STOCK MARKET WATCH -- Monday, 2 March 2015

[Demeter]

19. "Elizabeth Warren is clearly getting on the Administration’s nerves."

http://www.nakedcapitalism.com/2015/03/the-administrations-dishonest-response-to-elizabeth-warrens-attack-on-secret-investor-arbitration-panels-in-trade-deals.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

YVES: The Massachusetts senator has come out forcefully against the misleadingly named trade deals, the TransPacific Partnership and its ugly sister, the TransAtlantic Trade and Investment Partnership. Mind you, these treaties are not about trade. Trade is already substantially liberalized and in keeping, only five of the 29 chapters of the TransPacific Partnership deal with tariffs.

What these pacts are primarily intended to do is strengthen intellectual property laws to help US software and entertainment companies, along with Big Pharma, increase their hefty profits, and to aid multinational by permitting the greatly increased use of secret, conflict-ridden arbitration panels that allow foreign investors to sue governments over laws that they contend reduced potential future profits. I am not making that up.

Warren focused on the so-called investor-state dispute settlement process in a Washington Post op-ed last week. We’ve discussed these panels in gory detail in previous posts. That article led the White House to issue a “lady doth protest too much” rebuttal that we’ll shred shortly. But let’s first review the state of play...

The Administration had no luck in the last Congress getting so-called “fast track” authorization for the TPP due to widespread opposition. It wasn’t just that Majority Leader Harry Reid refused to table it in the Senate. John Boehner made it clear that he couldn’t get the votes in Republican-controlled House to pass it either. Over 200 representatives, including some Republicans, signed letters or otherwise voiced reservations about the trade deals, and another 30 to 40 were believed to be against it. Although the Administration has tried to claim otherwise, the opposition goes well beyond the small cohort of “progressives”. Part of the reason for the Congressional revolt is that the Administration has made it impossible for Congress to review the drafts properly. But another is that even some conservatives are willing to come out against these agreements as pork for big multinationals. For instance, the right wing think tank Cato supported the Warren op-ed:

An important pillar of trade agreements is the concept of “national treatment,” which says that imports and foreign companies will be afforded treatment no different from that afforded domestic products and companies. The principle is a commitment to nondiscrimination. But ISDS turns national treatment on its head, giving privileges to foreign companies that are not available to domestic companies. If a U.S. natural gas company believes that the value of its assets has suffered on account of a new subsidy for solar panel producers, judicial recourse is available in the U.S. court system only. But for foreign companies, ISDS provides an additional adjudicatory option.

As a practical matter, investment is a risky proposition. Foreign investment is even more so. But that doesn’t mean special institutions should be created to protect MNCs from the consequences of their business decisions. Multinational companies are savvy and sophisticated enough to evaluate risk and determine whether the expected returns cover that risk. Among the risk factors is the strength of the rule of law in the prospective investment jurisdiction. MNCs may want assurances, but why should they be entitled to them? ISDS amounts to a subsidy to mitigate the risk of outsourcing. While outsourcing shouldn’t be denigrated, punished, or taxed – companies should be free to allocate their resources as they see fit – neither should it be subsidized.

The trade deals are coming up again for a fast track vote, perhaps as soon as this week. Warren’s focus on the investor panels has the potential to raise awareness of how dangerous they are and stir more voters to press their Congressmen to nix fast track authority. Here is the guts of her case against these tribunals:

ISDS would allow foreign companies to challenge U.S. laws — and potentially to pick up huge payouts from taxpayers — without ever stepping foot in a U.S. court. Here’s how it would work. Imagine that the United States bans a toxic chemical that is often added to gasoline because of its health and environmental consequences. If a foreign company that makes the toxic chemical opposes the law, it would normally have to challenge it in a U.S. court. But with ISDS, the company could skip the U.S. courts and go before an international panel of arbitrators. If the company won, the ruling couldn’t be challenged in U.S. courts, and the arbitration panel could require American taxpayers to cough up millions — and even billions — of dollars in damages.

If that seems shocking, buckle your seat belt. ISDS could lead to gigantic fines, but it wouldn’t employ independent judges. Instead, highly paid corporate lawyers would go back and forth between representing corporations one day and sitting in judgment the next. Maybe that makes sense in an arbitration between two corporations, but not in cases between corporations and governments. If you’re a lawyer looking to maintain or attract high-paying corporate clients, how likely are you to rule against those corporations when it’s your turn in the judge’s seat?

If the tilt toward giant corporations wasn’t clear enough, consider who would get to use this special court: only international investors, which are, by and large, big corporations. So if a Vietnamese company with U.S. operations wanted to challenge an increase in the U.S. minimum wage, it could use ISDS. But if an American labor union believed Vietnam was allowing Vietnamese companies to pay slave wages in violation of trade commitments, the union would have to make its case in the Vietnamese courts.

And what was the White House’s response? It was dishonest at a high level and in detail...On a high level, it asserts that subordinating the jurisdiction of US courts to secret, undemocratically accountable arbitration panels and given them the power to fine the US government for its laws and regulations is not a loss of sovereignty. Help me! Last week, Lambert flagged that the Administration can’t even get its story straight. The text states:

The reality is that ISDS does not and cannot require countries to change any law or regulation.

Looking more broadly, TPP will result in higher levels of labor and environmental protections in most TPP countries than they have today.

Not only are those two statements inconsistent, but extensive work by Public Citizen demonstrates that the claims are misleading. Narrowly speaking, suing ex post facto to make a government pay a foreign investor for his future lost profits does not “require” a country to revamp its rules. But who are you kidding? The ISDS mechanism vitiates enforcement. In addition, the claim that the TPP will strengthen environmental protection is spurious. Wikileaks published a draft of the environment chapter. From Professor Jane Kelsey of New Zealand’s analysis:

The most egregious threat to the environment is the investment chapter, in particular the prior consent by all countries except Australia to investor-state dispute settlement (ISDS). The vast majority of investment arbitrations under similar agreements involve natural resources, especially mining, and have resulted in billions of dollars of damages against governments for measures designed to protect the environment from harm caused by foreign corporations. The US is also demanding that contracts between investors and states that involve natural resources also have access to ISDS.

Moreover, notice how the White House claims is “ISDS does not and cannot require countries to change any law or regulation. ” as opposed to “the TPP does not and cannot”? That word choice was deliberate. Other provisions in the agreement explicitly require all signatories to conform their laws to the TPP. From Public Citizen’s analysis:

What is different with TAFTA [pending Trans Atlantic Free Trade Agreement] (and TPP) is the extent of “behind the border” agenda

• Typical boilerplate: “Each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements.” …

• These rules are enforced by binding dispute resolution via foreign tribunals with ruling enforced by trade indefinite sanctions; No due process; No outside appeal. Countries must gut laws ruled against. Trade sanctions imposed…U.S. taxpayers must compensate foreign corporations.

• Permanence – no changes w/o consensus of all signatory countries. So, no room for progress, responses to emerging problems

• Starkly different from past of international trade between countries. This is diplomatic legislating of behind the border policies – but with trade negotiators not legislators or those who will live with results making the decisions.

• 3 private sector attorneys, unaccountable to any electorate, many of whom rotate between being “judges” & bringing cases for corps. against govts…Creates inherent conflicts of interest….

• Tribunals operate behind closed doors – lack basic due process

• Absolute tribunal discretion to set damages, compound interest, allocate costs

• No limit to amount of money tribunals can order govts to pay corps/investors
• Compound interest starting date if violation new norm ( compound interest ordered by tribunal doubles Occidental v. Ecuador $1.7B award to $3B plus

• Rulings not bound by precedent. No outside appeal. Annulment for limited errors.

In detail, the White House arguments were just as disingenuous. The text starts out by saying that arbitration is widely used and therefore the public should see it as safe and uncontroversial. Bollocks. Arbitration in the US is most often used in take-it-or-leave it contracts like brokerage and credit card agreements and cell phone contracts. And arbitration is hardly squeaky-clean even in the US; see the lawsuits and controversies faced by the National Arbitration Forum, for instance. Moreover, the rebuttal attempts to depict these corporate star chambers as consistent with constitutional Fifth Amendment protections:

But when government takes its citizen’s property from them – be it a person’s home or their business – the government is required to provide compensation. This is a core principle reflected in the U.S. Constitution and recognized under international law and the legal systems of many countries.

So since this premise is so well accepted (and Warren reminds us that the TPP signatories all have grown-up legal systems), pray tell why do we need a special system of de facto above the legal system panels for the biggest, richest companies who are in a better position than just about anyone to press for their legal rights? The idea that a special legal venue that is for well-heeled multinationals has anything to do with the rights of ordinary citizens is an insult to the reader’s intelligence.

AND THERE'S STILL MORE! SEE LINK