TPP Is Not A Trade Deal – It's A Corporate Power Play

The Huffington Post has a long article on one particular aspect of the proposed Trans-Pacific Partnership (TPP), the huge new trade deal with Asian-Pacific countries, that perfectly illustrates that these are not “trade” deals at all, but are just vehicles for protecting certain industries from competition. TPP has lots of additional patent and copyright protections that will only help Hollywood, the big pharmaceutical companies, and, of course, Wall Street.

Today’s article focuses on what is called “investor-state dispute settlement” or ISDS in shorthand. It is essentially an extra-judicial court that resolves disputes between corporations and states. The court operates outside any country’s judicial system – it is totally independent. The court was originally set up to ensure that states do not nationalize foreign-owned companies or seize their products without some form of compensation, which would be determined by the court. This gave foreign investors at least some confidence that their investment would not be totally lost through state intervention. But over time, the court’s jurisdiction has expanded and TPP looks to expand it even more. Under ISDS, companies are now suing states over mere changes in policy that effect their business. As an example, due to the financial crisis and the resulting budgetary problems, Spain has been forced to reduce its subsidies to the solar power industry on a pretty regular basis over the last few years. As these subsidies were declining, investment arms of Deutsche Bank and BNP Paribas bought a few Spanish solar-thermal power plants. When Spain continued to reduce the subsidy, these investment firms sued Spain, claiming their expectation was that the subsidies would continue at a fixed level and their business was harmed because of the new reductions. It really takes a lot of nerve to create the financial crisis that drives countries into the ground and then sue them for not supporting your investments, but we are taking about the cartel of global banks – nothing is beyond them. The case is still pending. In fact, most people believe that these investments were made primarily to bring an ISDS case against Spain in the hopes of a massive settlement. And, increasingly, third parties are providing funding for these cases, protecting companies from the up-front costs of litigation and then taking a cut of whatever settlement results. In fact, many cases have resulted in over $100 million judgements against the states and that settlement has to be paid in cash. So, rather than being used as a tool to prevent states from seizing corporate property, ISDS is increasingly becoming a vehicle for speculation for investors to wins huge settlements from states for mere changes in policy.

TPP only expands this capability even further. Under the proposed treaty, at least 9,000 firms will now have access to ISDS. More importantly, the treaty expands “the minimum standard of treatment” to now cover financial firms.. This huge gift to Wall Street now gives those big banks the ability to demand compensation from countries that implement regulations that somehow effect the firms’ bottom line under ISDS. And it is yet another example of how corporate power is challenging state sovereignty. From Aetna threatening to withdraw from Obamacare if their merger is blocked to tax-avoidance schemes using other countries, corporations are slowly whittling away at the power of individual countries to regulate them. Passage of TPP would just be another step down that road.