Why is TPP so secret?

The Trans-Pacific Partnership Agreement, or TPP, is a proposed trade agreement between several Pacific Rim countries concerning a variety of matters of economic policy. TPP negotiations are being held by all 14 governments participating of it, Malaysia included. All negotiators claim TPP will provide an economic boon to their countries. PM Najib is specially upbeat on TPP, pushing hard for Malaysia to be part of it.

PM Najib upbeat on TPP. Original article on Nikkei.

PM Najib upbeat on TPP. Original article on Nikkei.

TPP negotiations are being held in secret, without disclosure of what is being negotiated, and no public consultation whatsoever. You might wonder, if TPP is really all so good, then why keep it secret? Well, let’s see what is actually being negotiated.

One of the core provisions implemented under TPP is the Investor-State Dispute Settlement (ISDS), which allows investors to directly challenge—and claim compensation for—government measures without ‘exhaustion requirement’ of seeking legal, local remedies. It forces governments to treat investors “fairly”, and if the investors “feel” they have been treated unfairly, then they have the legal right to seek for compensation from the government.

In its actual implementation, ISDS are structurally biased against host governments: only investors can bring claims—states cannot bring an ISDS dispute to the arbitration tribunal—, awards made by arbitration tribunals cannot be reviewed, and, in most cases, arbitration process and decisions are secret.

So, it is not just that TPP negotiations are being held in secret. If it gets implemented, and Malaysia gets sued by an investor (and it will, as I will show below), then the suit will also take place in secret. Malaysian people will not find out about it until it is too late, and told to compensate hundreds of millions of USD to an investor who was treated “unfairly”.

This is not hyperbole. ISDS have indeed proved to be a ‘chilling factor’ for governments to implement public measures, under the threat of investors’ suits. Recent history shows us that ISDS have been terrible both for the environment and people where the investor was based. These are just some examples:

Ethyl vs Canada
Canada banned methylcyclopentadienyl manganese tricarbonyl (MMT) on concerns that it contributed to air pollution and global warming. The investor who made MMT sued the Canadian government under the expropriation provision in the NAFTA , upon which the Canadian government settled, reversed its ban on MMT, and paid US$13 million in legal fees and damages to the Ethyl Corporation.

Metalclad vs Mexico
Mexico refused to allow a toxic waste facility a construction permit in a specially declared ecological zone that had unique biodiversity, rare plants and geology, and which could have exposed water sources to contamination. The company, Metalclad, challenged the Mexican municipality and won USD 15.6 million was paid in compensation.

Occidental vs Ecuador
The government of Ecuador had annulled a contract with US-based Occidental Petroleum (Oxy) because it violated a clause that the company would not sell its rights to another firm without permission. Oxy sued Ecuador and won the case, with an award of around US$2.4 billion. The tribunal conceded that the violation of a contract provision had taken place, but judged that the annulment of the contract as a whole violated Ecuador’s obligation to accord “Fair and Equitable Treatment” to foreign investors.

Renco vs Peru
Renco’s metal smelter in Peru is located in La Oroya, a town of 30,000 people. Peru’s health ministry found that 99% of La Oroyan children had lead poisoning and 20% of these needed urgent medical attention. The health ministry had to declare a state of emergency in La Oroya, and “to immediately provide health care for those harmed by the contamination, especially children and pregnant women.” Renco failed to comply with environmental cleanup requirements, yet is suing the Peruvian government for US$800 million for its failure to give it a third extension to comply with its environmental remediation obligations.

In general, disputes initiated under free trade agreements similar to TPP have proved disastrous to governments in both environmental and economic terms:

  • The number of investment arbitration cases surged from 38 in 1996 to 450 in 2011, with a full third of these cases involving corporations demanding at least US$100 million from states, on each case
  • Legal and arbitration costs average over US$8 million per investor-state dispute, exceeding US$30 million in some cases, paid by taxpayers, even if the state wins the suit
  • Just 15 arbitrators, nearly all from Europe, the US or Canada, have decided 55% of all known investment-treaty disputes.
  • The investment arbitration system is becoming increasingly integrated with the speculative financial world, with investment funds taking a cut from any granted award or settlement. And they seek out every available opportunity: lawsuits are being held against governments in crisis, most recently Greece and Libya.
  • The provisions are worded very vaguely, as to increase the number of investment dispute cases.

And this is going to be the case with TPP. Just consider the following, concerning how the documents (from what we know about it thanks to the leaks) has been worded. An earlier draft of TPP contained the following statement:

countries “acknowledge climate change as a global concern that requires collective action and recognize the importance of implementation of their respective commitments under the United Nations Framework Convention on Climate Change (UNFCCC).”

What does that mean? Can anyone explain to me? But it gets worse: in a later draft, this paragraph was removed! Now, TPP completely ignores the commitments made to address the climate crisis under the UNFCCC.

Which means that, if Malaysia signs into TPP, it won’t be able to commit itself to combat the climate crisis. If it does, business-as-usual will be affected, provoking economic harm to some investors. And these investors will have the legal rights to sue the country, and everything will be set against the host country.

Development not at expense of environment”, says PM Najib at climate change conference. Original article on The Malaysian Insider.

Development not at expense of environment”, says PM Najib at climate change conference. Original article on The Malaysian Insider.

So, in spite of what the country leaders might say about it, TPP is at the expense of the environment. Actually, TPP is going to cause important environmental harm to the country, and there is no bigger threat to the environment than TPP. (Worried about Lynas? TPP will allow plenty of Lynas-like companies to operate without restrictions, and citizens will not be able to do anything about it.)

And that’s just talking on environmental grounds. But what about economics, how much sense does TPP make to Malaysia? Malaysians are getting into a Free Trade Agreement with not one but two economic powerhouses: United States and Japan. How are you going to compete with them? Do you plan to sell Proton in Japan? Myvis in the United States? It’s clear that Malaysia will see its markets flooded with foreign products and completely unable to compete with them. If history is to serve as a guide, just check what happened to Mexico after if became part of NAFTA.

After signing into TPP, you can expect Malaysia to become the next Mexico.

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