Davies led the way vetoing unfair deals

AS the weeks turn into months and the months into years, it is looking increasingly likely that the hugely ambitious trade agreement between the EU and the US, the Transatlantic Trade and Investment Partnership, will go the way of the World Trade Organisation’s Doha Agreement.

And it will go that way for the same reason that our minister of trade and industry, Rob Davies, rejected bilateral investment treaties last year. Giving companies exceptional powers in relation to democratically elected governments is unacceptable. The Doha discussions were launched in 2001 with a target date for implementation of 2010. But it was too ambitious and required support from too broad a range of interests to get final sign-off.

Although considerably less ambitious than Doha, the transatlantic trade partnership’s bid to create the world’s largest free-trade zone is certainly impressive. Talks were launched by President Barack Obama in February 2013 and some form of deal is expected in 2016.

Despite, or perhaps because of, enthusiastic support from large multinationals, the proposed partnership is facing growing opposition. And it is not because the Germans, who dominate the EU, are increasingly disinclined to cosy up to the US, which keeps snooping on their chancellor, Angela Merkel. No. The major challenge to the partnership is the very thing Davies decided was unacceptable for trading agreements between consenting partners.

In January, just two months after EU governments had threatened and harangued Davies for refusing to renew bilateral investment treaties with EU countries, the bloc’s trade commissioner suspended negotiations over the investment chapter of the transatlantic deal. A public consultation process was launched.

The potentially deal-killing section of the investment chapter relates to a provision that would give foreign investors the right to circumvent domestic legal processes and go to special arbitration panels to sue host governments. This “investor-state dispute settlement” mechanism is the device that Davies decided was unacceptable in our trading agreements.

An opposition EU civil society voice said the mechanism gave transnational capital a status equivalent to that of a sovereign state. US and EU corporations “would be granted the power to challenge democratic decisions made by sovereign states and to claim compensation where those decisions have an adverse effect on their profits,” said the organisation.

The public consultation process did little to allay civil society’s concerns, mainly because it quickly became apparent that it was aimed at persuading the European public that the dispute settlement mechanism was necessary.

As two health policy advisers remarked in a letter to the Financial Times, the device “demonstrates a distinct lack of confidence in the judicial systems on both sides of the Atlantic and [we] see it as a serious threat to . . . national governments’ right to regulate”.

One trade and investment policy adviser, writing for Forbes, said the mechanism was “overkill”. Investment was risky and foreign investment much more so — but multinational companies were powerful, sophisticated and capable of evaluating risk, wrote the adviser.

The device also gave foreign companies an unacceptable advantage over locals, who could not turn to special arbitration panels.

The most infamous use of this mechanism is the case by tobacco group Philip Morris against Australia’s plain-packaging law.

Businesses’ insistence that the arbitration clauses remain has confirmed the perception that trade agreements are designed for the benefit of large corporations.

Opponents say the arbitration mechanism highlights the fact that when business talks about the need for agreements that will reduce the barriers to trade, they are actually looking to reduce the standards and rights enjoyed by citizens.

Concerns that the agreement will restrict labour rights, as well as lower environmental and food standards, have resulted in the large and powerful EU and US trade unions joining the battle.

Street protests have begun. The levels of opposition may not look like the protests against the WTO in the ’90s, but this might only be a matter of time.