[Ip-health] Shawn Donnan in the FT: EU and US pressed to drop dispute-settlement rule from trade dea

Thiru Balasubramaniam thiru at keionline.org
Tue Mar 11 04:57:03 PDT 2014


March 10, 2014 5:12 pm
EU and US pressed to drop dispute-settlement rule from trade deal
By Shawn Donnan in London

Faced with an increasingly vocal opposition to a landmark EU-US trade
growing number of backers of the deal are starting to ask a simple
question: might the future of transatlantic trade be better served if one
of its most controversial provisions was simply dropped?

Almost nine months after negotiations opened with great hope and fanfare,
opponents of the mooted Transatlantic Trade and Investment
or TTIP, are rallying against a plan that would allow private investors to
use the pact to sue governments if they felt local laws threatened their

Environmentalists worry that it would allow big US oil companies to
challenge France's anti-fracking laws
other environmental regulations, while consumer groups fret that it would
open the EU's sacrosanct ban on genetically modified organisms to a
challenge from American agribusiness.

The concerns in Europe over the inclusion of an "investor-state dispute
settlement", or ISDS, mechanism grew so loud earlier this year that Karel
De Gucht, the EU's trade commissioner, announced he would suspend
negotiations on the relevant text to hold public consultations.

But in recent weeks, as both sides have been preparing for Monday's
resumption of negotiations in
the opposition has spread beyond the traditional sceptics.

In a paper released last
Daniel Ikenson, director of the trade programme at the conservative Cato
Institute, argued that the investor protection measure had become too
toxic. And that in order to defuse the growing opposition, negotiators
should simply drop what seemed like a superfluous provision.

"ISDS is not even essential to the task of freeing trade. So why burden the
effort by carrying needless baggage?" Mr Ikenson wrote in his paper, which
called for the US to drop ISDS provisions from its push for a 12-country
Pacific Rim deal, the Trans-Pacific Partnership, as well.

Dropping ISDS would "assuage thoughtful critics of the trade agenda, who do
not oppose trade, but who believe trade agreements should be more modest
and balanced", he wrote.

"Meanwhile, what now appears to be an angry mob protesting trade generally
will be thinned out, exposing the unsubstantiated arguments of the
professional protectionists who benefit by impeding Americans' freedom to

Mr Ikenson is not alone. In a recent debate in the British parliament a
number of MPs raised their own concerns over the inclusion of ISDS even as
they offered their backing for the broader push for freer trade across the

"Why do we need these tribunals for a country where the rule of law is
adhered to, more or less across the board?" asked Zac Goldsmith, a
backbench MP from Prime Minister David Cameron's ruling Conservative party.

ISDS mechanisms have been a feature of trade and investment treaties around
the world since the 1950s and were originally intended to help protect
investors from government expropriation or rogue judgments in countries
with weak judicial systems.

The provisions have been largely uncontroversial for most of their history.
But in recent years their use has soared as a way for companies to
challenge national regulations.

According to Mr Ikenson, between 1959 and 2002 there were less than 100
known ISDS claims lodged worldwide. But between 2003 and 2012 investors
lodged more than 400 such cases. In 2012 alone a record 58 cases were filed
worldwide, he points out.

In many instances, critics charge, the cases amount to a cynical ploy to
get around local regulations. The example they cite most often is the
continuing challenge by Philip Morris
Australia's plain packaging rules for cigarettes via an investment treaty
with Hong Kong.

Both the EU and the US remain eager to have the investor-state provision
included in the TTIP agreement. And so too are business groups.

Trade officials contend that ISDS panels actually tend to issue commonsense
rulings and that rogue cases rarely succeed.

Moreover, the EU-US negotiations, European officials argue, present a rare
opportunity to close loopholes and raise the bar to prevent frivolous cases.

As with many things in the EU-US negotiations, trade officials also argue
it is an opportunity to set an ambitious example for other agreements.

"We cannot go on and negotiate an investor protection agreement with India,
which clearly has big problems right now, if we don't have a precedent from
somewhere else," says Alex Stubb, the Finnish trade minister.

Mr Ikenson, however, says those arguments miss the point. Trade negotiators
have in recent years underestimated the depth of popular opposition to
trade deals and they are miscalculating again, he says.

The current stand-off in the US Congress, where the Democratic party's
leadership is blocking the granting of so-called fast-track negotiating
authority to the Obama administration, is driven in part by scepticism over
ISDS, he points out. In Europe the scepticism is equally strong.

"This is something that is almost non-controversial between the European
Commission and the US government and the business lobbies want it," he
says. "But they don't need it."

And, he adds: "If the trade agenda is shut down [by the opposition], which
I suspect there is a very good chance of happening for [President Barack
Obama], then the business community is going to have to prioritise what it

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