AFTINET submission to the Joint Committee and Senate inquiries says no to the TPP-11

3 May, 2018: AFTINET's full submission to the Joint Committee and Senate inquiries into the TPP-11 is available here, and summarised below. 

Thanks to all those who sent submissions to these inquiries. The Joint Standing Committee on Treaties is due consider submissions, hold public hearings and report on August 22, but the government may attempt to cut short the process. The Senate inquiry is accepting submissions until May 31, and is due to report on September 18. Parliament will then vote on the implementing legislation. Our assessment is that the TPP-11 is not in the public interest and we will campaign for the majority in the Senate to block the implementing legislation.

TPP-11 suspended clauses

Only 22 of the original TPP-12 provisions have been suspended, but not removed, pending the US re-joining the deal. Many of these provisions increase monopolies on medicines, including the most expensive biologic medicines, which would delay the availability of cheaper forms of these medicine, and others would increase copyright monopolies at the expense of consumers. The suspension of these provisions identifies them as unacceptable to all TPP countries, yet they could be resurrected if the US re-joins the agreement.

Australia has never before signed a deal containing essentially unacceptable provisions that could be re-activated if an outside party re-joins the deal. These clauses should be deleted.

ISDS: global corporations can sue governments in unfair international tribunals

This chapter is almost completely unchanged from the TPP-12. ISDS gives increased legal rights to global corporations which already have enormous market power, enabling them to bypass national courts and sue governments for millions of dollars in unfair international tribunals over changes in law or policy, even if they are in the public interest. These tribunals have no independent judiciary, precedents or appeals, and are based on legal concepts not recognised in national systems and not available to domestic investors. The “safeguards” for public interest legislation are inadequate, and governments can only clearly exclude tobacco regulation from ISDS cases.

Over the past 2 years, even more legal experts and legislators have condemned flaws in the ISDS system as the numbers of cases against public interest laws have increased. Even the EU and the US are now negotiating agreements without ISDS. The two institutions that oversee ISDS arbitration systems are conducting ongoing reviews which have also identified serious flaws in the system.

Given these developments, the TPP-11 should not contain ISDS.

Trade in Services: governments restricted from regulating essential services

This chapter is unchanged from the TPP-12. The structure of the chapter treats regulation of services as if it were a tariff, to be frozen at existing levels or reduced over time, and not to be increased in future, known as the “ratchet” structure. The negative list structure means that all services are included, unless specifically exempted. Exemptions are intended to be reduced over time. The exemptions do not apply to ISDS, and do not prevent ISDS cases on exempted services.

The negative list and ratchet structure are not acceptable, because they are specifically intended to prevent governments from introducing new forms of regulation, which are seen as potential barriers to trade. But this structure ignores the need for democratic governments to respond to changed circumstances, like the re-regulation of the financial sector following the Global Financial Crisis, and the need for new regulation of carbon emission levels and energy markets in response to climate change. The structure can also prevent governments from responding to failures of privatisation and deregulation, as occurred with the need to re-regulate the provision of Australian vocational education services.

Temporary movement of people: more workers vulnerable to exploitation

This chapter is unchanged from the TPP-12. The TPP-11 commits Australia to accepting unlimited numbers of temporary workers from Canada, Mexico, Chile, Japan, Malaysia and Vietnam as contractual service providers in a wide range of occupations, without labour market testing to establish whether there are local workers available. The fact that they are tied to one employer and face deportation if they lose the job means that these workers are vulnerable to exploitation. Recent studies have provided even more evidence that exploitation is widespread. Australia has made far more extensive commitments for entry of contractual service providers than have other TPP countries.

The government has recognised some of these issues through its abolition of the visa 457 and claimed restoration of labour market testing. The government could have chosen to reinstate labour market testing in the TPP-11, as would be consistent with its claimed change of domestic policy, but it has chosen not to do so. The government did choose to restore labour market testing in the Peru-Australia FTA, which was negotiated over the same period. This begs the question of why the two agreements are inconsistent.

Labour Rights and environmental standards not legally enforceable in the same way as the rest of the agreement

These chapters are unchanged from the TPP-12. Labour law experts have criticised the labour chapter because much of it is aspirational rather than legally binding. For example, the clause on forced and child labour only commits governments to “recognise the goal” of eliminating forced and child labour. The enforcement process for those few provisions which are legally binding is more qualified, lengthy and convoluted than in other chapters of the agreement. These processes have not proven effective in other agreements. The chapter is not specifically exempted from ISDS cases, and there is no reference to labour regulation in the claimed ISDS safeguards. This means that future changes to labour laws could be the subject of ISDS disputes.

Environmental law experts have criticised the environment chapter for its weak environmental standards, which are not fully enforceable. Only the   international environmental agreement on trade in endangered species has enforceable commitments. The text does not refer to climate change, but only to voluntary measures for lower emissions.

The non-binding nature of commitments and weak enforceability in the environment chapter contrast sharply with the legal rights of corporations to sue governments over domestic laws, including environmental laws, under the provisions for ISDS described above.

Technical Barriers to Trade (TBT): threats to food labelling and product safety standards

The TPP-11 includes new commitments for Australia to mutually recognise product conformity assessment procedures in other TPP countries.  This raises the question of how to maintain and improve Australia’s relatively high standards in areas like food regulation and building product standards. Harmonising standards may not be in the public interest.

Australia introduced a form of country of origin food labelling after the imported infected frozen berries scandal, and more regulation may be needed in future. After numerous reports of dangerous imports of asbestos products and flammable building cladding, a Senate inquiry has recommended stronger regulation to ensure that imported building products conform to Australian standards. The commitments to recognise other countries’ conformity assessment procedures may impede future governments from regulating in these areas.

ISDS disputes are not excluded from the TBT chapter. Foreign investors could use ISDS to claim compensation for changes to food labelling requirements, or changes to building product conformity standards after the TPP-11 is in place. The wine and spirits annex could restrict future options for mandatory alcohol health warnings like those for pregnant women, and such regulation could also be open to ISDS cases.

Government procurement chapter may reduce procurement access for local firms

Australian procurement policy should follow the example of trading partners like South Korea and the US in having policies with more flexibility to consider broader definitions of value for money, which recognise the value of supporting small and medium-sized local firms in government contracting decisions.

The recent Joint Select Committee inquiry into changes to Commonwealth Procurement Rules recommended that the Australian government should not enter into any commitments in trade agreements that undermine its ability to support Australian businesses, taking the view that this would not conflict with Australia’s international trade obligations. The government has rejected this recommendation, and so appears to have a different and far less flexible interpretation of Australia’s international trade obligations, including the TPP-11 procurement chapter.

The Committees should scrutinise any proposed changes to the Commonwealth Procurement Rules resulting from the TPP-11 before they are tabled in Parliament to ensure that they do not remove the flexibility to support local small and medium sized enterprises.

Conclusion

The Government has refused to undertake independent studies of the economic, health, environmental and other impacts of the TPP-11 in Australia despite advice from key bodies like the Productivity Commission, the Australian Competition and Consumer Commission, environment and public health experts. International predictive econometric studies based on unrealistic assumptions show tiny economic gains by 2030, which have not been assessed against the costs of other impacts. The government emphasises gains for particular export sectors, but there is no assessment of the costs of government revenue losses, unemployment, temporary labour, ISDS and future restrictions on government regulation. Given these severe shortcomings, the Committee should recommend against the implementing legislation.