What’s At Stake For The US And Latin America In TPP Negotiations?

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  • Trans Pacific Partnership (TPP) is a proposed regional regulatory and investment treaty
  • President Obama and Republicans want the deal to pass
  • Many democrats, lead by Elizabeth Warren oppose the deal
  • TPP was due to be signed in 2012
  • Some consider it an attack on National Sovereignty
  • Agreements made in secret
  • US Trade Unions do not support the deal
  • Public Protests have taken place across all member states 
  • The US, Canada, Mexico, Peru, Chile, Vietnam, Singapore, Japan, Brunei, Malaysia, Australia and New Zealand, are to be members. 

Last week, leaders from both parties in both chambers of Congress agreed on “fast track” legislation for the Trans-Pacific Partnership (TPP), presumably meaning it would pass when it’s brought up for a vote. The legislation would allow President Obama and the US trade office to finish up secret negotiations with the other eleven countries involved.

If an accord is reached, the Senate would reserve the right to vote on the deal – but not amend it. A lot of the Democrats hate the fast track bill, and the idea of the TPP itself. So do unionsWhich means the president is in for a fight with his own party over a deal expected to resemble the Clinton-era North-American Free Trade Agreement (NAFTA) in several crucial ways.

One of their key beefs with the deal is the apparent inclusion of investor-state dispute settlement (ISDS) tribunals – “apparent” because what we know comes from Wikileaks. Wikileaks managed to get hold of three chapters dealing with intellectual property rights, the environment, and investment, although those chapters aren’t necessarily final drafts.

What Are The Investor-State Dispute Settlements (ISDS)?

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Image Source: The Kansas Network

ISDS are common in international trade deals. They were a part of NAFTA and its Central American counterpart. The US Chamber of Commerce considers them indispensable. The tribunals help to secure the investments of multinational companies, arbitrating disputes between the companies and the countries where they operate. Multinationals can sue health ministries, environmental agencies, and so on if they think a country has violated a trade accord. 

Elizabeth Warren Is Not A Fan

Of course, corporations’ definition of unfair play can vary widely. Nations can’t use the tribunals to sue companies.  Some opponents – like democratic senator Elizabeth Warren, for instance — point to the corporate lawyers manning the tribunals as evidence that the process only favor corporations. Even among the free-trade set, there’s doubt over the usefulness of the tribunals.

As the Economist noted last October, companies can buy forms of insurance that cover political risk. Skeptics point to Brazil, which long managed to attract foreign investors even as it steadily refused to enter into deals with such a mechanism involved.

The tribunals date back to first-world companies’ efforts to protect against expropriations in underdeveloped countries. This dynamic hasn’t changed – the United States, for example, has never lost a case brought against it in an ISDS. But a 2011 case in which tobacco giant Philip Morris sued Australia for a law mandating plain packaging and graphic health warnings on cigarette boxes ended up helping raise the profile of these tribunals among citizens of rich countries.

Warren, the most outspoken critic of the TPP, warned in her Washington post op-ed that someday the United States could see itself on the wrong end of a ruling: “With the number of ISDS cases exploding and more multinational corporations headquartered abroad, it is only a matter of time before such a challenge does serious damage here,” she wrote.

But with negotiations held in secret, and Republicans in Congress pressuring to clear the way for a deal’s passage, the question is…

What Might The TPP Mean For Latin America? 

Only three Latin American countries are on board for the talks: Mexico, Chile and Peru. The idea is that the deal will allow them to boost exports by giving them access to markets in a host of new countries. But with negotiations being held in secret, it’s tough to tell what each country’s leaders are bargaining for, or which sectors in their country stand to win or lose from the deal.  

The Case Of Mexico

Regardless of whether the TPP is a good deal for Mexico, the country has a chance of becoming a member country. This happens despite its conflicted past with free trade deals. In 1994, when the predecessor to TPP was passed, it triggered a civil war in its south. The Zapatistas’ chief point of opposition was that NAFTA made ejidos (or lands farmed communally, usually by indigenous groups) eligible for sale.

But NAFTA was fraught with symbolic power in a way that the TPP is not. The ejidos dated to the Mexican Revolution; together with the opening of corn markets to often-fatal competition from the US, the deal meant a blow to a pillar of Mexico’s traditional economy and culture. 

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Image Source: Times Of Malta

The PRI – the party which held power in 1994, as it had for the seventy years before it – is back at the helm now. They never cared about environmentalists or indigenous-rights defenders. And neither the administration of Enrique Pena Nieto nor the most powerful opposition party have any organic base of support among Mexico’s most humble citizens. Overall, there is not likely to be much concern about what the deal means for the 45% of the country who live beneath the poverty line. 

Some lawmakers in Peru and Chile, however, are voicing opposition to the TPP. In both countries, there’ve been years of resolutions and formal requests to make negotiations public, without success. 

What About Peru?

Peru has its own skeletons in the closet. It’s called the “Baguazo”. In 2009, it passed a free trade deal with the US; multinationals got access to drill for oil in the Amazon. Indigenous and environmental groups protested, and blocked a remote highway near the town of Bagua. Army and police forces targeted the protest, opened fire and killed thirty-two people.

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Image Source: La Republica

It’s an ongoing thing – multinational mining company Renco Group, Inc. has an $800 million case pending against Peru. The government refused to grant Renco a third time extension in a project designed to remediate the damage its metal smelting did in the town of La Oroya, which is ranked as one of the top 10 most polluted sites in the world.

And Chile?

Chile’s history is a bit different. Since the dictatorship of Augusto Pinochet ended and free elections were held again, Chile has been governed by a series of centrist administrations. These governments have slowly gone about expanding the safety net and tightening down on Pinochet’s Reaganesque economic model.

But certain provisions in a US-Chile free trade deal passed during the Bush years, under the current president’s predecessor, are a sticking point with president Michelle Bachelet. Back in 2004, Chile tried unsuccessfully to maintain its authority to control the flow of capital across their borders, as Foreign Policy noted in February. The idea was to keep Chile insulated from global economic crises. The TPP is unlikely to include such a provision.

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Image Source: BBC

Plus, Bachelet is a doctor. And the deal’s intellectual property protections will certainly be bad news for the health of poor Chileans. Doctors Without Borders describes the TPP as “the most harmful trade pact ever for access to medicines in developing countries” – among other reasons, because it would be a blow to competition from generic medicines that help keep prices low.

To be approved in Chile and Peru, the deal would still need to pass in these countries’ congresses. Their presidents are unlikely to be able to ram it through, meaning they could be in for a dogfight when and if the time for a vote comes around.