The corporate takeover Secret
NEW YORK - The United States and the world are engaged in a great debate about new trade agreements. Such agreements used to be called "free trade agreements" ; in fact, they managed trade agreements, tailored to corporate interests, mostly in the US and the European Union. Today, these agreements more often referred to as "associations" as in the Trans-Pacific Partnership
(TPP). But partnerships are not equal: US effectively dictates the terms . Fortunately, "partners" of the United States are becoming increasingly resistant.
It is not hard to see why. These agreements go far beyond trade, governing investment and intellectual property and impose fundamental to the legal, judicial and regulatory frameworks of the countries changes without input or accountability through democratic institutions.
Perhaps the most hated - and most dishonest - part of these agreements relates to investor protection. Of course, investors must be protected against the seizure of their assets rogue governments. But that's not what these provisions are about. There have been very few expropriations in recent decades, and investors seeking protection can buy insurance from the Multilateral Investment Guarantee Agency, a subsidiary of the World Bank, and the US and other governments provide similar insurance. However, US They are demanding such provisions in the TPP, even though many of their "partners" have protection of property and judicial systems that are as good as their own.
The real intent of these provisions is to prevent health, environment, safety, and, yes, even the financial regulations protecting own economy and citizens of the United States . Companies can sue governments for full compensation for any reduction in future expected benefits resulting from regulatory changes.
This is not just a theoretical possibility. Philip Morris has sued Uruguay and Australia to require warning labels on cigarettes. It is true that both countries were slightly beyond the US, the compulsory inclusion of graphic images depicting the consequences of smoking.
The labeling is working. It is discouraging smoking. So now Philip Morris is demanding to be compensated for lost profits.
In the future, if it is discovered that some other product cause health problems (think asbestos), rather than face lawsuits by the costs imposed on us, the manufacturer may sue governments to restrict them to kill more people . The same could happen if our governments impose stricter to protect us from the effects of emissions of greenhouse gases regulations.
When I chaired the Council of Economic Advisers to President Bill Clinton, anti-environmentalists tried to enact a similar provision, called "regulatory takings." They knew that once enacted, regulations would be brought to a halt simply because the government could not afford to pay the compensation. Fortunately, we succeeded in beating back the initiative, both in the courts and in Congress.
But now these groups are trying an end run around the democratic process by inserting such provisions in trade bills, the contents of which remain largely secret from the public (but not corporations that are pushing for them). It is only from leaks, and to talk with government officials seem more committed to democratic processes, we know what's going on.
Is central to the system of government of the United States is an impartial civil judiciary , with legal regulations built up over the decades, based on the principles of transparency, precedents, and the opportunity to appeal unfavorable decisions . All this is being set aside, and the new agreements require private arbitration, not transparent, and very expensive . Moreover, this arrangement is often riddled with conflicts of interest ; for example, the arbitrators may be a "judge" in one case and a defense in a related case.
The procedures are so expensive that Uruguay has had to resort to Michael Bloomberg and other wealthy Americans committed to the health of defense against Philip Morris. And while corporations can sue, others can not. If there is a violation of other commitments - in labor and environmental standards, for example - citizens, trade unions and civil society groups have no recourse.
If ever there was a unilateral dispute settlement mechanism that violates basic principles , that's all. So I joined leading US legal experts, including Harvard, Yale and Berkeley, writing a letter to President Barack Obama explaining how harmful to our justice system these agreements.
American supporters of such agreements state that the US defendants have been only a couple of times now, and have not lost a case. Companies, however, are just learning how to use these agreements to their advantage.
And the high cost of corporate lawyers in the US, Europe and Japan probably outmatch the underpaid government lawyers trying to defend the public interest. Worse, companies in advanced countries can establish subsidiaries in member countries through which they invest back home, and then sue, giving a new channel to block the legislation.
If there was a need to improve the protection of property, and if this, costly settlement mechanism private disputes were superior to a public judiciary, we should be changing the law not only for the wealthy foreign companies, but also for our own citizens and small businesses . But there has been no suggestion that this is the case.
Rules and regulations determine the type of economy and society in which people live. Affect relative bargaining power, with important implications for inequality, a growing problem worldwide. The question is whether we should allow wealthy corporations use hidden provisions in so-called trade agreements to dictate how we live in the XXI century . I hope people in the US, Europe, and the Pacific answer with a resounding no.
Joseph E. Stiglitz , Nobel laureate in economics.
May 13, 2015
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