Press Statement Bantah TPPA: Do not be naive – TPPA is not the best trade deal of the century

Jun 25, 2015 Publish by MTEM


25 JUNE 2015


1. As an organisation that was set up to be a vanguard against the possible selling out of Malaysia via the Trans-Pacific Partnership Agreement (TPPA), Bantah would like to counter the statement made by IDEAS’ Chief Executive Officer Wan Saiful Wan Jan on June 23 regarding the trade deal.

2. As we all know, the TPPA negotiations is shrouded in secrecy. Wan Saiful believes more transparency is needed but he fully supports continual participation believing that Malaysia can simply pull out of signing the deal if it is found not to be favourable to the country’s interests.

3. As Bantah has pointed out many times, Malaysia should cease negotiations as it is very clear from various leaked documents and even from statements made by American lawmakers who have seen some of the contents, that the TPPA only truly benefits multi-national corporations who can sue participating member states for billions of dollars for “future earnings” if national laws are deemed to be against their interests.

4. Wan Saiful also expressed confidence in the abilities of our negotiators to protect Malaysia’s sovereignty and interests: “Janganlah kita sangka pegawai-pegawai negara yang dihantar untuk berunding bodoh-bodoh belaka dan hanya akan menjadi pak turut Amerika. Sudah pastilah kehadiran mereka duduk di meja rundingan untuk mempertahankan kedaulatan negara dan mereka tidak akan tunduk membuta tuli.”

5. This is not optimism but naivety. With respect, if our negotiators had been really tough, supremely skilled and experienced, would they have allowed themselves to be persuaded into accepting provisions that will expose Malaysia to alarming future risks? Based on leaked documents, we know that Malaysia did not ask to be excluded from certain provisions, specifically on the Investor-State Dispute Settlement (ISDS) mechanism, which has weakened its position drastically. Except for Australia which may agree to ISDS arbitration in an international court “subject to certain conditions”, all other TPPA negotiating countries have insisted on exemption.

6. Our question is: Why didn’t Malaysian negotiators work harder to protect Malaysia’s interests? For example, Australia, Canada, Mexico and New Zealand have reserved the right to pre-approve foreign investors. Despite our recommendations previously, the recently leaked Investment Chapter shows the Malaysian government has not demanded that right.

7. We believe Malaysia has lost an opportunity to strengthen its position, especially regarding the ISDS mechanism, which has the potential to bankrupt the country, and we are not mincing words here.

Investor-State Dispute Settlement (ISDS) remains a MAJOR contentious issue

8. At par with the “secrecy” surrounding the TPPA negotiations, ISDS remains a thorny issue. This mechanism allows a foreign corporation to sue a sovereign state in an international court of arbitration for lost future earnings due to a change in public policy designed and implemented to protect the country’s citizens and ensure their wellbeing.

9. Nobel prize winning economist Joseph Stiglitz said in an open letter last month: “There is much confusion about ISDS, but plain and simple: ISDS is about rewriting the rules of how our economy works, tipping the balance of power in favour of big businesses at the expense of workers and the public here (in the US) and in partner countries.” Simply put, ISDS is designed to “strengthen corporations at the expense of the rest of society”, he added.

10.Last year, a big country like Russia was ordered to pay more than US$50 billion to oil company Yukos for expropriating its assets. So far, it is the “biggest arbitration award ever made”, wrote lawyer Bianca Muller in a statement published in New Zealand, which is also a TPPA negotiating nation. Muller added that the costs of arbitration including arbitrators’ fees and all other expenses amounted to around US$9 million. “The claimants incurred costs for legal representation (ie lawyer’s and experts fees) of US$79,628,055.56 of which Russia was ordered to pay US$60 million.”

11.Negotiating countries, especially developing nations like Malaysia, may not have the necessary “arsenal” – money, professional expertise, experience – to win if it is sued in an international court of arbitration. International arbitration can cause millions, or in the Russia-Yukos case, billions of taxpayers’ money being siphoned out of the country.

12.In an Opinion piece published by the Boston Globe on Tuesday (June 23), US Senator Elizabeth Warren wrote: “And these awards stick. No matter how crazy or outrageous the decision, no appeals are permitted. Once the arbitration panel rules, taxpayers must pay.” Obviously, the public and especially voters, will not be happy if their hard-earned money is being used to compensate wealthy multinationals for future lost earnings.

13.The legal fees itself is enough to create ripples of fear among governments dragged into a dispute. Warren added, “Because of how costly these awards can be, ISDS creates enormous pressure on governments to avoid actions that might offend corporate interests. Corporations have brought ISDS cases against countries that have raised their minimum wage, attempted to cut smoking rates, or prohibited dumping toxic chemicals.”

14.With ISDS, governments are put in a difficult position even though they are acting in the public interest. Germany, for example, might have to pay the Swedish state-owned energy giant Vattenfall a sum of US$6 billion as compensation to close down its nuclear power plants in the EU state when Chancellor Angela Merkel decided to phase them out in 2011 following the Fukushima disaster. Another two companies are also demanding millions in compensation.

15.Closer to home, Australia is being sued by tobacco giant Philip Morris for introducing plain packaging, which it states will affect its future profits. The tobacco company — whose annual revenue totaled US$80 billion – is also suing Uruguay, a much smaller and less prosperous country than Australia with a population of 3.4 million and GDP of US$53 billion, over its decision to increase the size of health warnings to cover 80 per cent of the cigarette packaging. Uruguay’s legal adviser Silvina Echarte Acevedo told The Independent in a report published last year: “They are bullying us because we are small. This is like David and Goliath. But we will fight because it is our right and duty as a government to protect our citizen’s health.”

16.In its analysis of the latest leaked Investment Chapter, US-based Public Citizen states that the provision on “Investment and Environmental, Health and other Regulatory Objectives”, which is largely based on past US pacts, provides “no meaningful safeguard against ISDS challenges to public interest policies (Article II.15)”. Self cancelling language is used stating that “a signatory government may enact public interest protections, so long as doing so does not conflict with the sweeping rights that the pact gives to foreign investors”. Public Citizen, however, states that a government’s right “to regulate trumps its obligations to foreign investors”. By signing this trade agreement, Malaysia, as well as other negotiating parties, will not be able to freely and fully implement its public policies, including those we believe are important for our socio-economic development.

17.Countries, rich or poor, face the same risks. There are no guarantees that rich countries like the US, Australia or Germany can win in an international court even though it can afford the best lawyers to argue its case. The US, for example, has never lost an arbitration ruling, stated Stiglitz, but this “impressive” record is due to the fact that most of the counties involved in an arbitration suit with the US are developing countries with “little investment in the US or capacity to mount such challenges”. However, wealthier Japanese and European companies “with much larger stakes in the US economy, with more resources, and more international business savvy” can use the ISDS policy to challenge US public policies.

18.Furthermore, as Bantah has explained previously in our various articles and statements, the international arbitration panel is open to abuse. It is made up of three independent arbitrators “who issue rulings not subject to legal review or appeal”, states Stiglitz. There exists “an inherent conflict of interests in that the arbitrators are drawn from a small pool of highly specialized investment lawyers, who may serve as counsel to plaintiffs in cases at the same time they sit as arbitrators in other related cases”. It does not seem fair that three individuals are given huge authority to pass judgment on a case that involves a sovereign state.

If Americans do not give full support to the TPPA, why should we?

19.We have to ask ourselves, if the TPPA is such an excellent idea, purportedly the Trade Deal of the 21st Century, why couldn’t US President Barack Obama get full support from his own party members? He has faced open opposition from Democrat lawmakers such as Elizabeth Warren and Nancy Pelosi. Last week, Democrat Hillary Clinton even said, according to CNN, that the ISDS mechanism is a “fundamentally anti-democratic process”.

20.Legislative politics of the TPP have become “strange”, stated an article in The New Yorker early this month. William Finnegan wrote: “Nearly every constituency in the Democratic Party opposes it; and the more they learn about it, the more they oppose it. And yet their leader, Obama, wants it badly.” It is clear that there are many grey areas that should be made clear, issues that have to be dissected and addressed by the negotiatiors but more importantly by our lawmakers. “Policymakers should consider very carefully anything that would exacerbate inequality because of the negative long-term effect on economic opportunity. I believe that these trade agreements are likely to exacerbate inequality,” Stiglitz stated.

21.It has been a struggle for the president to get the required Fast Track authority, otherwise knows as the Trade Promotion Authority (TPA), through to the Senate and then to Congress. Hours ago, the Senate finally passed a bill to give Obama Fast Track authority after a “six-week battle”. It has not been an easy win for Obama who only managed to get the bill approved with a minimum 60 – 38 vote. The fact that a president does not get firm and full support from his own party should give us pause. What do they know that we don’t?

22.Fast Track is a mechanism that would allow US President Barack Obama with the power to present the Trans-Pacific Partnership Agreement (TPPA) for a Yes or No vote in Congress without allowing for amendments. To conclude the TPPA according to the desired time frame, Obama needs Fast Track. Most countries are resisting signing until Obama gets Fast Track authority. However, with this green light from the US Senate, a final ministerial meeting is expected to be held next month to conclude the deal.

23.Currently on his second and final presidency, Obama is racing against time to get the TPPA signed. As Obama races to the finish line, the Ministry of International Trade and Industry (MITI) is still talking about doing a Cost Benefit Analysis (CBA) which should have been done ages ago. From a deadline of late last year to early this year, to June and now it has been pushed to July. Will the public ever get to see the results? It does not matter. We believe this CBA exercise is just a sham anyway – to show the public that something is being done.

24.The best trade deal for the 21st century has yet to be created. We believe the TPPA IS NOT THE BEST DEAL OF THE CENTURY and certainly NOT THE BEST DEAL FOR MALAYSIA. We should aim for a winwin situation for everyone. As Stiglitz said: “It will take time to craft a good agreement – and it will take an open and democratic process, one in which all parts of our society participate.”

25.Wake up, Malaysians! The agreement is just a hair’s breadth away from being signed and Malaysia’s CBA has yet to be finalised! Our future and the future of our children and grandchildren are at stake here.

26.Stop dreaming and face facts. TPPA will not make Malaysia a better or more prosperous nation. It will clip our wings, limit our potential, destroy our sovereignty. So, stop making excuses, make a stand. Stop the TPPA!

Mohd Nizam Mahshar


Bantah TPPA