Congress Shouldn’t Fast-Track Covert Trade Deals

Dec. 11 (Bloomberg) -- The standards ensuring the safety of our food, medicines and cars, the energy and climate policies needed to save our planet, and the financial regulations designed to prevent banks from creating another crisis all involve decisions that should be made in open, democratic venues.

Yet the Obama administration is engaged in closed-door negotiations for free-trade agreements -- one with the European Union and one with Canada and 10 Asian and Latin American countries -- that could undermine these vital citizen safeguards. The negotiations on the Transatlantic Trade and Investment Partnership began this summer and could last two years, and the administration is trying to sign the Trans-Pacific Partnership, initiated by President George W. Bush in 2008, by the end of this year.

The TPP includes 29 chapters, only five of which pertain to traditional trade matters. The rest would require the U.S. to conform domestic financial regulations, climate policies, food and product safety standards, and data privacy protections to enforceable TPP rules.

What’s worse is that the talks have been conducted in secret, and the public and news media have been denied access to the draft text of the agreement. At the same time, more than 600 official U.S. “corporate trade advisers” have access to the deliberations and have helped devise the TPP rules.

Only because of leaks do we know that this corporate Trojan horse agreement would impose policies that were rejected by the public and Congress, including limits on Internet freedom, requirements that the U.S. import food that doesn’t meet its safety standards, and new powers for the giant pharmaceutical companies to increase medicine prices.

At the heart of the two trade agreements are terms that would grant non-U.S. companies the power to contest domestic health, financial, environmental and other public-interest policies. Any U.S. law, for example, that undermines expected future corporate profit or contains policy that conflicts with a foreign corporation’s “expectations for a stable regulatory climate” could be attacked as a violation.

The treaties would elevate individual corporations to equal status with nation states, empowering them to drag the U.S. government before closed-door extrajudicial tribunals. These panels, made up of three private lawyers, unaccountable to any electorate, would be authorized to order taxpayer payments for domestic policies or government actions the corporations oppose. Many of those serving on the tribunals would be allowed to rotate between serving as judges and bringing cases for corporations against governments. The small club of international investment tribunalists contains 15 lawyers who have been involved in 55 percent of the investment-state cases to date. There is no independent judicial mechanism to appeal their decisions, which could be riddled with conflicts of interest.

There is no limit to the amount a tribunal can order a government to pay a foreign corporation. In one recent case, a tribunal ordered Ecuador to pay Occidental Petroleum Corp. $2.3 billion after the company breached a term of its contract with the government that explicitly stated that doing so would terminate its oil concession. At present, even when governments win, they often must pay for the tribunal’s costs and legal fees, which average $8 million a case, wasting resources to defend public-interest policies against corporate challenges.

This extreme “investor-state” system has already been included in U.S. pacts such as the North American Free Trade Agreement, forcing taxpayers to shell out more than $400 million to compensate foreign companies for toxics bans, land-use rules, regulatory permits, and water and timber policies that are alleged to restrict profit. More than $14 billion is pending in foreign corporate claims against medicine-patent policies, pollution cleanups, climate and energy laws, and other public interest rules.

Australia, which is being attacked by Philip Morris International Inc. for laws aimed at curbing smoking, has refused to be bound by this regime. Shamefully, however, the Obama administration is the main promoter of the investor-state system. The U.S. has been able to dodge many attacks until now because its past agreements involved developing countries that didn’t have investors established here. But there are more than 24,000 subsidiaries of European companies in the U.S. and more than 14,000 subsidiaries from TPP countries that would be able to take on safety laws these tribunals choose to reject.

The United Nations Conference on Trade and Development reported a 10-fold increase in the cumulative number of investor-state cases since 2000. More were begun in 2012 than ever before, spawning an entire industry of third-party financing and specialized law firms.

The system was ostensibly established to ensure that foreign investors operating in developing countries without reliable domestic court systems could obtain compensation if their factories, mines or land was expropriated. The U.S. and EU have among the world’s strongest domestic court systems and property rights protections. Inclusion of the regime in the trans-Atlantic trade pact would only serve to provide foreign corporations a new means to attack U.S. policies approved by domestic courts.

As a candidate, in 2008, Barack Obama promised to stop Nafta’s erosions of U.S. labor, environmental and legal sovereignty. Now he is leading the charge to undermine U.S. laws for reckless foreign companies by pushing for congressional ratification of these much larger trade treaties under a “fast track” procedure with brief debate time and no amendments permitted.

To protect the U.S. and its people, Congress must deny the president that authority.

(Ralph Nader, a consumer advocate and lawyer, is the author, most recently, of “Told You So: The Big Book of Weekly Columns.” Lori Wallach, a lawyer, is the director of Public Citizen’s Global Trade Watch.)

To contact the writers of this article: Ralph Nader at; Lori Wallach at

To contact the editor responsible for this article: Max Berley at