TPP: Concentration of Power for Investors and Inequality for Citizens

By Conrado Olivera | Red Uniendo Manos Peru, Joining Hands Peru
Conrado Olivera is interviewed outside of the Marriot in Lima where negotiators of the TPP were meeting in May 2013. (Photo by Red Uniendo Manos Peru)

Conrado Olivera is interviewed outside of the Marriot in Lima where negotiators of the TPP were meeting in May 2013. (Photo by Red Uniendo Manos Peru)

On October 5, 2015, after numerous rounds (and years) of negotiations, the public officials and advisors of the twelve countries representing more than a third of the global economy, finished redacting the terms of the Trans-Pacific Partnership (TPP) trade agreement. After being signed on February 4, 2016, it now awaits ratification by each of the corresponding parliaments of the 12 countries within a two-year time frame.

The TPP is considered to be the largest geopolitical pact ever, achieved through ambitious and multilateral commercial negotiations. Its promise is to stimulate the economic growth of the member countries by way of standardizing regulations through a long series of agreements among the governments of the participating countries.

Nonetheless, the average citizen is unaware of the terms of these agreements due to the secrecy of the process, the lack of information sharing and the technical language used by the negotiators and specialists – considering that the advisors and consultants for the negotiations represent big corporations, and the agreements were not consulted with the population at large (not even elected officials representing the population). Furthermore, the terms agreed upon cannot be modified by the respective parliaments of the 12 countries; they can only be ratified. So, will the TPP be as beneficial for common citizens, indigenous communities and small local economies as it is for transnational corporations?

Among the 30 chapters of the TPP, the agreed upon terms go beyond the elimination of tariffs on commercial products and services to be traded. What is at play are fundamental changes to the institution of the countries involved, affecting ways of life and security of people because the agreement reduces or makes invisible social, environmental and citizen rights for an indefinite period of time, such as:

  • Elevating the protections of intellectual property rights in order to increase earnings for corporations that own the intellectual rights, at the cost of consumers.
  • Placing greater restrictions on labor rights (right to strike, unionize, collective bargaining, etc.)
  • Increasing the privatization of public services (health, education, water services, etc.) with greater benefits for large corporations who will provide such services at greater cost to consumers.
  • Broadening the rights of foreign investors by providing them with the channels to sue a State if the profits generated by the investor do not meet its expectations due to actions of the State.
  • Lowering restrictions on the internal controls of food and medicines that enter a country (genetically modified organisms, foods with hormones, or other substances potentially dangerous to health).

In short, the governments that represent democratic states such as Peru are being diminished in their capacity to legislate and establish national laws to protect labor, the environment, health and human rights. The citizens nor their representatives in government were ever consulted about the agreement and its applications that could affect the life of local populations.

The mechanism for resolving controversies between investors and States found in the TPP is particularly dangerous for Peru and its citizens. If a law affects the projected earnings of a foreign investor, that investor may sue the State, demanding compensation for the value of the expected earnings, which would be paid by public funds.

A Woman from La Oroya led protestors in chants directed to the negotiators of the TPP in Lima in 2013. (Photo by Red Uniendo Manos Peru)

A Woman from La Oroya led protestors in chants directed to the negotiators of the TPP in Lima in 2013. (Photo by Red Uniendo Manos Peru)

Nonetheless, these lawsuits can emerge easily because the expected profits of investors can be very sensitive to environmental protections, public health laws, tax laws, etc. What is most problematic however is that these lawsuits do not occur in ordinary tribunals, rather in special international tribunals composed by three lawyers, who are typically more experienced in corporate law than in environmental or human rights law. Their decisions are based on the rules of the trade agreement itself and the regulations of the court, as opposed to the constitution of the country and the domestic courts where the complaint occurs.

Peru already faces several such lawsuits within the framework of other trade agreements (as do many other countries in Latin America). One in particular is the lawsuit filed by the U.S. company Renco Group (holding company of the Peruvian company Doe Run Peru). Just defending itself in the dispute process has already cost Peru six million US dollars.

It is unbelievable how the free trade agreement between the U.S. and Peru (and now potentially the TPP) gives power to an investor like Renco Group to sue the State of Peru, in this case for $800 million, claiming a supposed ¨indirect expropriation¨ of its investment by the State due to costly environmental laws, despite the social and environmental behavior of the company that was disastrous for the local population (lead contamination of children and pollution of water, air and soil) during its years of operating the Doe Run Peru metallurgical smelter in the town of La Oroya.

Nonetheless, Renco Group and its subsidiary Doe Run Peru have the security not only of recuperating supposed losses through the arbitration but also of avoiding justice in the United States where a class action suit filed on behalf of the children of La Oroya against Renco Group has been suspended until the outcome of the arbitration filed in the framework of the trade agreement. A favorable outcome for Renco Group in the international arbitration would also make the State of Peru responsible for any losses in the class action suit.

The governments of the South find themselves increasingly subject to rules set by transnational corporations, as the world continues to orient itself to satisfy the demands of the global market and profit, even when this leads to inequality and social conflicts over resources.

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