The United States and the world are engaged in a great debate about new trade agreements. Such pacts used to be called ‘free-trade agreements’ – in fact they were managed trade agreements – tailored to corporate interests – largely in the US and the European Union. Today such deals are more often referred to as ‘partnerships’ as in the Trans-Pacific Partnership (TPP). But they are not partnerships of equals: the US effectively dictates the terms. Fortunately America’s ‘partners’ are becoming increasingly resistant.
It is not hard to see why. These agreements go well beyond trade – governing investment and intellectual property as well – imposing fundamental changes to countries’ legal – judicial – and regulatory frameworks – without input or accountability through democratic institutions.
Perhaps the most invidious – and most dishonest – part of such agreements concerns investor protection. Of cours investors have to be protected against the risk that rogue governments will seize their property. But that is not what these provisions are about. There have been very few expropriations in recent decades – and investors who want to protect themselves can buy insurance from the Multilateral Investment Guarantee Agency – a World Bank affiliate (the US and other governments provide similar insurance). Nonetheless the US is demanding such provisions in the TPP – even though many of its ‘partners’ have property protections and judicial systems that are as good as its own.
The real intent of these provisions is to impede health – environmental – safety – and yes – even financial regulations meant to protect America’s own economy and citizens. Companies can sue governments for full compensation for any reduction in their future expected profits resulting from regulatory changes.
This is not just a theoretical possibility. Philip Morris is suing Uruguay and Australia for requiring warning labels on cigarettes. Admittedly both countries went a little further than the US – mandating the inclusion of graphic images showing the consequences of cigarette smoking.
The labeling is working. It is discouraging smoking. So now Philip Morris is demanding to be compensated for lost profits.
In the future – if we discover that some other product causes health problems (think of asbestos) – rather than facing lawsuits for the costs imposed on us – the manufacturer could sue governments for restraining them from killing more people.