that the negotiators couldn’t even get into the venue. They had to move the negotiations to a golf course 20 kilometers away. And afterwards the Thai negotiator came out and he thanked the demonstrators, and he said, ‘Because of you, I could resist the provisions for stronger intellectual property on medicines.’

Then they had a military coup, and the US Government said, ‘We don’t negotiate with the military,’ so they did not sign. Very dramatic. And then the military came in, and the military said, ‘We listen to the people. We will change the Thai constitution so that before we can have one of these US free trade agreements we must consult, Parliament must be involved, it cannot harm the public etc…’ So the military constitution made it harder for Thailand to join.

Then Thaksin the sister came in, and she had briefings every week by her brother, and she wanted the TPP again, but she was restricted by the military constitution which said ‘you must consult, parliament must be involved, it can’t harm the public etc.’ Then she got kicked out and we are back to the military again. So now I’m not sure, if this current military is the same as the last military or not.

Lastly, India and Russia

India hasn’t decided to join. Russia is in APEC, but a bit remote lah. They are still getting to grips with joining the WTO which they did recently.

Video starts at 1:20

What are possible geopolitical and strategic impacts on Malaysia?

I’m not an expert on the security part, but some people do see the links. Because, for example, people ask, why is Vietnam signing the TPP, when they’re so poor, that they need medicines affordably even more than in Malaysia, they also have GLCs which are in trouble, macam-macam… But, for Vietnam, as I understand it, they’re worried about the South China Sea, and the islands, and China taking over the islands, so they say, ‘We go to America, we hope they save us from China.’

So, some countries are thinking about the geopolitics and the strategy, eg US Secretary of Defense Ash Carter said, “The Trans-Pacific Partnership (TPP) is as important to me as another aircraft carrier.”  The other question is whether the TPP could be upgraded like the North American Free Trade Agreement (NAFTA between Canada, Mexico and the USA) into a military pact, and what that would mean for US bases in Malaysia, for example. Maybe that’s something that Malaysia wants, because of its own South China Sea claims.

Existing US FTAs are signed, surprisingly with small countries

So I don’t know all these geopolitics, but one thing that was interesting to me is that, some of those existing twenty US free trade agreements are with quite surprising countries. You would think the US would sign with big markets, right? Where they can invest in or where they can sell to. They have signed free trade agreements with Oman, Bahrain, Jordan, Morocco, Singapore… these are little countries, economically not worth much. So maybe there’s some other consideration about why they’re picking these countries to sign with.

TPPA could be used also as a political tool

There was one more thing I was thinking of. Oh yes. New Zealand, famously, did not want to allow American nuclear submarines to dock in New Zealand, after Greenpeace and the Rainbow Warrior and everything, right? So for a long time the government said no US nuclear submarines, and the US said, ‘Because you don’t let us have nuclear submarines, we don’t give you this wonderful free trade agreement.’ Now, the government in New Zealand said, ‘Ok, your nuclear submarines can come to our ports,’ and suddenly New Zealand was allowed to join the TPP.

So there has been some people making links to the military and the geopolitical strategy, because the US’s pivot to Asia, I think, was partly military, but now this is a trade agreement. So as far as I’ve seen in the 6000 pages, nothing there says ‘military’, but doesn’t mean there isn’t a side deal that goes along with it. But I don’t know what it is. What has been published is the text of the trade agreement, not all of it is about trade, but it is still about economic stuff.


Index of the Series

This series contains 20 articles on the TPP, and can be read in any order:

Transcriptions are kept chiefly ad verbatim, with some minor edits for readability. The text has also been checked by Ms Smith for accuracy.

on 24 Jan, 14:09

TPP Impacts: Governance (Workshop by Sanya Reid Smith)

TPP Impacts: Governance (Workshop by Sanya Reid Smith)
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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:

Transcriptions are kept chiefly ad verbatim, with some minor edits for readability. The text has also been checked by Ms Smith for accuracy.

on 24 Jan, 14:06

TPP Impacts: Sovereignty (Workshop by Sanya Reid Smith)

TPP Impacts: Sovereignty (Workshop by Sanya Reid Smith)
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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.

It is recommended that this article be read in conjunction with other articles such as the ratification and certification processes after signing, the investment chapter with ISDS, and TPP’s impact on taxpayers and citizens.

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:

Transcriptions are kept chiefly ad verbatim, with some minor edits for readability. The text has also been checked by Ms Smith for accuracy.

on 23 Jan, 12:57

TPP Impacts: On Society (Workshop by Sanya Reid Smith)

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.

Video starts at 15:08

Investment chapter overrides health, environment, privacy issues

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:

Transcriptions are kept chiefly ad verbatim, with some minor edits for readability. The text has also been checked by Ms Smith for accuracy.

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