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WikiLeaks on the Trans-Pacific Partnership Environment Chapter: “Toothless Public Relations Exercise“

The TPP’s environment chapter has no effective enforcement mechanisms, and its investment chapter allows foreign investors to sue governments over lost prospective profits in secret arbitration panels.

(Image via Shutterstock)

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WikiLeaks has thrown yet another wrench in the negotiations over the sellout-to-multinationals-masquerading-as-trade-deal otherwise called the Trans-Pacific Partnership. Wednesday, on the eve of an expected-to-be-contentious Senate Finance Committee hearing on the Administration’s request for “fast track” authority for the TPP, WikiLeaks released another important draft chapter from the pact, this on environmental regulations. It’s relatively current, as of the last day of the Salt Lake City session in November, putting it only one negotiating round the behind the actual draft. And this, like the intellectual property chapter that WikiLeaks published last year, is one that shows the parties to the deal at loggerheads.

WikiLeaks also published an analysis by Professor Jane Kelsey of New Zealand. Given how difficult it is to parse the text (particularly since one also needs to understand how its provisions relate to other international agreements to appreciate the significance), her report provides a good, technical overview.

The main points of her analysis of the chapter proper are that despite aspirational language, the draft chapter has few definitions of key terms and has no mechanism for providing penalties. The one stab at defining terms is “environmental laws” and that is narrow, including only environmental protection and human health and safety. It excludes prudent resource management practices and also appears to impinge on the UN Declaration on the Rights of Indigenous Peoples, which all parties to the pact save the US have signed. Among other things, it protects the rights of indigenous people over traditional knowledge, specifically:

…genetic resources, seeds, medicines, knowledge of the properties of fauna and flora…and … the right to maintain, control, protect and develop their intellectual property over such cultural heritage, traditional knowledge, and traditional cultural expressions.

Seeds? Monsanto is going to cede control over seeds to savages indigenous people? Similarly, Big Pharma has been scouring exotic locations to try to find new molecules and treatments to exploit. It would be a shame if pesky natives stood between them and their profits. You can see why the Administration keeping these notions out of the text.

Professor Kelsey also notes that she is reading this chapter in isolation, she can’t tell how conflicts between chapter will be resolved, but she can see there are plenty, most importantly with the investment chapter:

The most egregious threat to the environment is the investment chapter, in particular the prior consent by all countries except Australia to investor-state dispute settlement (ISDS). The vast majority of investment arbitrations under similar agreements involve natural resources, especially mining, and have resulted in billions of dollars of damages against governments for measures designed to protect the environment from harm caused by foreign corporations. The US is also demanding that contracts between investors and states that involve natural resources also have access to ISDS.

Now it isn’t hard to surmise what is going on here. You have an environment chapter with no effective enforcement mechanisms. You have an investment chapter that allows foreign investors to sue governments over lost prospective prospective profits in secret arbitration panels and win large judgments. Gee, what do you think matters, the headfake environment chapter or the chapters that allow investors to sue because protecting the environment or citizens’ health costs them money or to patent even more biological products and extract rents?

And this concern isn’t theoretical. Public Citizen has done extensive data collection on and analysis of past trade deals, as well as what could be discerned about the TPP and its sister, the TransAtlantic Trade and Investment Partnership. The TPP and TTIP have stronger foreign investor protections than existing trade pacts, which heretofore (post NAFTA) have broadly similar provisions. The results can hardly be characterized as pro-health, pro-environment, or pro-regulation. I’m reproducing this section from a November post because it’s hard to believe how bad these agreements are unless you see the details:

Even though no one has seen the exact language of the text, since it is being kept under wraps, both deals are believed to strengthen and extend investor rights, which means give them easier access to the courts. Consider this description from a July presentation by Public Citizen:

What is different with TAFTA [pending Trans Atlantic Free Trade Agreement] (and TPP) is the extent of “behind the border” agenda

• Typical boilerplate: “Each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements.” …

• These rules are enforced by binding dispute resolution via foreign tribunals with ruling enforced by trade indefinite sanctions; No due process; No outside appeal. Countries must gut laws ruled against. Trade sanctions imposed…U.S. taxpayers must compensate foreign corporations.

• Permanence – no changes w/o consensus of all signatory countries. So, no room for progress, responses to emerging problems

• Starkly different from past of international trade between countries. This is diplomatic legislating of behind the border policies – but with trade negotiators not legislators or those who will live with results making the decisions.

• 3 private sector attorneys, unaccountable to any electorate, many of whom rotate between being “judges” & bringing cases for corps. against govts…Creates inherent conflicts of interest….

• Tribunals operate behind closed doors – lack basic due process

• Absolute tribunal discretion to set damages, compound interest, allocate costs

• No limit to amount of money tribunals can order govts to pay corps/investors
• Compound interest starting date if violation new norm ( compound interest ordered by tribunal doubles Occidental v. Ecuador $1.7B award to $3B plus

• Rulings not bound by precedent. No outside appeal. Annulment for limited errors.

And that’s alarming in light of some of the cases already brought before these panels in existing trade agreements like NAFTA. For instance:

Eli Lilly is suing the Canadian government for not having the same extremely pro-drug-company patent rules. It is seeking $500 million in damages for two drugs that Canada approve to be sold as generics. If Eli Lilly prevails, other drug companies are sure to follow suit.

Vattenfal, a Swedish company, is a serial trade pact litigant against Germany. In 2011, Der Spiegel reported on how it was suing for expected €1 billion plus losses due to Germany’s program to phase out nuclear power:

According to Handelsblatt, Vattenfall has an advantage in seeking compensation because the company has its headquarters abroad. As a Swedish company, Vattenfall can invoke investment rules under the Energy Charter Treaty (ECT), which protect foreign investors in signatory nations from interference in property rights. That includes, according to the treaty’s text, a “fair and equitable treatment” of investors.

The Swedish company has already filed suit once against the German government at the ICSID. In 2009, Vattenfall sued the federal government over stricter environmental regulations on its coal-fired power plant in Hamburg-Moorburg, seeking €1.4 billion plus interest in damages. The parties settled out of court in August 2010.

Phillip Morris threatened suit against Australia for its plain cigarette packing rules and is suing Uraguay for anti-smoking regulations

Now consider what this means. These companies are not suing for actual expenses or loss of assets; they are suing for loss of potential future profits. They are basically acting as if their profit in a particular market was guaranteed absent government action. And no one else enjoys these rights. Consider highly paid workers in nuclear plants. Will they get payments commensurate with the premium they’ve lost over the balance of their working lives from the phaseout of nuclear power? Will cigarette vendors in Australia get compensated for the decline in their sales? Commerce involves risk, which means exposure to loss, yet foreign investors want, and seem able to get, “heads I win, tails you lose” deals via these trade agreements.

And it’s even worse than you imagine once you understand how these panels work. Recall how Public Citizen mentioned the role of the panelists who go between working for the companies and serving on the panels? A small and tight-knit group has disproportionate influence (click to enlarge):

Screen shot 2013-11-13 at 6.23.31 AM

Consider the implications of the fact that the 15, and the larger community of panel “regulars,” work both sides of the street. They draw cases that go before the trade panel, as well as hear them. Thus it’s in their interest to issue aggressive rulings in order to facilitate more cases being filed.

Back to the present post. Now contrast this discussion with the pro-Obama propagandizing in the New York Times article on the WikiLeaks disclosure. Astonishingly, it ignores the substantive irrelevance of the environment chapter and instead pretends that the Administration really, truly wanted to hang tough on environmental issues, but is being beaten up by those meanie foreigners and has been forced to give a lot of ground to get that oh-so-valuable “trade” deal:

The negotiations over the Trans-Pacific Partnership, which would be one of the world’s biggest trade agreements, have exposed deep rifts over environmental policy between the United States and 11 other Pacific Rim nations. As it stands now, the documents, viewed by The New York Times, show that the disputes could undo key global environmental protections….

The documents consist of the environmental chapter as well as a “Report from the Chairs,” which offers an unusual behind-the-scenes look into the divisive trade negotiations, until now shrouded in secrecy. The report indicates that the United States has been pushing for tough environmental provisions, particularly legally binding language that would provide for sanctions against participating countries for environmental violations. The United States is also insisting that the nations follow existing global environmental treaties.

“Existing global environmental treaties”? Huh? The US wouldn’t sign the Kyoto accords. And it’s simply untrue that the US is proposing language up to the standards of other international environmental agreements. Consider this section from Kelsey’s report:

New Zealand is part of the WTO group ‘Friends of the Fish’. The proposals in Article SS16.6 to restrict fisheries subsidies that contribute to overcapacity and overfishing fall far short of the positions they have been promoting. These are detailed in the US environment groups’ memo…

In Article SS15 the parties merely agree to discuss ways to deal with climate change with possible links to the APEC process. The US and Australia oppose even that provision.

To put this another way, to the extent that the US has gotten tougher environmental protections, which the Times depicts as “strong language” (as in legally binding), it is only in bilateral deals. But my understanding is the foreign investor protections are in all post-NAFTA trade pacts. Thus the environmental provisions (to the extent that they actually are well-defined enough to be enforceable) would still conflict with the foreign investor protections.

It would appear that in practice, the foreign investor provisions would vitiate any environmental provisions. In other words, to the extent the green lobby thought they were getting anywhere, they were kidding themselves (and that before you get to the question of whether the US was serious about enforcement, or would at most file the occasional token action to go through the motions). Nevertheless, it is true that this draft chapter retreats from what little progress has been made. As Kevin Gosztola recaps in Firedoglake:

Michael Brune, executive director for the Sierra Club, one of the largest and most influential environmental organizations in the US, reacted, “If the environment chapter is finalized as written in this leaked document, President Obama’s environmental trade record would be worse than George W. Bush’s. This draft chapter falls flat on every single one of our issues – oceans, fish, wildlife, and forest protections – and in fact, rolls back on the progress made in past free trade pacts.”

According to a Sierra Club analysis, it would not prohibit shark finning, even though the US is required by law to seek bans against this practice from countries. It relies on trade sanctions instead of fines if a country violates its obligations, which is a step backward. There also is no requirement in the drafted chapter to require countries stop illegal trade that may threaten communities or ecosystems.

So when is the New York Times editorial board going to eat some crow? They endorsed these negotiations, taking at face value the Administration’s party line:

The Obama administration said it wants a “next-generation” agreement that, in addition to lowering tariffs, lowers investment restrictions, improves labor rights, encourages environmental protection and reduces government favoritism of state-owned businesses. That is an ambitious agenda considering that more than 150 countries are struggling to complete a much simpler deal at the World Trade Organization…The hope among some American officials is that by completing deals with Europe and Pacific nations, Washington will set an example for the rest of the world to follow.

Sadly, even as the evidence against this deal mounts, I wouldn’t bet on an retreat by the Times’ editorial board, nor by Paul Krugman, who has gone silent after saying he’d do “some homework” on TPP. But for once, Congress appears to be out ahead of the lapdog media. Even before the latest release, fast track authority was in trouble in the House, with Boehner saying he didn’t have the votes.

But this is no time for complacency. Please use this new information as the basis for calls to your Senators against this sellout to multinationals.

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