Trans Pacific Partnership: Corporations Before People and Democracy

Part 2

Part 2: Implications of the TPP: The Corporations of US Foreign Policy and Erosion of Domestic Protections 

Our analysis reveals major implications for public accountability if Congress approves the TPP. This section outlines how the TPP is an extreme example of continued corporatization of US foreign policy and that the deal would not only exacerbate the erosion of public protections, but could also affect the stability of the Asia-Pacific region. Meanwhile, the terms of the TPP set corporations up to benefit the most, with the interests and wellbeing of people faring the worst.

Geopolitical Intentions and Strategies: The TPP and the “Pivot to Asia”

As outlined in PART I, the use of trade and trade agreements by the United States to influence foreign policy has long been the norm. This reality is also apparent in the potential implications of the Trans-Pacific Partnership. Most notable is how the TPP would impact the US’s “Pivot to Asia” strategy and how it could set the stage for major geopolitical implications in the region. Ultimately, despite proponent’s claims of economic growth or job creation, the possible outcomes of the TPP—and its role in the “Pivot to Asia” in particular—do not necessarily serve the interests of American people. 

As the center of gravity of US political, economic, and military policy abroad is seen as shifting to the Asia-Pacific region, the TPP can be analyzed as part of that reality.32 By joining economic policy—shaped by corporate interests—with foreign and national security interests in the Asia-Pacific region, the TPP aims to develop partnerships that can be leveraged into geopolitical and military power.33 In a speech in early April 2015, Defense Secretary Ash Carter stressed this aspect of the agreement, stating that, “in terms of our rebalance in the broadest sense,” passage of the TPP is as important as “another aircraft carrier,” and that it would “help us promote a global order that reflects both our interests and our values.”34

The Obama administration’s announcement of a military and diplomatic “pivot” toward Asia points to the continued investment by the US in global leadership. According to a March 2015 paper prepared for members of Congress, “The TPP has potential implications beyond US economic interests in the Asia-Pacific. The region is increasingly seen as being of vital strategic importance to the United States. Throughout the post-World War II period, the region has served as an anchor of US strategic relationships, first in the containment of communism and more recently as a counterweight to the rise of China.”35

In other words, the stated context in which the TPP is being promoted by the United States is to secure dominance in the region in the face of China’s growth. Despite the assertions that are being made by proponents, it is clear that the TPP over-reaches and expands corporate prerogatives in ways that have little to do with China, all the while still securing US dominance in the region as the agent of such corporate prerogatives.

For example, the first way in which the TPP unites corporate prerogatives and military interests with foreign policy is by framing the TPP’s pact as supposedly helping secure trade routes in an increasingly turbulent region. Specifically, China’s territorial ambitions in the regionxiv have seemingly made the US and its regional allies anxious about China’s rise and willingness to project military power, as well as the security of regional trade.37 In May 2015, Secretary Carter clarified the anticipated role of the TPP and stated that the US “will remain the principal security power in the Asia-Pacific for decades to come.”37 Thus, it is under the guise of enforcing freedom of navigation that the agreement may come into play as a major foreign policy “wedge” that secures the interests of the US and its regional allies under the banner of “free trade.” 

A major way in which the TPP may uphold US regional and global influence as the agent of corporate interests is by strategically securing Vietnam’s growing economy in a US and Southeast Asia-centric trading bloc that excludes China. Vietnam’s GDP has grown, in part, because of rising wages in China, and because it has had success in attracting the types of low-wage jobs that China aims to move beyond, particularly in sectors such as textiles and low-end assembly.38 Under the banner of facilitating the East Asian development model of export-led growth in manufacturing, proponents of the deal have reported that Vietnam is one of the countries that will supposedly gain the most within the Trans-Pacific Partnership.39 For example, according to the International Trade Administration Office of Textiles and Apparel, in 2015, Vietnam exported roughly $10.5 billion worth of apparel to the United States (12.4 percent of US apparel imports) and roughly $4.3 billion worth of footwear. Under the TPP, Vietnam would be able to export such items to the US at a 0 percent tariff rate, theoretically making Vietnamese exports even more competitive.40

It’s under the guise of enforcing freedom of navigation that the TPP may come into play as a major foreign policy “wedge” that secures the interests of the US and its regional allies under the banner of “free trade.

Despite such justifications for the agreement, were the TPP to be implemented, the least economically powerful of the TPP member countries—among them, Vietnam, Malaysia, Chile, and Peru—would have foreclosed to them investment, intellectual property, trade, agriculture, procurement, and other policies that the rich TPP member countries used to develop their own economies. As Kim Elliott of the Center for Global Development argues, the benefits of the TPP to Vietnam and other clothing exporters would be compromised by the US “yarn forward” rules, which restrict the use of raw materials and textiles from countries outside the agreement—namely, China, a major player in its growing economy.41 Even worse than the issues that arise from the rule of origin are the ways in which Chinese firms, including major state-owned enterprises, are buying up existing Vietnamese production capacity and creating new plants to use Vietnam as an export platform to the US and Japan. Thus, despite the TPP proponents’ push for export-led manufacturing growth, supposedly liberating poor and vulnerable economies, the agreement would instead foreclose particular means of growth while emboldening the US as a key determiner of trade relations in the region.42

Corporate Control and Transnational Power: State-Investor Settlement Disputes and Voluntary Regulations

An alarming reality of the TPP text is that it would significantly expand an international legal and political regime that would allow multinational and transnational corporations to bypass domestic courts and evade public accountability. Additionally, the institutions and mechanisms that corporate actors have used to subvert standard procedures of judicial litigation may themselves be inconsistent with US law, ultimately threatening democratically-elected governments with trade sanctions or cash damages for implementing policies on behalf of the public they serve that do not meet TPP constraints. Principal among these mechanisms invoked within the TPP is the “Investor-State Dispute Settlement” (ISDS), an international arbitration procedure wherein national governments that are member to the particular agreement legally bind themselves to settle “disputes” with “investors” in supra-national tribunals.43xv Broadly, the tribunals are free standing and ad hoc, with tribunalists coming from a “club” of mainly elite private sector lawyers at firms that specialize in this practice, and that rotate between being arbitrators and using governments.

Various forms of the ISDS arbitration procedure are now a part of almost 2,300 bilateral investment treaties and trade agreements worldwide, of which the United States is party to 50.44xvi Although there is a wide range of differences in scope and process between each such treaty and agreement, the supra-national tribunal and procedure outlined in the TPP in particular would continue the trend of preferential treatment of corporations.45 For example, if the agreement were to be approved by Congress, the TPP’s ISDS arbitration mechanism would grant foreign investors within TPP member states procedural rights that are not available to domestic firms to “sue” governments outside of national court systems, unconstrained by the rights and obligations of countries’ constitutions, laws and domestic court procedures. The investor can seek compensation from taxpayers not only for actual investments made, but also for the profits that they claim would have been earned where the challenged policy not in place. Significantly, the TPP’s investment protections are extensive and include compensation for “regulatory takings” (in contrast to US law), a guaranteed minimum standard of treatment that extends beyond standard due process rights, free transfer of funds, a ban on performance requirement for foreign investors, and the freedom to appoint people of any nationality to senior management positions, among other protections. 

The institutions and mechanisms that corporate actors have used to subvert standard procedures of judicial litigation under democratically-elected governments may well be inconsistent with US law. 

Yet, according to an extensive analysis by Public Citizen, the TPP’s investment protections—ostensibly designed to provide foreign investors a means to obtain compensation if a government expropriated their factory or land and the domestic court system did not provide for compensation—are far broader than those provided under any existing Free Trade Agreement to which the various TPP member states are a party.46 For example, by widening the scope of domestic policies and government actions that could be challenged, the TPP would expand US ISDS liability. With Australian, Japanese, and other firms newly empowered to launch ISDS attacks against the United States, the TPP would double US ISDS exposure. More than 1,000 additional corporations in TPP nations, which own more than 9,200 subsidiaries here, could newly launch ISDS cases against the US government, and about 1,300 foreign firms with about 9,500 U.S. subsidiaries are so empowered under all existing US investor-state enforced pacts (most of these are with developing nations with few investors here). Additionally, the TPP would newly empower more than 5,000 U.S. corporations to launch ISDS cases against other signatory governments on behalf of their more than 19,000 subsidiaries in those countries.

At the same time, under pressure from US negotiators, the final text expands the scope of matters that are subject to investor-state enforcement to also include government contracts with foreign investors for natural resource concessions, construction projects and more. According to the analysis by Public Citizen, the final TPP text gives foreign investors greater rights than domestic investors with respect to disputes relating to procurement contracts with the signatory governments, contracts for natural resource concessions on land controlled by the national government and contracts to operate utilities. Finally, the only meaningful new ISDS safeguard or exception included in the final TPP text is a carve-out for tobacco-related public health measures that allows countries to elect to remove such policies from being subject to ISDS challenges, either in advance or once a policy is attacked. Thus, in these and other ways, the TPP unequivocally expands the power of corporations.47

National Policies and Regulations Must Comply with TPP Terms: Labor and Employment, Health and Medicine, and the Environment

The TPP pursues the interests of US foreign policy in such a way that US global leadership is intertwined with and increasingly beholden to the interests of multinational and transnational corporations, while allowing corporations themselves to bypass domestic courts and evade public accountability. Yet, as outlined below, many policies and regulations of the US and other member states of the TPP must comply with TPP terms, and therefore to the corporate interests behind the agreement. There are few protections that the governments and citizenry of TPP member countries can employ when the interests and wellbeing of the public are compromised, despite clearly identified rules codifying benefits for multinational and transnational corporations.48 The principal areas of concern include labor and employment, health and medicine, and the environment and the workers involved in those industries. Specifically, while the TPP includes expansive constraints on government policies to safeguard public health and provide access to affordable medicines, it has weak labor and environmental standards and no rules regarding human rights.

The Impact on Labor: Bad for Working Communities

Many economists warn that if Congress approves the TPP, the US and other member states could see a new austerity regime that could exacerbate existing inequality, and shift more power and wealth from working com - munities to corporations and elites.

Given the threat that a TPP-governed system of global trade and investments would pose to working communities, the presidents of five of the most powerful unions in the US, including the Teamsters, United Steel - workers, Food and Commercial Workers, Machinists, and Communication Workers, issued statements declaring their opposition to the agreement. The leaders framed their opposition in the context of the impact that Free Trade Agreements from the last several decades have had on workers, such as contin - ued deindustrialization and the outsourcing of American manufacturing and service jobs to low-wage countries like Vietnam.i

Labor and Employment

If passed, the TPP would have drastic effects on labor and employment. Among the most significant of such changes for the United States in particular, the TPP would make it far easier for corporations to offshore American jobs. Specifically, the TPP includes investor protections that reduce the costs and risks of relocating production to low-wage countries. Pro-free-trade groups such as the Cato Institute consider such protections a “subsidy” on offshoring, in that these terms lower the risk premium—the return in excess of the risk-free rate of return that an investment is expected to yield—of relocating to venues that American firms might otherwise not consider.49 For example, an initial analysis by labor and public interest experts found that the TPP’s rules of ori - gin would provide further incentives for US companies to outsource produc - tion and offshore jobs, and use countries such Vietnam as export platforms to send their products back to the US.50

Additionally, by facilitating further corporate exploitation of foreign work - ers and increasing downward wage pressure on US workers, the TPP would accelerate the “race to the bottom” spurred by other free trade agreements, such as the NAFTA and CAFTA.51 For example, after NAFTA, US manufac - turing firms fired thousands of US workers and shut down operations in the US and relocated to Mexico in order to take advantage of the low wages and lax restrictions in the country’s “maquiladora” zone.52 The TPP would drive down the wages of US workers by putting them into competition with, for example, Vietnamese workers with abysmal wages. Broadly, a major result of such agreements is that US middle-class wages have remained flat in real terms since the 1970s, despite US worker productivity doubling. Economist now widely name “increased globalization and trade openness” as a key explanation for the unprecedented failure of wages to keep pace with productivity, as noted in recent Federal Reserve Bank research.53 Even economists who defend status-quo trade policies attribute much of the wage-productivity disconnect to a form of “labor arbitrage” that allows multinational firms to continually offshore jobs to lower-wage countries.54/55

To promise a number of benefits to TPP member countries through privatized trade while not requiring countries to comply with a firm set of labor standards would be a devastating blow for some of the member states’ most marginalized populations, such as low-wage workers, while being a boon for corporate interests.

The TPP also does not strengthen international labor rights protections. A 2014 Government Accountability Office report found that the terms of key labor reforms put into place in May 2007—which are similar to some of those within the TPP—had failed to improve workers’ conditions.56 Further, according to the AFL-CIO, there are extensive, well-documented labor problems in at least four TPP countries (Mexico, Vietnam, Brunei and Malaysia)57 though there is no commitment to requiring all TPP countries to be in full compliance with international labor standards before they receive the supposed benefits of the agreement. Worker rights obligations have never been fully enforced under existing free trade agreements, which have provided a great deal of discretion for worker complaints to be delayed for years or indefinitely.58

Many of the TPP recommendations made by organized labor groups in the US were completely disregarded, particularly those tied to the rights of laborers under international labor conventions. Among such demands was the need to: improve compliance and enforceability, and define the core labor standards, e.g., by referring to International Labor Organization (ILO) Conventions; 59 require that Parties not waive or derogate from any of their labor laws (laws implementing either ILO Core Conventions or acceptable conditions of work), regardless of whether the breach occurred inside or outside of a special zone;60 define “acceptable conditions of work” more broadly to include such concepts as payment of all wages and benefits legally owed and compensation in cases of occupational injuries and illnesses; and increase compliance with labor obligations such as effective labor inspections.61 Rather than incorporate these demands, the TPP fails to set any standards for acceptable conditions of work. To promise a number of “benefits” to TPP member countries through liberalized trade while not requiring countries to comply with a firm set of labor standards would be a devastating blow for some of the member states’ most marginalized populations, such as low-wage workers, and a success for corporate interests. 

A separate but related issue is that of public procurement and the promotion of further offshoring of US tax dollars. That is, the TPP and other Free Trade Agreements also undermine the right of nations to set and maintain purchasing preferences that ensure that taxpayer dollars re-circulate domestically.62 For example, during the negotiation process for the TTP’s potential successor, the TTIP, the European Union has been mounting pressure to open public procurement contracts to bids from foreign firms at all levels of government—federal, state and local—thereby treating foreign bidders as if they were local bidders. The TPP already features such a chapter on government procurement (though TPP procurement rules cover only federal procurement) as well as annexes for the US and other member countries, despite the American labor union giant AFL-CIO having urged the omission of that provision. Ultimately, commitments and constraints upon public procurement—which would otherwise be some of the most significant job creation and economic stimulus tools—undermine domestic fiscal policy, and make procurement trade into a private market and not a government tool. Governments should not be required to spend their stimulus funds to create jobs outside of their country, nor should developing countries be prevented from using their funds on domestic stimulus. Rather, governments should be able to use stimulus funds to create jobs at home.63

The Impact on Health: The Cost of Medicine

If approved by Congress, the TPP’s provisions on Intellectual Property (IP) and Investor-State Dispute Settlement (ISDS) would undermine existing national laws that provide some protections for generic drug manufacturers and help guarantee the relatively low medicine costs. Groups like Médecins sans Frontières and Oxfam warn, for example, that the agree - ment could threaten the lives of millions of people in developing countries.i As such, in an open letter to the trade ministers, prime minis - ters, and presidents of TPP member countries, key nurse, midwife, and healthcare worker organizations from eight TPP countries voiced strong concerns about the power that the TPP would grant to multinational pharmaceutical manufactures, as well as the role that such manufacturers have had in the negotiation process itself.ii

Health and Medicine

If passed, the TPP could have a substantially negative effect on the health and wellbeing of the population of the US and other TPP member countries, ultimately extending monopoly rights and undermining the potential for affordable health care and medicine. Regarding Intellectual Property (IP), for example, the TPP contains provisions for “soft linkage” between the patent system and US Food and Drug Administration’s (FDA) approval process.xvii Under “soft linkage,” according to Public Citizen, a Party must either create a system to provide notice to a “patent holder” (essentially the authorized holder of marketing approval) or allow for notification prior to the marketing of a competing product, or a product for an approved use, claimed under a patent.64 The TPP’s “soft linkage” provisions, though placing restrictions upon manufacturers of generics and biosimilars (products not identical to the original product, unlike generics), are not the worst provisions that the agreement has in store for the health and wellbeing of the population of the US and other TPP member countries.

Particularly devastating among the TPP’s Intellectual Property provisions that extend monopoly rights for corporations and undermine the potential affordable health care and medicine are provisions that ensure marketing exclusivity for biologics. According to Public Citizen, “market exclusivity rules delay generic drug registration for a specified period of time, by limiting the ability of generics manufacturers and regulatory authorities to make use of an originator companies’ data and grant generics marketing approval.” Specifically, such rules allow for “at least five years” of market exclusivity for new pharmaceutical products, where Parties can accept generic medicine applications during those five years, but cannot grant the marketing approval before five years pass from the date of marketing approval in the territory of the Party.65 Ultimately, such measures provide the inventor with a monopoly over the invention for the patent term and have the effect of keep generic competitors off the market.

Ultimately, the TPP gives the food industry a powerful new weapon to wield against the nationwide efforts for affordable health care, safe food, consumer awareness, as well as environmental protections. 

Furthermore, according to Public Citizen, marketing exclusivity for new forms and uses of old medicines could be considered a form of “evergreening.” Since marketing exclusivity would apply regardless of the patent status of a drug, even off-patent medicines presented in particular forms and uses outlined by the TPP would not have a generic competitor.66 Among other evergreening rules is the TPP provision requiring all countries to adopt second-use patents that would give another 20-year monopoly to a new use of the same chemical formulation, allowing brand-name companies to re-patent old medicines.

Another damaging provision within the TPP is the mandatory extension of patent terms, also known as “adjustments,” if patent prosecution or drug regulatory reviews exceed a certain period. By delaying market entry for low-cost generic alternatives, longer pharmaceutical patent terms increase cost burdens on patients and government health programs and constrain incremental innovation.67

In these ways, the TPP would ultimately extend monopoly rights and compromise the availability of relatively affordable health care and medicine. For example, generic drugs have saved the US population an estimated $239 billion in 2013 and $1.5 trillion within the past 10 years, yet these and other restrictions would have drastic effects on their costs.68 Considering these provisions, furthermore, it is unsurprising that PhRMA, the lobbying arm of the pharmaceutical industry, is among the top supporters of the TPP.69

In addition to potential impact of the TPP’s Intellectual Property provisions, the health and safety of the general public are compromised by key food safety measures in chapter 7 (Sanitary and Phytosanitary). According to the US Trade Representatives, the chapter aims to give “American farmers and ranchers a fair chance to feed the region’s people; ensure that America’s food supply remains among the safest in the world; and help all TPP partners to better protect the health and safety of their food through modern, science-based food safety regulation.”70 Critics argue, however, that the TPP would allow unsafe food to be imported to the US by allowing new challenges to the US border food safety inspection system not provided for in past trade agreements.71 According to the agreement, border inspections must be “limited to what is reasonable and necessary” and “rationally related to available science,” which, according to Public Citizen, allows challenges to the manner inspections and laboratory tests are conducted.72 According to Food and Water Watch, such provisions mean that agribusiness and biotech companies can now more easily use trade agreements to challenge countries that test for GMO contamination, do not promptly approve new GMO crops or even require GMO labeling, or that ban GMO imports altogether.73

The language in the TPP is far more expansive and powerful than existing trade deals that have already been used to weaken or eliminate country of origin labels, GMO labels, dolphin-safe tuna, and other regulations.74 Ultimately, the TPP gives the food industry a powerful new weapon to wield against the nationwide efforts for affordable health care, safe food, consum - er awareness, as well as environmental protections.

The Impact on Environment and Climate Change: Protecting the Fossil Fuels Economy

The language of environmental protection within the TPP is dangerously vague, has no mention of climate change, and provides no legally biding mechanisms to reduce the social and environmental impacts of extractive fossil fuel-based economies. Instead, the TPP simply calls upon member countries to transition to a low-emissions economy and to “cooperate and engage in capacity-building activities.” As such, many environmental organizations have opposed the TPP on the basis of weak environmental protections and the ability of the Investor-State Dispute Settlement (ISDS) arbitration mechanism to further relieve corporations of their responsibility to social and environmental wellbeing.

Environmental Protections

The region covered by the TPP faces an array of environmental challeng - es, including illegal logging, wildlife trafficking, illegal fishing, marine pollution, and the effects of global climate change—challenges that would ultimately devastate the environment and threaten human health and the wellbeing of communities. As such, the TPP Environment chapter (Chapter 20) includes “commitments by all TPP Parties to effectively enforce their environmental laws and not to waive or derogate from environmental laws in order to attract trade or investment.”75 Yet, in addition to the fact that such commitments would be enforced through the same dispute settlement pro - cedures and mechanisms available for disputes arising under other chapters of the TPP, there are many other issues with the chapter that undermine international and domestic environmental protections.

Principal among these issues is that the TPP actually erodes some of the in - ternational environmental protections of all US Free Trade Agreements since 2007, particularly with respect to Multilateral Environmental Agreements (MEAs). The TPP limits cooperation on environmental protections among its member states to one MEA—the Convention on International Trade in Endangered Species of Wild Fauna and Flora76—rather than the seven MEAs of other major Free Trade Agreements.77 The chapter is considered to have weak conservation rules and other environmental protections, and is ultimately, according to Naomi Klein, “the latest and largest in a series of international agreements that have attacked working women and men, fueled mindless and carbon-intensive consumption, and prevented governments from enforcing their own regulations to cut greenhouse gas emissions.”78 When addressing fishing and trade in flora and fauna, for example, the TPP merely suggests that (using the loose terminology of the text itself ) member countries “combat” illegal trades, “endeavor” to follow existing measures, and “promote” conservation, thus continuing the trend of excluding provisions that enforce environmental obligations within US-crafted trade agreements.79 Perhaps the most egregious omission is that the TPP makes absolutely no mention of climate change or any international measures to combat it. 

The TPP would also greatly erode domestic environmental protections. According to an initial analysis of the TPP that compiled contributions by labor and public interest experts, the TPP would empower foreign fossil fuel corporations to undermine environmental and climate safeguards: “The TPP’s extraordinary rights for foreign corporations virtually replicate those in past pacts that have enabled more than 600 foreign investor challenges to the policies of more than 100 governments, including a moratorium on fracking in Quebec, Canada, a nuclear energy phase-out in Germany, and an environmental panel’s decision to reject a mining project in Nova Scotia, Canada. In one fell swoop, the TPP would roughly double the number of firms that could use this system to challenge US policies.”80 Finally, according to 350.org, the TPP would “greatly enhance the ability for fossil fuel companies to sue local governments that try to resist such extractive industries (e.g., if a province puts a moratorium on fracking) and overrule community resistance (e.g., if a community tries to stop a coal mine).81