John Quiggin. The Trans-Pacific partnership: it might be about trade, but it’s far from free.Mar 18, 2015
There can be few topics as eye-glazingly dull as international trade agreements. Endless hours of negotiation on such arcane topics as rules of origin and most favoured nation status combine with an alphabet soup of acronyms to produce a barely readable text hundreds of pages long. But unless you were actually involved in exporting or importing goods, or faced import competition, it used to be safe enough to leave the details to diplomats and trade bureaucrats.
That all changed with the emergence of “new generation” agreements, of which the most ambitious so far is the Trans-Pacific Partnership Agreement, or TPP, which is on course to be completed in May this year. Depending on the content of the final deal, it could affect almost everything we do, from buying a secondhand book to campaigning to protect a local park from development.
Although the new generation agreements are described as trade agreements, this is quite misleading. Except for restrictions on imports of agricultural commodities (which are unlikely to go away any time soon), tariffs, quotas and other restrictions on trade have largely disappeared in our region. The new generation agreements are primarily about imposing a particular model of global capitalism, with the United States as the model and multinational corporations as the main engines of economic activity. It’s already clear that the TPP will fit this pattern.
But what exactly do we know about the deal? If it were not for an embarrassing leak of the negotiated draft text of the intellectual property and environment chapters, released by WikiLeaks in late 2013 and early 2014, ordinary Australians would know nothing more than the barest details, namely that the TPP has been the subject of more than a decade of negotiations involving twelve countries, and that it builds on a web of bilateral deals with the United States at the centre.
Given the lack of public information, the negotiations are often described as secret, but this is not quite correct. While citizens in general have been kept in the dark, corporate lobbyists have been actively involved, apparently to the point of drafting much of the text as it affects their corporate interests.
By the time we do see the final text it will probably be too late to do much about it. So we have to make an educated guess, based on the WikiLeaks material and on previous new generation agreements, of which the most important were the (failed) Multilateral Agreement on Investment, or MAI, the Agreement on Trade-Related Aspects of Intellectual Property Rights, or TRIPS, and the Australia–US Free Trade Agreement, or AUSFTA.
These agreements are primarily concerned with protecting the rights of multinational corporations. This fact was clearest in relation to the MAI, which proposed to give these corporations the right to sue governments over legislation on issues such as environmental protection, cultural policy and labour market standards. These investor–state dispute settlement procedures have become a standard demand of US negotiators in bilateral trade agreements. They bypass normal courts, and are only available to corporations, with no corresponding right for states to sue investors.
The MAI would have made them a core part of the structure of global trade managed by the World Trade Organization. But the agreement was abandoned after a string of governments, beginning with France, withdrew from negotiations in the light of public concerns about its implications. Attempts to implement it by other means have continued, with the TPP being the most recent example.
The TRIPS agreement dealt with “intellectual property,” a term that refers to government-granted monopoly rights such as patents and copyright. As such, it is the direct opposite of a free trade policy. The idea of granting inventors and creators of cultural material a temporary right to control the use of their ideas is an old one and, within limits, generally a good one. But as valuable rights have fallen into the hands of corporations, pressure has increased to make them more permanent and to expand their scope.
When the US copyright system was established in 1790, writers and other creators enjoyed a copyright term of fourteen years, which could be extended for a further fourteen years if the author were still alive. This provided the chance to make a living out of writing while ensuring that the vast majority of literature and other cultural material was in the public domain. Over time, the term of copyright was extended to the author’s life and then beyond, and the scope was expanded to material that would not have been considered worthy of protection in the past. The result was to build up corporate interests centred on the exploitation of the system.
The archetypal example is the Disney Corporation, which derives a huge income from the character of Mickey Mouse. Under the legislation prevailing when Mickey was created in 1928, his copyright would have expired in 1984. Whenever Mickey’s copyright has come close to expiry, though, Disney has succeeded in inducing Congress to legislate for longer terms.
Another Disney property, Winnie the Pooh, is an even more egregious case. Mickey Mouse is at least a Disney product, but the rights to Winnie the Pooh were acquired in 1961, five years after the death of his creator A.A. Milne. Again, if it were not for repeated extensions of copyright, Winnie would be in the public domain.
Restrictions on the use of cartoon characters aren’t of great importance. But the expansion of copyright has had a chilling effect on creative activity of all kinds. Even such a simple act as singing the song “Happy Birthday,” composed over a hundred years ago using an even older tune, can potentially attract copyright action from the global conglomerate Warner/Chappell (which has a dubious claim to own the rights). This possibility becomes a certainty if the song is sung as part of a film or play.
If the copyright situation is bad, that of patents is even worse. The patent system for pharmaceuticals has been abused in various ways, from “me too” products with little additional benefit to “evergreening,” involving marginal changes to extend patent life beyond the legally intended period. Then there is the extension of patent protection to things that were never intended to be covered, from business methods to human genes. The result is to stifle the natural tendency of information to flow freely and contribute to new and unexpected innovations.
At the bottom of the heap are “patent trolls,” companies that file patents on trivially obvious activities, such as using a scanner attached to a network. These patents are invariably granted by the intellectual property authorities, whose job it is to decide whether a novel process has been identified. The trolls then send out letters demanding money from anyone who infringes their supposed patent. In many cases it is cheaper to settle than to fight.
The abuse of the patent system has become so bad that some studies conclude we would be better off abolishing patents altogether. Courts and policy-makers have responded to some extent, for example by finding against patent trolls. Unfortunately, trade negotiators haven’t got the message and are still pushing the most extreme version of the intellectual property agenda.
The implications of intellectual property deals and investor–state dispute mechanisms are best illustrated by the dispute over Australia’s legislation for plain packaging of cigarettes. The tobacco companies fought this legislation through the political process and lost. They took their case to the High Court, claiming that the legislation was an unconstitutional “taking” of their branding rights, a claim rejected by a 6–1 majority.
If it were not for the new generation trade deals, that would have been that. But these deals gave Big Tobacco many more venues for litigation. First, the tobacco companies ginned up such major cigarette producers as Ukraine and Honduras to bring disputes under the TRIPS agreement. Next, Philip Morris undertook a corporate restructure to reinvent itself as a Hong Kong company, taking advantage of a 1993 deal with Australia that incorporated investor–state dispute settlement provisions.
It goes without saying that these cases have no merit. But while they drag on, they deter other countries from following the Australian example. And, should the unaccountable tribunals established under these agreements rule in favour of the tobacco companies (for whatever reason), Australia has access to absolutely no redress.
The emergence of plain packaging legislation as a test case may perhaps prove to be a blessing in disguise. There are few litigants less sympathetic than Big Tobacco, reliant on a deadly and addictive product and marked by a long history of dishonesty, criminality and political corruption. The fact that the countries notionally bringing the dispute have no genuine interest makes the case even more unappealing.
Despite their trappings of legality, the tribunals of the World Trade Organization and similar bodies are political bodies. The WTO in particular has been badly burned by the political reaction against its decision that US policies requiring “dolphin safe” labelling of tuna represent an improper restriction of trade. As a result, it recently reversed its previous stance and upheld EU restrictions on the importation of skins from Canadian seals killed in the infamous clubbing hunt.
The political fallout from a decision in favour of Big Tobacco would be far worse than anything the pseudo-courts of international trade have experienced before. It would instantly confirm the most dire predictions of critics of investor–state dispute procedures and intellectual property rules. Precisely for this reason, it seems likely that the tobacco lawsuits will fail, setting precedents that will constrain future abuses of these provisions. But that doesn’t change the obviously undemocratic nature of agreements under which Australian health policy can potentially be overturned by the machinations of corporate lobbyists.
Given our recent experience with such deals, would an Australian government be willing to expose us to more such action? The Labor government responded to the plain packaging dispute by announcing that it would discontinue the practice of seeking to include investor–state dispute provisions in trade agreements with developing countries. More generally, there was some movement away from strong intellectual property policies in areas such as fair use of copyright materials.
But this shift has been reversed under the Abbott government, with its recent rush of bilateral agreements. Unsurprisingly, political journalists pay hardly any attention to the actual content of these agreements, and their signing is almost invariably treated as a political win for the government of the day.
This uncritical attitude is reflected in the generally favourable press received by trade minister Andrew Robb for the signing of agreements with Korea, Japan and China, bringing a rapid conclusion to negotiations that had proceeded at a glacial pace under Labor. No one in the normally hardbitten press gallery, it seemed, was cynical enough to suggest that the easiest way to conclude a negotiation is to accede to the demands of the other party while withdrawing any sticking points of your own.
In the case of the agreement with Japan, for example, Australia secured some modest concessions regarding tariffs on beef, which will be reduced from 38.5 per cent to 19 per cent over a period of fifteen years. In return, our government accepted the total exclusion of rice from the deal, and the maintenance of most restrictions on dairy products.
The Korean agreement, KAFTA, was arguably even worse. Reversing our previous position, the government agreed to the inclusion of investor–state dispute provisions. This was apparently done not in response to Korean demands but because US negotiators were pushing the provision in the parallel negotiations for the TPP.
It seems certain that the final agreement will involve a substantial loss of Australian sovereignty and an acceptance of economically damaging intellectual property rules. In return, Australia will receive marginal and long-drawn-out improvements in market access for agricultural commodities. While a Labor government might perhaps have held out for a better deal, it seems unlikely that the opposition will reject legislation implementing the agreement.
Ironically, our best hope lies in the United States. The Obama administration, backed by the Republican congressional leadership, is seeking approval to push the TPP through on a “fast track” basis, which would not permit any amendments. But it is facing stiff opposition both from Republicans (concerned about sovereignty and unwilling to grant any additional power to Obama) and from liberal Democrats, who reject the key provisions of the deal. In the current congressional atmosphere, inaction is the most likely result of any contentious process. So, it may be that the deal will fail at this crucial hurdle. We can only hope.
John Quiggin is Professor of Economics at the University of Queensland.
This article first appeared in Inside Story on 15 March 2015.