What’s in the Trans Pacific Partnership: Investment Chapter

Quietly, Barack Obama is cementing his legacy.

Throughout his second term, the President has taken special effort to establish the next multi-lateral trade deal to govern United States and global economics, over twenty years since the ratification of the North American Free Trade Agreement (NAFTA).

The resounding silence surrounding the negotiations of the Trans Pacific Partnership is no accident either – its text is forbidden for the public’s eyes.

Even U.S. Senators, who Obama has asked to “fast track” the treaty (approve without amendments), are barely allowed to read it, while around 500 “trade advisors” are given exclusive access to the treaty.

“For any senator who wants to study the draft TPP language, it has been made available in the basement of the Capitol, inside a secure, soundproof room. There, lawmakers surrender their cellphones and other mobile devices. Any notes taken inside the room must be left in the room.”

It wasn’t until the international whistleblower, Wikileaks, began leaking chapters in 2013 that the global public was able to peek in and see for ourselves what this deal is all about.

The Investment Chapter

The Investment Chapter of the TPP governs exactly what it says: international investments. However, the definition of an “investment” stretches beyond the common notion of the term. Under the Investment Chapter, the “commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk,” are considered conditions for protected investment (emphasis added).

invest_1 invest As we move forward, we begin to see how the TPP extends its authority to our local levels of government.

Scope and coverage

In section 2(a) of Article 11.2, we read that a “Party’s obligations under this Chapter shall apply to… the central, regional, or local governments and authorities of that Party.” Under this section, multinational investors are allowed to bypass the authority of local courts and demand compensation for breaches on their investments through the TPP’s arbitration panels.

Example: The Township of Clinton, New Jersey passes a law preventing TransAmerica from building a pipeline through the town. TransAmerica bypasses the Township’s courts and brings the United States to TPP arbitration.

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Expanding neo-liberal trade

The TPP creates numerous restrictions on a Party’s ability to set protective tariffs to favor national industries over foreign investments, such as local agriculture and renewable energy production. Anti-protectionist measures are no surprise from a “free” trade agreement, but the outlawing of preferential treatment extending to the regional level of government comes as a surprise in Article 11.4 section 3.

ntl_treat_1_converted The outlawing of protectionist measures continues into Article 11.9:

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The most significant aspect of Article 11.9 is section 1(c), where a Party cannot implement measures to favor products produced in its own territory that interferes with the a multinational’s protected investments.

Example: The promotion of “Buy American” by the United States government is a “preference to goods produced in its territory” that interferes with the “sale or disposition” of Toyota’s “investment” in the American car market.

The first major regulation deals with the process of nationalization; when a state seizes the assets or resources of another investor within its borders. Article 11.7 section 1(a)-(d) protects a Party’s right to nationalize its resources as long as it meets the specified criteria. It must be acknowledged, however, that when governments nationalize resources, they typically do so with little regard to trade agreements and multinational investment interests. Repercussions of neo-liberal economic activity are often a primary motivator for nationalization.

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Arbitration

The most important part of the Investment Chapter and arguably the TPP is its judicial process. Opponents of the TPP cite its Tribunal judiciary system as a direct assault on the authority of national and local courts, which are viewed as more democratic.

What are these Tribunals? They are councils consisting of three individuals, one appointed by each grieving party and the third by the Secretary General. Quite simply, they are bestowed the power of interpreting the treaty. Any grievance submitted by a Party or protected investor is decided by a Tribunal that serves as both the justice and the jury.

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Regulations

The TPP contains a number of Articles and provisions intended to protect the environment and public health. A major regulation occurs within Article 11.9 section 3, which states that sections 1(b)(c)(f) and 2(a)(b) “shall not be construed to prevent a Party from adopting measures… necessary to protect human, animal, or plant life… or non-living exhaustible natural resources.” Highlighted in green are the sections of Article 11.9 that fall under the regulations of section 3.

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Despite these regulatory provisions, a Tribunal maintains the authority in Article 11.9 section 3(g) to overrule these regulations if it is decided they “constitute a disguise or restriction on international trade or investment.”

The strongest regulations found in the Investment Chapter come in Articles 11.15 and 11.16. With Article 11.15 serving as the environmental regulation and 11.16 as “Corporate Social Responsibility,” these Articles provide Parties an opportunity to favor their own national standards of environmental and public health over the investments of multinationals.

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Expropriation

Out of the entirety of the Investment Chapter, Annex 11-B grants multinational investors the most power through rights in the expropriation processes. Expropriation, as defined, comes in two different varieties.

The first is direct expropriation; when a Party nationalizes the investment of a protected investor or Party.

The second is indirect expropriation. Outlined in section 3 of Annex 11-B, indirect expropriation will constitute “the extent to which the government action interferes with distinct, reasonable investment-backed expectations.” A government can be brought to TPP arbitration for an action that a multinational thinks will interfere with their “investment-backed expectations,” i.e. profits.

expro_1_converted The possibilities for the exercise of corporate power over popular democracy under this provision and therefore under the TPP as a whole seem endless. While the TPP throws the general public a bone in Annex 11-B section 3(b), stating that “non-discriminatory regulatory actions by a Party… to protect legitimate public welfare… and the environment” do not constitute indirect expropriations, its imperative not to forget who is playing judiciary in the matter.

The Investment Chapter leaves critical matters of environmental health and public welfare to be determined not by local consent or a jury of anyone’s peers, but by Tribunals appointed within the TPP. The general public will be left out entirely in matters determining its own fate.

The United States government describes how the TPP will “boost U.S. economic growth, support American jobs, and grow Made-in-America exports to some of the most dynamic and fastest growing countries in the world.” Yet, without democratic whistleblowers like Wikileaks, we wouldn’t even have access to the handful of chapters that are currently available online. With 26 chapters still secret, what comfort is any citizen of a TPP Party to have that it holds our best interests at hand when were not trusted us to read it for ourselves?

Read the Investment Chapter in its entirety here.

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