Leaked TPP document sparks row over foreign investment privileges

30 March 2015

The significance of trade treaties between Peru and other countries or economic blocks are at least as much about securing favourable conditions for investment as they are about trade. This was the case with the Free Trade Agreements (FTAs) with the United States and with the European Union. It is also the case of the Trans-Pacific Partnership (TPP) being negotiated behind closed doors between Peru and eleven other countries (including the United States).

Last week, Wikileaks published a draft text of the chapter on investment to a number of newspapers in TPP aspirant countries, including Peru’s La República. Dated 20 January 20 2015, and the subject of discussion at the recent round of negotiations in Hawaii (9 March 2015), the text expands on the faculties granted by Peru to foreign investors under the provisions of the FTA with the United States. It allows, for instance, for arbitration by international mediators in investment disputes even while local courts may still be engaged in seeking settlements.

A number of countries in Latin America, among them Argentina, Bolivia and Ecuador, have routinely criticised the international arbitration panels that exist to resolve investment disputes. They accuse them of institutional bias in favour of international companies. A number have withdrawn from the International Center for the Settlement of Investment Disputes (ICSID), an agency that is part of the World Bank.

Why does this matter so? Because every treaty or trade agreement once signed has the natural consequence of taking decision making out of the hands of state, local government and local people. Unless specific provision is made in such treaties or trade agreements, they reduce the degree of ordinary people’s democratic control with respect to investment projects. Further, the treaty negotiation process itself can be captured by special interest groups. Conflict over such ‘capture’ in the course of trade negotiations rages in Europe and the US as much as in Latin America. The United States is also pushing for agreement on a similar free trade agreement (the TTIP) with the European Union where, in both the US and EU, there is continuing fierce contention and debate (see for example: http://www.theguardian.com/membership/2015/feb/18/guardian-live-what-is-ttip-and-how-does-it-affect-us, https://www.youtube.com/watch?v=V7_XbqFVgtQ ). However, in many cases weaker states judge that they are better off with even a flawed international agreement (e.g. Peru and TPP; UK and TTIP), than no agreement or one negotiated bilaterally between the weaker state and a hegemon (e.g. the US).

It is not for nothing then that the TPP chapter of investment has been negotiated in absolute secrecy by the Peruvian government, its publication triggering a bitter row among members of Congress who have been kept studiously out of the loop. No sooner had La República published it than members of the Trade Commission of Congress, led by congresswoman Natalie Condori, demanded a debate in parliament in which Trade Minister Magali Silva would give explanations. “We only ever are made aware of [such negotiations] when they are putting the finishing touches [on them] and it is the moment for them to be signed” she said. Similarly, Daniel Abugattas of the ruling Gana Peru coalition criticised the way such important trade and investment agreements were prepared without proper discussion in Congress or amid civil society.

The pill was only made more bitter by the case brought against Peru in international courts by Doe Run, the American company which operated the mineral smelter at La Orroya. Doe Run alleges that Peru violated the terms of the FTA with the United States by refusing to allow a third period of delay for it to implement environmental upgrading of one of the world’s worst polluters. The terms of the TPP would seem to make it even easier for disgruntled investors to be paid huge indemnities at the expense of the Peruvian Treasury.

Abugattas also complained that Peru ‘would lose sovereignty and control over public health’ and that these would be sacrificed to ‘economic interests’ if the TPP goes ahead in its present form. This is because it would make it easier for pharmaceutical companies to take legal action against states for producing generic drugs that do not accord with company patents. As well as compensation claims against the state in cases of direct or indirect expropriation for whatever reason, the 55-page document also mentions claims regarding losses suffered by companies as a consequence of social conflicts or changes in legislation (on such matters as the environment or health) that they consider detrimental to their interests, present or future.

Public Citizen, a US-based watchdog NGO, had previously drawn attention in 2012 to what it considered ‘unprecedented threats to national sovereignty and democracy’. However, it considers that the latest version to come to light is even more harmful than its predecessor.

Other than Peru, the would-be signatories of the TPP include Australia, Brunei, Canada, Chile, Japan, Malaysia, New Zealand, Singapore, Vietnam and the United States. Only Australia, it seems, has expressed reservations about the draft investment chapter.

For a full text in English of the TPP document, go to https://wikileaks.org/tpp-investment/WikiLeaks-TPP-Investment-Chapter/page-2.html .

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