IAN MCAULEY. The Trans-Pacific Partnership isn’t about trade liberalisation: it’s about corporate protection

It’s in Australia’s interests to remain open to the world on immigration and trade, and to cooperate on climate change and labour standards, but when “openness” comes to mean a permissive set of policies satisfying the demands of foreign investors, as proposed in the “Trans-Pacific Partnership”, we risk a political backlash leading to isolation and protectionism.  

The headline “Nation must remain open” in last Monday’s Australian caught my attention.

Was the article to be about openness to immigration and to taking refugees from war-torn countries? Perhaps about cooperation on global environmental issues – coverage of the UN Climate Change Conference currently underway in Bonn? Perhaps about cooperation on eliminating child labour, the sex trade and other forms of labour exploitation (child labour is currently on the ILO’s agenda at a gathering in Buenos Aires).

The article turned out to be about a roundtable of business people, convened by The Australian, timed to coincide with the APEC discussions in Da Nang on resurrecting the stalled Trans-Pacific Partnership (TPP).

We may expect a group of Australian businesspeople to be concerned with access to markets. That’s always been of interest to Australia, because our agricultural and manufacturing sectors are still confronted by a plethora of quotas, protective regulations and even old-fashioned tariffs in many countries.

But trade wasn’t on the this group’s agenda either.

The photograph accompanying the article gave a clue. It showed five men – from Bank of America Merrill Lynch, UBS, J B Morgan, Macquarie, and Gilbert Tobin (a law firm).

And their concern was about openness to foreign investment.

The words of those pushing for the TPP, in the joint ministerial statement  following the Da Nang negotiations, are about “commitment to open markets” and the need to “ combat protectionism”, but in reality most of the provisions in the TPP have little to do with trade. In fact many are about sustaining or extending protection to favoured industries.

Most notably the TPP is about protecting multinationals from the policy decisions of sovereign governments, in clauses known as Investor State Dispute Settlement (ISDS). ISDS provisions give foreign-owned corporations the right to sue governments, in an international tribunal, if the corporations believe changed government policies have jeopardised their interests. It is questionable, for example, if our cigarette plain-packaging legislation would have succeeded had ISDS been in place.

There are also clauses protecting holders of copyright and patents – particularly pharmaceutical patents. In relation to copyright, for example, the draft of the TPP has a clause lengthening copyright protection from 50 to 70 years – an extension of what some call the “Mickey Mouse” clause in recognition of the interests of the Walt Disney Company.

Although in the latest round of TPP negotiations copyright extension is now off the table, Australia has already agreed to its extension when, in a grovel to the United States, the Howard Government made the 70-year concession when it signed up to the Australia-United States Free Trade Agreement in 2004.

The TPP as it is presently drafted reflects strongly the interests of multinational firms, particularly US entertainment and pharmaceutical corporations. It’s only because of Trump’s visceral dislike of international agreements, and his obsession with bilateral trade balances (a long-standing US concern) that the US has withdrawn from the TPP process.

In the meantime, however, there is still interest among the eleven other Pacific rim countries that have been in TPP negotiations. But for interventions by New Zealand and Canada, with their concerns for ISDS and copyright provisions, the TPP would be much further advanced. Turnbull would have come home with a nearly-finished agreement, and would be planning a few cross-bench deals to bypass Green and Labor opposition to Parliamentary ratification.

Even though many multinational firms have been given access to clauses of the TPP, the Commonwealth has kept a veil of secrecy around the process and its specific provisions. They don’t want it to be subject to economic scrutiny. The Productivity Commission, in its 2014-15 Trade and Assistance Review, said that ISDS  provisions and copyright are of “questionable benefit”. And the Commonwealth has refused to run any cost-benefit analysis over the TPP.

In response to such secrecy Labor has promised that if it wins office all future trade agreements will be examined by the Productivity Commission and will be reviewed every ten years. Such a policy hardly needs justification on economic grounds and is bound to be politically popular. The onus of justification lies with the Coalition’s secrecy.

So why is the Turnbull Government so determined to push through with the TPP?

The answer lies with the bankers and lawyers assembled by The Australian. The TPP, with its generosity to foreign investors, is about keeping up the inflow of foreign investment into Australia – the same concern that is driving the Coalition to push for corporate tax cuts.

It’s an attempt to keep going for a few more years – to the next election at least – an economic model that is unsustainable. That model is about using foreign investment as a means to finance our appetite for imports of consumption goods, a habit that has led us into a massive level of foreign indebtedness – an issue about which I have written before in Pearls and Irritations.

We cannot go on forever expecting foreigners to support our material living standards. Foreign investment comes with the liability of paying dividends, interest and paying down debt, and as we have learned, foreign firms don’t contribute much to our tax revenue.

The other trouble with the TPP and similar deals favouring multinationals over sovereign governments is that they become synonymous in the public mind with “globalisation”. When proponents of the TPP hijack the language of free trade and openness, it’s hardly surprising that the public’s political reaction is to reject economic openness in all its dimensions – including immigration, cooperation on climate change, trade and labour treaties – as has happened in the UK and the USA.

Just over a year ago, in the wake of the Brexit vote and (at that stage) the looming possibility of a Trump victory John Menadue and I warned that we in Australia risk a retreat to isolationism if the liberal aspects of globalisation are sacrificed to the interests of financiers and lawyers, as represented by the TPP’s cheer squads.

Our best hope is for the TPP negotiations to drag on past the lifetime of this Parliament, allowing an incoming government to negotiate multilateral deals that promote trade rather than the interests of bankers and corporate lawyers.


Ian McAuley is an Adjunct Lecturer in Public Sector Finance at the University of Canberra and a Fellow at the Centre for Policy Development


Ian McAuley is a retired lecturer in public finance at the University of Canberra and a Fellow of the Centre for Policy Development.

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7 Responses to IAN MCAULEY. The Trans-Pacific Partnership isn’t about trade liberalisation: it’s about corporate protection

  1. Avatar Craig Welch says:

    “ISDS provisions give foreign-owned corporations the right to sue governments, in an international tribunal, if the corporations believe changed government policies have jeopardised their interests”.

    No it doesn’t. It allows investors to raise an arbitration dispute if, and only if, there is a case that the state has breached the agreement (subsequently damaging the investor). Were that not the case, a simple tax hike, for example, could lead to an ISDS dispute.

    “It is questionable, for example, if our cigarette plain-packaging legislation would have succeeded had ISDS been in place”.

    Note to author: ISDS is in place. The dispute between Philip Morris and Australia took place under the ISDS provisions of an Investment Treaty between Hong Kong and Australia. Philip Morris lost, by trying to be too clever. To see a case that was argued on the merits we should look at the dispute between Philip Morris and Uruguay. Again, Philip Morris lost, with the tribunal making it quite clear that the Government of Uruguay was entitled to legislate in the interests of public health.

  2. Avatar Hazel Moir says:

    Absolutely spot on. But we should also be concerned about the patent provisions. These would make it impossible to undertake much needed reforms to the Patents Act. They would also remove the last element of balance in our current system – that a granted patent is not presumed valid. The presumption of validity has been much criticised in the USA. The whole “IP” chapter should be abandoned.

  3. Avatar slorter says:

    The reason for their creation has never changed, they are corporate rights agreements!
    The neoliberal world designed them that way and nothing has changed!
    We still live in a neoliberal world controlled by a neoliberal media still pushing the trolley!

  4. Avatar Don Macrae says:

    The ABC News has reported this possible resurrection of the TPP without a hint of concern and implied that it’s a good thing. And maybe that its exciting and clever because it’s progressing despite Donald Trump. Almost as though it’s a bit of breathless gossip. Are the journalists on the job all cadets or what?

  5. Avatar Chris Sanderson says:

    Thank you for alerting us yet again to those determined to impose the pernicious ISDS on Australia. I thought we’d killed that destroyer of our Sovereign Rights protection against the multinational corporations, but I’d forgotten Murdoch.

  6. Avatar Dog's Breakfast says:

    ISDS and copyright extensions are just newer forms of protectionism.

    I’d rather we went down the path of isolationism than sign up to these clauses.

    Ross Gittins, some time ago, took down the notion that foreign investment would somehow dry up if this or that piece of legislation went through. A little drying up wouldn’t be a bad thing given that we are selling the silver to pay for their investment.

    Unsustainable is the exact description of our current economic policy. It’s bizarre that we continue to move in this direction.

  7. Avatar Paul Frijters says:

    yes, the perversion of our economic language is particularly strong around these deals between governments and vested interests. They use the language of markets and liberalism to hide the illiberal closing down of markets.
    What is also of interest with these deals is the opportunity for domestic corruption that the secrecy gives rise to. The lack of transparency makes it fertile ground for a little trade….

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