According to the publication “Inside US Trade”, which tends to be pretty good when it comes to sourcing its information, the next round of TTIP talks won’t take place until the end of September – obviously the negotiators felt they needed a holiday after all the excitement of the last year. But even if TTIP news is thin on the ground, there have been a couple of big developments recently that have important implications for the negotiations.
The first concerns the following news:
Philip Morris International, the world’s largest tobacco company, is prepared to sue the British government should it implement a law requiring plain packaging of cigarettes, a document seen by Reuters on Tuesday showed.
Another report claims that the tobacco company will be demanding exceptionally high “damages” - £11 billion. Unfortunately, it doesn’t provide any source for that figure, so I think it needs to be treated with caution. However, we do know that Philip Morris (PMI) is also suing Uruguay over its health policies, and in that case is demanding $2 billion. Given the greatly different size of their respective economies – Uruguay’s GDP is around $50 billion, while the UK’s is about sixty times as great – it’s quite plausible that PMI would want an even more outrageous figure.
The company has used ISDS provisions in an obscure treaty between Uruguay and Switzerland to sue the former. Unfortunately the articles about the new threat to sue the UK don’t say how PMI aims to do this; as far as I am aware, there aren’t any treaties where it could invoke ISDS clauses in the same way, so presumably it will just be trying to do so under UK law. That’s interesting, because it is how the company also tried to sue Norway over its own moves to discourage smoking. Here’s what happened:
PMI tried similar bully tactics against Norway when it banned the display of tobacco products in 2010. Crucially the case was tried in an Oslo District Court because the treaty through which PMI sued Norway – the European Economic Area agreement – had no ISDS. Norway made a public health defence. Norway won.
Now imagine a situation in which either TTIP or CETA (or both) has ISDS chapters in the final agreement (talking of CETA, the main text plus annexes have now been leaked – analysis to follow in later Updates.) An investor-state dispute procedure would then allow PMI to sue the UK (and any other EU country) directly, using secret tribunals, rather than national courts. Not only that, ISDS would allow any of the tens of thousands of US companies with subsidiaries in Europe to do the same. The latest threat of PMI shows that the will is there, even if the easy means to do so are currently lacking. Let’s hope this action will cause the British government to wake up to the dangers of ISDS, just as the Germany government did when a Swedish company sued Germany in 2012 for ‚¬3.7 billion using ISDS clauses in the Energy Charter Treaty.
The other news is very different. It comes from Professor Jane Kelsey of the Faculty of Law, University of Auckland, whom I mentioned last week for her insightful analysis of the leaked financial annex of TISA. She’s put together a hugely-important new site with the slightly odd name of "TPP: No Certification". Here’s what the “certification” refers to:
The US withholds the final steps that are necessary to bring a trade and investment treaty into force until the other party has changed its relevant domestic laws and regulations to meet US expectations of its obligations under the agreement. In the past, US ‘expectations’ have gone beyond what is in the actual text, and even included matters that were rejected in negotiations.
US officials can define another country’s obligations; become directly involved in drafting that country’s relevant law and regulations; demand to review and approve proposed laws before they are presented to the other country’s legislature; and delay certification until the US is satisfied the new laws meet its requirements.
There are already moves to apply a new and extended version of certification to the Trans-Pacific Partnership Agreement (TPPA).
The [US] Bipartisan Trade Priorities Act of 2014, which seeks to establish Fast Track authority for the TPPA, contains Sec. 4(a)(2):
"CONSULTATIONS PRIOR TO ENTRY INTO FORCE – Prior to exchanging notes providing for the entry into force of a trade agreement, the United States Trade Representative shall consult closely and on a timely basis with Members of Congress and committees as specified in paragraph (1), and keep them fully apprised of the measures a trading partner has taken to comply with those provisions of the agreement that are to take effect on the date that the agreement enters into force."
Although the new site’s main focus is on the Trans-Pacific Partnership agreement (TPP), that paragraph from the proposed Bipartisan Trade Priorities Act makes it clear that the certification requirement is general: “Prior to exchanging notes providing for the entry into force of a trade agreement” - that is, any trade agreement. As a result, the new site’s analysis applies equally to TTIP.
There is a detailed Q&A [.pdf], which is well-worth reading (not least for the appalling saga of how the US practically wrote the new laws that Peru was obliged to bring in), as well as a condensed explanation of what this is likely to mean in practice:
Certification is a legally binding obligation on the US President. The President withholds formal written notification to another party to a trade agreement that the US has satisfied its domestic approval processes until the US certifies the other party has altered that party’s domestic laws and policies to satisfy US expectations of what is needed to comply with the TPPA [and also TTIP].
The US officials transmit a list of the changes to the other country’s domestic laws and policies that the US government requires before it will allow the pact to go into force. US government officials then monitor compliance, and pressure the government of the trade partner country to alter its laws and policies until they satisfy the US view of the changes required.
Even if the US Congress passed the Trans-Pacific Partnership Agreement (TPPA) [or TTIP], the pact would only go into effect in relation to each party when the US certified that party had satisfied US notions of compliance. Certification therefore provides additional leverage to the US Congress and US industry to impose its interpretation on a party’s obligations under the TPPA [and TTIP].
That last part is particularly worrying. For example, the European Commission has been adamant that certain things like chlorine-washed chicken meat or hormone beef will not be part of TTIP. Let’s assume that is true. We know that some of the most powerful US farming groups have said that they will not support TTIP without Europe opening its doors and plates to chlorine-washed chicken and hormone beef, among other things. So one possibility is that the European Commission might refuse to allow either in the agreement as signed, but that under the influence of US lobbyists, the US government would refuse to certify TTIP unless they were added afterwards.
In this way, the European Commission would be able to say truthfully that it managed to keep out chlorine-washed chickens and hormone beef from TTIP’s text, but that it now had “no choice” but to add it in (and maybe change the relevant EU laws), otherwise all that hard work on the agreement would be wasted, and all those supposed “benefits” lost. And so, at the twelfth hour, chlorine chickens, hormone beef, GMOs, etc. etc. would be permitted in the EU so as to obtain final certification.
Of course, it may well not come to that. The resistance to TTIP is growing, and it may be that the whole thing – not just ISDS – collapses as people become aware of the reality of what is being planned. But what this valuable new site from Kelsey makes clear is that even if we manage to keep out the worst demands of the US side from the “final” text, it may not actually be final. Assuming certification is required for TTIP as for TPP, it would give one last chance for the US to try to bully the EU into accepting its demands – and one last chance for the European Commission to capitulate.