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The Free Trade Trap
by Harald Klimenta
Email: marc1seed (nospam) yahoo.com
25 Aug 2014
Political economies are calibrated to a form of economics oriented exclusively in competitiveness and high profits... The selling off of public services through the agreement on trade with services (GATS) and the new edition of MAI were prevented because of social protest.
THE FREE TRADE TRAP
By Harald Klimenta, Andreas Fisahn and others
[This introduction and excerpts published as Attac Basis Text 45/ VSA publishers Hamburg 2014 are translated abridged from the German on the Internet, www.attac.de.]
The EU (European Union) invests $120 billion annually in the US and the US invests $150 billion in the EU. The economic linkages between the two economic zones are enormous and greater every year. Nevertheless they should be expanded so trade and change become smoother. For that reason, a free trade zone should arise between the EU and the US comprised of 800 million persons and a third of the global commodity and service trade. Since July 2013 EU- and US delegations have negotiated behind closed doors – far beyond the public but with the support of many industrial associations. Economies are calibrated to a form of economics oriented exclusively in competitiveness and high profits. Lowering costs through larger markets and suppliers and more innovation through intensification of patent- and brand rights are the highest goals of world trade strategists. As a result, they should bring growth, prosperity and jobs for everyone. Can this succeed?
Location competition already makes social balance and ecological policy into a Herculean project… Decisions on working hours, wages and wage spreads, the financing of social balance and an engaged energy turn are determined by self-created “practical necessities” that will be even greater through the planned Transatlantic Trade and Investment Partnership , TTIP. The concrete course of the negotiations is unknown because the negotiators meet in secret. The negotiation mandate of the EU was only known because it was leaked by critical citizens. That the results of the negotiations first become known this way to citizens who want to form their societies is a disgraceful process.
We cannot know the results of the negotiations. The worst solution can be expected. Referring early to the threatening dangers in the different economic areas is important. The expertise of 18 experts, journalists and political activists from different non-governmental organizations (including some from the US) is presented in our reader…
Lori Wallach is director of Public Citizen (Washington), the largest consumer protection organization in the world. She helped organize the protests against the 1999 WTO ministerial conference in Seattle. She is on the board of directors of the International Forum on Globalization (IFG). This book ends with her political call to action “Stop the TTP” and the article by Ilana Solomon…
4. ACTORS AND ALTERNATIVES
4.1 THE ACTORS BEHIND THE TTIP AND ITS CRITICS
The interests behind the political concept of the TTIP should be scrutinized since the agreement, particularly the investment chapter, could narrow the possibilities of democratic politics.
CORPORATIONS AND THEIR LOBBYISTS
Employer associations like the European employer alliance Business Europe and the American Chamber of Commerce are mobilizing for far-reaching investment protection in the planned free trade agreement. Individual corporations like the US energy conglomerate Chevron are active. In its contribution for the US consultation on the TTIP negotiations, it focused on the theme investment protection, “one of the most important global themes for us” (Chevron 2013). Chevron wanted “the greatest possible protection” from regulatory incursions “to lessen the risks of large-scale, capital-intensive and long-term energy projects,” for example in the production of shale gas through fracking (see chapter 2.1). Many EU governments have issued moratoriums or strict regulations for this controversial technology on account of dangers for humans and the environment. Chevron & Co. could attack these moratoriums and regulations through far-reaching investment protection clauses in a future EU-US free trade agreement.
GOVERNMENTS, THE EU COMMISSXION AND PARLIAMENTS
Not a single investment protection agreement and no investor rights to sue the state would be binding in international law without the governments and parliaments that negotiate and ratify such agreements. In the European context, the competence for negotiating such agreements was transferred to the European Commission with the 2009 Lisbon treaty. Trade as the general direction is also responsible for investment agreements. Previously EU member states led by Germany created a large number of dangerous and one-sided investment agreements directed against developing countries since the first 1959 bilateral investment treaty (Germany-Pakistan). In the case of the TTIP, these EU member states gave the EU Commission the negotiation mandate on June 14, 2013 to negotiate a trade- and investment agreement with the US. In this mandate, there are very far-reaching and dangerous changes for a possible TTIP investment chapter. Several procedural reforms will be made in the mandate. For example, future courts of arbitration should be more transparent and the arbitrators subject to a code of conduct. However the EU Commission has not touched the hard core of investment protection. Quite the contrary! The German government always plays a hardliner role. In the internal EU conflict, the German government resists definitions and restrictions of investment protection standards, more transparency and all obligations (instead of only rights) for investors. Germany’s government has concern about a gentle investment agreement according to the pattern of the US. After experiences with NAFTA lawsuits, it inserted inadequate reforms in its model investment treaty and now wants to bring them into the TTIP. Therefore Germany gave an unpublished protocol explanation to the EU on the mandate for the TTIP. According to that explanation, a TTIP investment chapter is not really necessary. Investors should use the respective legal course of ordinary courts of law. For a long time, the German government indicated it would agree to a TTIP agreement at the end despite severe investment rules. Unfortunately that was also true in the past for the majority fractions in the European Parliament and in the German Bundestag.
LAW FIRMS, ARBITRATORS AND TRIAL FINANCIERS
The legal branch also lobbies for far-reaching investor rights in the TTIP. With hourly fees up to $1,000 and legal costs of eight million per trial on average, investor-state lawsuits are a lucrative business for law offices. The market leaders today come from the US and the EU. In 2011, three law offices – Freshfields (GB), White & Case (US) and King & Spalding (US) – worked on 130 investment disputes. Worldwide these law offices motivate investors to sue states, for instance against the re-scheduling debt policy in Greece. An investment protection chapter in the TTIP would expand their business tremendously.
The arbitrators who ultimately decide investor-state lawsuits have interests in expanding this business. They receive juicy royalties. In one case, an arbitrator earned nearly a million dollars. 15 arbitrators, nearly all from Europe, the US or Canada, decided 55% of all known investment protection suits. This small group of jurists, called the “inner Mafia” by some, awards compensation in courts of arbitration, represents the litigious parties, call on one another as experts and do not only function as arbitrators. The arbitrators tend to defend the rights of investors as the public interest. This small group of jurists reflects an inherent one-sided orientation of investment arbitration that benefits the suing party. Several prominent arbitrators sat on the boards of directors of large multinational corporations including companies that sued states. The belief in the unconditional protection of private winnings unites almost everyone. Some successfully fought against reforms of international investment law. Trial financiers are increasingly important actors in international investment arbitration. Through them, the legal field is strongly integrated in the world of financial speculation. Firms like Juridica (Great Britain), Burford (US) and Omni Bridgeway (Netherlands) act like hedge-funds. They (co-) finance legal costs for investor-state lawsuits in the millions and take a share of the later compensation. Trial financiers fuel the wave of investor lawsuits against states because money for trials exists that otherwise would run aground in the financing hurdles. Frivolous trials on an unfounded legal basis could also increase when funds as in the derivative trade sell whole legal packages to third parties in which “low-risk” lawsuits and lawsuits with trifling prospects of success are combined.
ACADEMIC HELP IN CREATING “PRACTICAL NECESSITIES”
In the academic area, international investment protection has become an attractive new field in which more and more legal scholars and research institutes romp. International investment protection law is now regarded as the fastest growing area of international law. A legitimation crisis of the legal realm and a certain need for reform are acknowledged. Investment jurists based on an uncritical, always positive, largely naïve economic and social-ecological understanding mostly start from the beneficial effect of international investments on the economy and society. They ignore fundamental questions of power and rule in far-reaching property protection and recommend in the political space the undisturbed status quo and further development of the prevailing investment regime – or try to rescue the acceptance and legitimacy of their legal province through cautious reform proposals. Lawyers specializing in investment protection have a great influence on academic discourse and author a large part of the academic publications on the theme… They raise questions about academic balance and independence of international investment law.
(written by Pia Eberhardt and Peter Fuchs)
4.2 THE ALLIANCE FOR AN ALTERNATIVE TRADE MANDATE
National and international alliances and networks protesting against this project arose very quickly after plans for a transatlantic free trade zone were announced. One of these networks is the alliance for an alternative trade mandate in which 50 organizations from the EU joined forces to urge a turn in European trade- and investment policy. The Alliance published its first study when the TTIP negotiations began. The movements critical of free trade developed a comprehensive counter-concept for the first time.
The breakdown of the OECD plans for a multilateral investment agreement (MAI) caused by disclosure of the documents and the subsequent public scandal in 1998 marked a turn in the largely unrestrained march of globalized neoliberal capitalism. The 1999 breakdown of the World Trade Organization (WTO) in Seattle followed. The street blockades of the social movements and the resistance of developing countries who recognized the fraud after four years of the WTO regime joined forces.
For several years, the resistance of the global justice movement successfully followed these two “strategies.” Scandalous political projects were made public. At large government meetings, activists skillfully coordinated the events in government buildings with protest actions outside to call attention to critical negotiating positions. The selling off of public services through the agreement on trade with services (GATS) and the reissue of MAI, both in the framework of the WTO, were prevented because of the social protest. The WTO was abandoned as a platform for advancing a neoliberal world economic system. At the same time in 2001, the World Social Forum was founded to give global civil society a forum for exchanging information about “another world.” As an answer to the increasing neo-colonialism of northern industrial states, NGOs in the South developed initiatives for “alternative regionalism” and South-South cooperation. In the framework of the Lisbon treaty, competence on trade- and investment policy completely changed hands on the EU plane. Applying pressure on the national parliaments was brought to a standstill as a strategy. The EU now negotiated bilaterally with small groups of states instead of at WTO ministerial conferences with a large public.
A crucial challenge for the movement critical of free trade is that there is no open social discussion about what trade policy we need and want. Opening all possible markets and investment possibilities for European businesses is the goal of the EU Commission in which it basically has a free hand and acts behind closed doors. In the published opinion of the mass media, world trade is the bringer of salvation that guarantees European and German prosperity. In this environment, the resistance against free trade agreements with countries of the South could also earn sympathy points for solidarity with the poor.
To fight against this blockade of thinking and discussion, becoming active when a new agreement threatens is not enough. The social movements must develop strategies to bring counter-concepts into the public debate and the decision-making processes. The Alternative Trade Mandate is a first attempt at that on the European plane.
4.3 CIVIL SOCIETY SETS POLITICAL GOALS
The idea of taking up an example from the US arose in the strategy debates of the European alliance of trade-critical groups, the “Seattle to Brussels Network” at the end of 2009. There NGOs brought an alternative bill on trade policy into Congress. So the idea originated of developing principles for an alternative European trade policy in Europe. In the meantime over 50 organizations participate in the Alternative Trade Mandate (ATM) including groups like the Corporate Europe Observatory (CEO), Oxfam Germany, the Trade Justice Movement (UK), environmental organizations and the Attac groups from France, Spain and Germany.
The idea of an alternative trade mandate emphasizes principles and values that should be realized and does not start from the conventional themes of free trade agreements. Human needs and challenges of the 21st century are sketched and the question raised what role trade and trade policy can and must play. Therefore ATM can be understood as a long-term project for a paradigm shift in our economic style. After a four-year consultation process with broad civil society participation, the ATM document was presented in the fall of 2013 that summarizes the state of the discussion. In the following we will give an overview on the most important critical points, demands and proposals presented in the ATM document (see www.alternativetrademandate.org).
THE PRINCIPLES OF AN ALTERNATIVE TRADE MANDATE
In the center of the Alternative Trade Mandate are principles of a democratically-controlled trade- and investment policy that serves humankind and protects the natural foundations of life. In summary, there are two core demands: the realization of comprehensive human rights and the right of societies to form their living conditions in a self-determined way. In particular, twelve points are named: http://www.alternativetrademandate.org/wp-content/uploads/2014/02/Trade-
1. Anti-Democratic Straitjackets, Pia Eberhardt, September 2013
2. Alternative Trade Mandate, 50 NGOs, December 2013, 20pp
3. TTIP: Deregulation, Attack on Jobs and End to Democracy, John Hilary, January 2014, 42pp
4. Investment Protection at a Crossroads, Pia Eberhardt, June 30, 2014
5. TTIP Undermines the Constitutional State, Lea Susemichel, 7/15/2014
6. TTIP: Threat to Democracy and the Constitutional State, IG Metal, Verdi service union and Christoph Butterwegge, August 11, 2014
The TTIP Transatlantic Trade and Investment Partnership (sometimes called TAFTA) is an anti-democratic corporate investment agreement that allows corporations to sue sovereign states for loss of expected profits. This free trade agreement negotiated in secret since 2013 does not allow states to sue corporations and decisions or awards are irreversible.
Fracking moratoriums, education, health care, Germany’s nuclear exit, minimum wage, chlorinated chicken, hormone-treated beef, genetic corn, the public sector in general and culture are potentially threatened by investor-state dispute settlements (ISDS) in private arbitration courts. The EU Commission and Germany in particular have suspended negotiations on investor protection and called a public consultation. Environmentalists, labor and social movements throughout Europe urge scrapping the TTIP/CETA/ TISA negotiations.
You can download a 20-page Alternative Trade Mandate (December 2013) from 50 NGOs at www.alternativetrademandate.org.