Australia must reject legal straightjacket on trade

By Patricia Ranald, for The Drum

April 8, 2014: Secretive economic partnership deals remain a worry, but it's good to see Australia hold strong against regulations that would expose us to potential legal action, writes Patricia Ranald.

The grand announcement about the Japan-Australia Economic Partnership Agreement was made yesterday, when Prime Minister Tony Abbott was in Japan, but the text of the agreement remains secret.

This enabled a splash to be made about claimed benefits without public scrutiny of the downsides of the deal.

Why is the text still secret? After the necessary legal checks by both sides, you might assume it would be released for public discussion. But the Australian process for approval of trade agreements is a Cabinet process.

This means that Cabinet will approve the text for signing before it is released publicly, and the text then cannot be changed.

It is tabled in Parliament and referred to the Joint Standing Committee on Treaties for review, but it cannot change the text and can only make recommendations. Parliament does not vote on the whole agreement, but only on the legislation required to implement the agreement.

This usually includes legislation about tariffs (taxes on imports), but may not include other aspects of the agreement, which could place limitations on what governments can do in future.

In short, the text of trade agreements is negotiated and finalised before it becomes available for public and parliamentary debate. This lack of transparency and democratic debate is why tens of thousands have signed various social media petitions demanding the release of the text of trade agreements for public and parliamentary discussion before they are endorsed by Cabinet.

The only official information available now about the Japan deal is a short summary from the Department of Foreign Affairs and Trade, which is mostly selected information about the benefits of increased market access for some Australian agricultural products. So the headlines are about selling more beef to Japan and Japanese cars being cheaper because of zero tariffs, with no information about any downsides.

I am relieved the agreement does not include the right of foreign investors to sue governments in international tribunals over domestic legislation, known as investor-state dispute settlement (ISDS). Thousands of social media messages expressing strong opposition to ISDS have also been sent to the Trade Minister, Andrew Robb.

The Minister claimed on ABC radio this morning that ISDS was not needed because both Australia and Japan had robust national legal systems. This makes the decision to include ISDS in the South Korea FTA very puzzling. Is the Minister claiming that South Korea does not have a robust legal system?

The Japan agreement is a rehearsal for the much bigger Trans-Pacific Partnership (TPP) agreement, still being negotiated between Australia, the US, Japan and nine other Asia-Pacific countries, (not including South Korea). The US is insisting on the inclusion of ISDS. The Australian Government has said it is willing to consider it.

The lack of ISDS in the Japan FTA should be a positive precedent for the TPP.

ISDS gives foreign investors the right to sue a government for hundreds of millions of dollars of damages if they can claim that a domestic law or policy harms their investment. The disputes are heard by international investment tribunals that lack the normal protections of domestic legal systems.

The proceedings are secret, not public, there is no independent judiciary, because judges can also be advocates, and there are no precedents or appeals, so decisions can be inconsistent.

The 2010 Productivity Commission Review of Australia's trade agreements found ISDS had no economic benefits, which resulted in the ALP government policy against it. The Howard Coalition government did not agree to its inclusion in the US-Australia FTA.

The US Philip Morris tobacco company is currently using ISDS in an obscure Hong Kong-Australia investment agreement to sue the Australian Government for billions of dollars over its plain packaging legislation.

The US Lone Pine mining company is suing the Canadian Québec provincial government for $250 million for daring to delay shale gas mining while it conducted an environmental review.

In the last two weeks the London Financial Times reported that the German Government rejected ISDS in the US-EU Trans-Atlantic free trade negotiations, and the Indonesian Government is withdrawing from all investment agreements containing ISDS.

Ten Latin American countries, South Africa and India have also rejected ISDS. Australia should follow these leads and refuse to include ISDS in the TPP or any other trade agreement.

The Greens have tabled a bill that would ban ISDS from all trade agreements and the Senate Foreign Affairs, Defence and Trade Committee is conducting a public inquiry into ISDS, with submissions closing on April 11.

This inquiry will enable public debate about ISDS and the concerns of many that it is a threat to democracy and sovereignty.

Dr Patricia Ranald is a research associate at the University of Sydney and is the convenor of the Australian Fair Trade and Investment Network. View her full profile here.