New Zealand Herald, Auckland
Shallow justifications for TPPA
By Bill Rosenberg
29 October 2015
Catherine Beard claims there is no problem with the ability of corporations to sue the New Zealand government in offshore tribunals for loss of profits under the TPPA. She bases this on "commissioned research" from the New Zealand Institute of Economic Research (NZIER).
Unfortunately this "commissioned research" shows that she who pays the piper calls the tune. NZIER has fitted its findings to suit Business New Zealand’s support for the TPPA. It is one-sided, failing to address a wide range of concerns of expert opinion.
Given that NZIER has itself also publicly stated its support for the TPPA MFAT should not, as Trade Minister Tim Groser has suggested, use them to carry out the government’s evaluation of the deal.
Catherine Beard’s article and NZIER’s paper are about Investor-State Dispute Settlement (ISDS). There is insufficient space here to address the many ways in which the NZIER commissioned research falls short, but in fact the very legitimacy of ISDS is under broad attack internationally.
Following a 2010 review, the Australian Productivity Commission recommends that Australian governments should not accept ISDS because there is little evidence that it increases investment but it has unacceptable risks. It cites a World Trade Organisation research division report showing that ISDS does not increase investment.
If the justification is to help local companies invest overseas, governments have lower-risk methods available that don’t compromise sovereignty, such as political risk insurance.
Australian governments of both right (the Howard Government) and left (Rudd and Gillard) have refused to accept ISDS. They have been burned by Philip Morris International’s case against their successful anti-smoking plain packaging measure which Australian media report has already cost Australia $50 million in just preliminary legal argument.
An international corporate lawyer experienced in ISDS cases, George Kahale in 2014 told a conference of experts that ISDS "is seriously flawed, and in my view it needs a complete overhaul".
His "top ten" flaws include conflicts of interest, severely limited appeals, inconsistency in judgements, and pro-investor biases ever widening the interpretation of countries’ obligations. We are told the TPPA is partially addressing some of these, but it is far from a "complete overhaul" with major problems remaining. NZIER barely touches these problems.
Germany and France have also opposed ISDS in the trans-Atlantic sister agreement to TPPA, and in response the European Commission is proposing major changes to ISDS process. Even that leaves big holes. South Africa and India are among countries withdrawing from ISDS, in South Africa’s case because it has been used to challenge laws righting the years of racism under apartheid.
This intrusion into human rights, which cases show could include labour rights, has shocked many people. It makes clear that ISDS protects investors rather than the broad social, economic and environmental concerns of governments and citizens.
Human rights authorities like Alfred de Zayas of the US, an expert in human rights and international law and an Independent Expert for the UN Human Rights Council, have repeatedly warned about the dangers. As recently as last Monday (October 26) in a report to the UN General Assembly he reaffirmed his view that ISDS "must be abolished" . He sees ISDS as fundamentally in conflict with international covenants on human rights and "the very essence of sovereignty and self-determination". NZIER ignores these expert opinions and dismisses such concerns.
In 2012, more than 100 jurists from TPPA countries including retired judges, investment law scholars and prominent legislators signed a statement opposing ISDS. Chief Justices in New Zealand (Sian Elias) and Australia (Robert French) have expressed concerns.
Also opposed are prominent economists such as Nobel laureate Joseph Stiglitz and trade expert Professor Jagdish Bhagwati. Even right-wing US think tank the Cato Institute opposes it, saying it "amounts to a subsidy to mitigate the risk of outsourcing".
NZIER neither acknowledges nor addresses most of the issues raised by these prominent and authoritative critics. It does acknowledge that ISDS can influence governments but justifies this in terms that favour investors over other public interests. Investment agreements embed policies which future governments may rightly want to change in the interests of New Zealanders. It enables a conservative government to permanently lock in its policies, shrinking the alternatives available to future electors.
Most treaties are subject to a "National Interest Analysis" before final ratification. They are frequently a travesty, shallow justifications commissioned or even written by MFAT for the Government - like marking their own exam. For a proposal as far reaching as the TPPA, a balanced expert panel should be funded to commission the independent economic, health, social, human rights and environmental impact assessment it deserves. The task cannot be left to committed parties like the Government, MFAT and NZIER.
Dr Bill Rosenberg is policy director and economist at the New Zealand Council of Trade Unions.