As Australians go about their normal lives, working, raising families, perhaps keeping abreast of current news, perhaps few would have heard of the TPP – the Trans Pacific Partnership. A nice little phrase, connoting working together across country boundaries for some obvious good purpose. The Australian Government has already signed the initial TPP agreement in New Zealand earlier this year, with plans for it to be ratified towards the end of the year. It has received very little media coverage, perhaps seen as too boring for any real exposure, non-controversial, and likely good for everyone involved.
But what exactly is the TPP, and what are the possible outcomes, good and bad, for Australia? Well according to the Dept of Foreign Affairs and Trade (DFAT), the TPP is a free trade agreement between the 12 signing countries that will give the following outcomes;
- open substantial new trade and investment opportunities for Australia;
- promote job-creating growth;
- further integrate our economies in this fast-growing region; and
- promote and facilitate regional supply chains.
The signing countries are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam, representing about one quarter of world trade. A similar agreement, called the TTIP, is currently in the negotiation stage. It is a proposed agreement between the USA and the European Union.
Sounds good. But there have been many criticisms. One is the enormous amount of legislation relating to corporate rights, particularly rights in relation to suing foreign governments. It is called the ISDS – Investor State Dispute Settlement. ISDS is basically an international court where corporations/investors can bring claims against governments for actions that adversely affect them. This could be a simple change in a country’s legislation.
Australia recently has been subject to such a dispute re its tobacco plain packaging laws. Philip Morris, taking advantage of a loophole in the law, sued the Australian Government via its Hong Kong subsidiary. The ISDS ruled in favour of Australia, but only on procedural grounds, determining that Phillip Morris had effectively treaty shopped”, by utilising an Australian-Hong Kong treat agreement. It did however cost Australia $50 million is legal fees, meaning it is not a loser pays system
The fact that the TPP includes a specific clause to stop the above happening means it is very likely such situations exist across other industries that corporations can take advantage of.
There is even a growing trend where dispute resolution itself is becoming an investment strategy. Ie investors are backing lawsuits, and essentially betting on the successful outcomes. This can only be open to greater manipulation if agreements like the TPP become law.