Open for Business?

“These people, dressed as they are, come from all over the United States to make deals here in the Market Place of America …  LET’S MAKE A DEAL!”– Jay Stewart, Let’s Make a Deal

Press coverage of the climax of the Atlanta ministerial meeting on TPP was as  herd-like as  the Corbyn 5 minutes of hate in the UK. Here are just a few of the headlines; you can see how very much alike they are, in tone and content:

Of course, nothing has been “signed,” and the deal has neither been “reached”, “sealed,” “struck,” or “agreed.” At best, what we have is a deal to try to make a deal; these headlines, and the mentality of the writers and editors, are all profoundly anti-democratic. As the BBC sheepishly admits:

Despite the success of the negotiations, the deal still has to be ratified by lawmakers in each country.

The Financial Times contradicts its own headline:

[T]he TPP must still be signed formally by the leaders of each country and ratified by their legislatures, where support for the deal is not universal. In the US, Mr Obama will face a tough fight to push it through Congress next year, especially as presidential candidates such as the Republican frontrunner Donald Trump have argued against it.

Nice spin on “formally.” And what are the lawmakers? Chopped liver? (For grins, here are the official texts that we do have: The “joint statement” from the trade ministers after the Atlanta meeting; The “summary” on the USTR’s website; and “Statement by the President” at the White House site. Needless to say, these should all be regarded as propaganda, just as much as the memes that the White House Internet operation has been assiduously pumping out since Monday morning.)

In this post, I want to first look at the exact status of the deal we do not yet have; that is, the text that will, at some point, be presented to lawmakers. Then I want to look at what the deal, or at least the dealings, are really about; and it’s not trade. NC readers already know this, of course; but it’s good to have more confirmation come out of the negotiation process. (In this post, I’m not going to look at the sausage-making[1] or who said what[2]; frankly, I’m not certain that’s the only method to examine — or, more importantly, disrupt — the TPP process, though it is necessary to be informed if only to refute or recontextualize in conversation.[3]) In conclusion, there’s hope: Deals like TPP have been defeated before.

TPP is Not (Yet) a Deal

As almost everybody knows, the text of the TPP has not been finalized. Obama himself:

Once negotiators have finalized the text of this partnership, Congress and the American people will have months [remember that] to read every word before I sign it. I look forward to working with lawmakers from both parties as they consider this agreement.

Now, to be fair (really), presumably the Atlanta negotiators had the bracketed draft in front of them, and staffers were able to record additions and deletions in the course of the meetings. So, finalizing the text ought to be a relatively mechanical editorial process, which the Japan Times describes:

[N]egotiators will continue technical work to prepare a complete text for public release, including the legal review, translation, and drafting and verification of the text.

However, this is the administration where “We have to pass the bill so that you can find out what is in it,” and jockeying ObamaCare through two houses and three branches of government is far less complex than negotiating and passing TPP between twelve sovereign states.  So, watch for squabbles about the text.

More centrally, there are side deals. Not everything in “TPP the deal” is in “TPP the text.” For example, currency manipulation:

With a wary eye on a weak yen and competition from Toyota and others, the US automobile industry and its supporters in Congress have been pushing for the TPP to include an enforceable ban on currency manipulation.

That is not likely to happen as a formal part of the TPP. But according to people close to the discussions finance ministers and central bank governors from the TPP countries have agreed to a parallel agreement that would commit them not to engage in competitive devaluations to benefit their own exporters.

Ah, a “parallel agreement,” part of “the deal,” but not in the text of the deal. How reassuring. Will this agreement be ready by the time Congress needs to give consideration to TPP legislation? And how many other such side deals will there be? It’s hard to be sure. On currency manipulation:

“We are pleased to announce today that we are working to strengthen macroeconomic cooperation, including on exchange rate issues, in appropriate fora,” the macroeconomic policy authorities of the 12 Trans-Pacific Partnership nations said in a statement.

Oh. “Appropriate fora.” How reassuring.

And already we’re seeing how side deals lead to differing interpretations. From New Zealand:

“The lack of access to details in the text means governments can put a positive spin on the deal, but the devil is in the detail, and we won’t have the detail for at least another month. This secret and undemocratic process was slammed by a recent Senate Inquiry report aptly titled Blind Agreement,” said Dr Ranald.

“We note the assurances of Trade Minister Andrew Robb that Australia has not agreed to immediate extension of monopolies on costly life-saving biologic medicines beyond the current Australian standard of five years. …

“However, we note these assurances are weakened by the fact that the US is claiming that 5 years is a minimum standard and there is a “voluntary” agreement using administrative means [that is, a side deal] for an additional three years of monopoly on biologics, referred to as ‘5 years+3 years’. Without the detail of the text it is difficult to know exactly what impact this will have,” said Dr Ranald.

Finally, it’s highly likely there are secret side deals, and not just because the TPP process so far has been marked by a total lack of transparency. Now, I know I shouldn’t ask a TPP proponent to prove the negative by saying “Show me there are no secret deals!” but the administration is certainly acting as if there are such deals. International Business Times:

Yet, in recent months, the administration has declined to respond to open records requests for communications between Froman — a former Citigroup executive — and financial services companies with vested interests in the deal’s structure.

So, no text, a complex process to prepare it, side deals, secret side deals, and already there are differing interpretations. There is (as yet) no deal, because there is no deal to see.

TPP is Not a Trade Deal

Besides describing the outcome of the Atlanta meeting as a “deal,” the press described it as a “trade deal.” That’s not true either. NC readers are already familiar with the perspective that the Investor-State Dispute Settlement (ISDS) process is a surrender of state sovereignty to corporations (see here, here, and here), so I won’t repeat that material here. But I will look at how the Atlanta negotiators addresses ISDS criticisms, after reviewing additional material, thrown up in the course of this round of negotations, that shows why TPP is not a trade deal.

First, TPP will have minimal economic impact. AP:

Peter Petri, a professor of international finance at Brandeis University, says he doesn’t expect the deal to lead to any U.S. job gains. But he forecasts it will boost U.S. incomes by $77 billion a year, or 0.4 percent, by 2025, mostly by creating export-oriented jobs that will pay more, even as other jobs are lost.

“Most likely.” And an 0.4% income boost is the outcome of five years of negotiation between twelve countries? What kind of a trade deal is that?

Second, many TPP proponents don’t act like it’s a trade deal. The Wall Street Journal‘s coverage gives five ways to “sell the TPP,” and only #3 has anything to do with trade whatever. Listing the headings only:

1. It’s all about China; 2. Bush, not Obama; 3. A tax cut for American products; 4. Obama, not Bush; 5. It’s all about U.S. leadership.

And now to ISDS. Yves summarized the problems with ISDS:

What may have torched the latest Administration salvo is a well-timed joint publication by Wikileaks and the New York Times of a recent version of the so-called investment chapter. That section sets forth one of the worst features of the agreement, the investor-state dispute settlement process (ISDS). As we’ve described at length in earlier posts, the ISDS mechanism strengthens the existing ISDS process. It allows for secret arbitration panels to effectively overrule national regulations by allowing foreign investors to sue governments over lost potential future profits in secret arbitration panels. Those panels have been proved to be conflict-ridden and arbitrary. And the grounds for appeal are limited and technical.

The first thing to remember here is that ISDS is not needed for investor protection, as Stiglitz points out:

Perhaps the most invidious – and most dishonest – part of such agreements concerns investor protection. Of course, investors have to be protected against the risk that rogue governments will seize their property. But that is not what these provisions are about. There have been very few expropriations in recent decades, and investors who want to protect themselves can buy insurance from the Multilateral Investment Guarantee Agency, a World Bank affiliate (the US and other governments provide similar insurance). Nonetheless, the US is demanding such provisions in the TPP, even though many of its “partners” have property protections and judicial systems that are as good as its own.

So, “overrule national regulations” and consequent “surrender of state sovereignty to corporations” based on the noxious “lost profits” doctrine is what ISDS is all about. So how did the Atlanta negotiators address these issues?  Here’s what the USTR says:

The chapter also provides for neutral [snort] and transparent international arbitration of investment disputes, with strong safeguards to prevent abusive and frivolous claims and ensure the right of governments to regulate in the public interest, including on health, safety, and environmental protection.  The procedural safeguards include:  transparent arbitral proceedings, amicus curiae submissions, non-disputing Party submissions; expedited review of frivolous claims and possible award of attorneys’ fees; review procedure for an interim award; binding joint interpretations by TPP Parties; time limits on bringing a claim; and rules to prevent a claimant pursuing the same claim in parallel proceedings.

Bafflegab and minor tweaks. First, the USTR says nothing about abolishing the “lost profits” doctrine. Second, that means that even the threat of an expensive, country-busting ISDS lawsuit could cow an entire nation. Third, “neutral” is just embarassingly false; the so-called judges (“arbitrators”) are and will be corporate lawyers, not subject to any form of accountability, let alone democratic accountability, and can also serve as advocates to the same court (!), so the potential for back-scratching, logrolling, and general conflict of interest is obviously present. Finally, I’m seeing a lot of verbiage about “strong safeguards,” “procedural safeguards,” and “rules,” but who does the enforcing? Prince Grigory Potemkin? Here, however, we seem to get an answer from Politco:

The changes also would establish a new arbitrator code of conduct. The latter builds on existing rules to address concerns about potential conflicts of interests among lawyers who hear [and advocate] the cases.

Oh, a “code of conduct.” So all the safeguards and rules depend on a self-regulating guild? How reassuring.

Finally, on ISDS and our loss of national sovereignty, Politico once more:

Another reform would make clear that companies cannot challenge a country’s laws or regulations simply by arguing that they have hurt the company’s expectation of earning a profit on its investment. Additional ‘preamble’ language would underscore that countries retain the right to regulate in the public interest, including on health, safety and environmental protection.

Some problems. First, in the international standards I’m familar with, preambles are informative, not normative; preambles are in no sense rules and do not affect procedures, and not even the interpretation of procedures. So “underscore” means nothing. (I’d welcome clarification on this point from a trade lawyer). Second, without the text, it’s impossible to tell what, exactly, TPP now “makes clear.” However, here’s my comment on the TPP draft of the investment chapter from WikiLeaks:

Of course, government — at least hitherto — has re-ordered prices, income steams, claims on future income streams, and capitalization generally since forever; one might even say that’s the purpose of government, its raison d’etre, at least in a capitalist society.[4] However, TPP’s jurisprudential innovation is to reframe  such re-ordering as “expropriation,” and to set up the ISDS to compensate the capitalists for it. Naked Capitalism again, with images of the text of TPP’s “Investor Clause”:

Note that the expectation of profit is one of the characteristics of an investment. And what better judge of those expectations could there be than the investor?

Can “expropriation” include state actions that damage an investors expectation of profit? You betcha! Here’s how that “direct or indirect” wording gets teased out:

Get a load of those loopholes! “Intangible property rights” and “indirect expropriation” are to be determined on a “case-by-case, fact-based inquiry” as to whether “distinct” (sez who) and “reasonable” (sez who) “expectations” (sea who) were “interfered with.” But don’t worry, little governments! Only in “rare circumstances” will your “legitimate” (sez who) “public welfare objectives” be considered expropriations.

Of course, the text may have changed between this Wikileaks draft and Atlanta (although potential changes to a draft are typically placed between square brackets). That said, if you look at this version, can see how “simply by arguing that they have hurt the company’s expectation of earning a profit” is weasel wording; in fact, it’s entirely compatible with the draft you see above! What, after all, is “simply”? Well, presumably that’s to be determined by a “‘case-by-case, fact-based inquiry.” How reassuring. As Stiglitz points out:

Imagine what would have happened if these provisions had been in place when the lethal effects of asbestos were discovered. Rather than shutting down manufacturers and forcing them to compensate those who had been harmed, under ISDS, governments would have had to pay the manufacturers not to kill their citizens. Taxpayers would have been hit twice — first to pay for the health damage caused by asbestos, and then to compensate manufacturers for their lost profits when the government stepped in to regulate a dangerous product.

Foreign Policy sums up the changes to ISDS in Atlanta:

While these changes are important, they’re more or less along the lines of what trade watchers expected and aren’t nearly as comprehensive as critics would’ve liked, said one trade expert who preferred to remain on background since the final text of the agreement has yet to be unveiled. “Based on early reports of the TPP [investor-state] language, the changes from past agreements appear to be more like tinkering around the edges, rather than a comprehensive reform,” he wrote in an email.

In other words, a nothingburger. ISDS remains what it was: A surrender of state sovereignty to corporations based on the lost profits doctrine. Nothing to do with trade; everything to do with shifting power away from the state to corporations.

Conclusion

I’ve said before that Maui and Atlanta were battles, TPP is a campaign, and TTP/TTIP/TiSA are a war. Michael Froman, the USTR, seems to agree:

(Bonus quote: “[Disgraced and hopefully prosecuted and jailed] Volkswagen CEO Martin Winterkorn called TTIP a ‘historic opportunity’ that would allow Europe and the US to set joint standards, ‘which will shape our world in the coming decades’ (Daily Mail, thanks to NC’s alert readers. And I bet Winterkorn has *** cough *** had his own ideas for the shape of things to come!)

Thing is, there’s hope! The elite doesn’t always win these wars. Boing Boing:

[A]ctivists have dogged the TPP process, showing up uninvited, publishing and analyzing leaked TPP drafts, making sure that politicians who supported TPP (sight unseen!) were held to account at each election cycle.

It was inevitable that eventually, negotiators would call it a day and declare the TPP “finalized” and send a secret draft back to all the member-states’ legislatures to be passed without public review. Today, that happened..

If this sounds familiar, it’s because it happened once before, with ACTA, another secret treaty that was TPP 1.0. Like TPP, ACTA eventually went back to member-states. But then a funny thing happened: the people rose up. Across the US and Europe, people took to the streets, worked the phones, wrote letters. The normally boring business of the technicalities of law — a death-sentence for any kind of public interest — was overruled by the easiest-to-understand of points: if ACTA is so great, why did they have to keep it a secret?

So TPP really is not a done deal. Here’s the timeline for the next phase of the campaign and the battles to come:

Congress is expected to receive the legal documents to start the 90-day clock later this week. Lawmakers will then have 30 days to review the deal before it is made public.

The next step will be for the U.S. International Trade Commission to conduct a full economic review of the deal. The agency has up to 105 days to complete that work.

Capitol Hill staffers said votes in the House and Senate are not likely to take place before mid-April, at the earliest, and a reshuffling in the House Republican leadership after the announced resignation of Speaker John A. Boehner (R-Ohio) could produce even more uncertainty. While the GOP has been more supportive of Obama’s trade agenda, some conservatives have opposed a pact negotiated by a Democratic White House.

Those are the “months” — “months!!” — Obama talked about (and remember we won’t necessarily know about the side deals (or the secret side deals (or differing interpretations))).

Oh, and here’s one good litmus test for [snort] good faith on USTR Froman’s part: The timing:

The Trade Promotion Authority bill requires that the USTR submit a notice of agreement to Congress 90 days before ratification, and include a 60 day public notice period. If he takes full advantage of that timeline, he could release the text 30 days from now – on November 5 – for a 60 day period that will include the Thanksgiving and Christmas recesses in Congress. Not exactly planned to maximize public debate.

So, something to look forward to, during the Holiday season!

NOTES

[1] Kevin Drum:  “Paul Ryan is concerned about dairy products. Sander Levin is concerned about cars. In Louisiana they’re concerned about sugar. The whole deal is oozing with parochial local concerns.” Not that there’s anything wrong with that; the sausage-making process is important. But NC is about critical thinking skills, and not reverse-engineering the collective thought processes of local oligarchies and their legislative representives.

[2] For starters, Trump might weigh in. Kevin Drum again: “He’s opposed to the deal—there’s no telling why, really—and he’s shown a genius in the past for picking out specific details about various issues and then flogging them to death.” Politico has a good summary of the players here.

[3] For example, here’s Levin’s comment:

“The most important objective is to get the strongest agreement that benefits American workers and the U.S. economy for generations. The role of Congress now is as important as ever.”

No. The most important objective is no TPP at all. The Obama administration didn’t even pass card check. Can Levin seriously believe that the administration is going to expend a single penny of political capital for Vietnamese workers? After they threw the workers Malauysia enslaved under the bus? Levin writes a good memo, for sure, but in the end his memo is all about “Let’s make a deal.” No, let’s not.

Appendix

Here’s a useful video from the Young Turks that covers “the deal,” and some of the sausage-making detail that I didn’t want to go into.

Enjoy!

Posted on October 6, 2015 by Lambert Strether