Gordon Campbell on TPP dairy , and investor-state disputes   28 Sep 2015

Column - Gordon Campbell

Gordon Campbell on New Zealand’s TPP done deal on dairy, and on investor-state disputes

For five years, the public has been denied any meaningful information about the content and progress of the TPP – on the bogus excuse that for the government to do so would jeopardise its ability to conduct the negotiations. Yet in other countries, far more information is publicly available than is the case here. As a result, the public is being made vulnerable to political manipulation – as information is drip fed by the government primarily for its own political ends. We are not North Korea, but a five year blackout amounts to a near- totalitarian abuse of information on matters of crucial public interest.

Currently a classic example of this process is under way. For the past week, the government has been actively downplaying the likely deal on dairy access to overseas markets that New Zealand may achieve via the TPP . Prime Minister John Key has warned that the dairy deal outcome will not be ‘gold-plated’ ; and on Friday Trade Minister Tim Groser told RNZ that if a better deal than the one hitherto on offer wasn’t available, it would hardly be worth his time attending the upcoming ministerial talks in Atlanta this week, which are expected to conclude the TPP deal. It was a peculiar renark. Surely if the dairy deal is on the ropes, should’t Groser be rushing to help push it over the line. Surely five years of negotiations deserve no less than 110 per cent effort at the finale. What’s going on here?

The likely explanation is that the dairy deal, has in fact, been done. Over the weekend, evidence has emerged that a new deal for NZ on dairy – and a solution to the previous impassae – has been reached, and is being reported on in North America. What our government has done is to talk down the likely outcome, so that it can maximise the gains of pulling the rabbit successfully out of the hat. Secrecy breeds the opportunities for this kind of spin.

True, there is still a little bit of static online as to whether it is Canada or the US that is unilaterally opening its dairy markets to New Zealand without reciprocal gains elsewhere for its dairy producers. Early last week, there was a roar of noise in TPP channels about alleged US demands that Canada would massively open up its dairy markets to US dairy producers, who would in turn, open up access for New Zealand.

The short strokes on dairy come down to how much of Canada's domestic market would be opened up to American products to compensate U.S. dairy producers for opening up their market to TPP partners such as New Zealand, an aggressive and competitive dairy exporter.

CBC News has learned Canada is prepared to offer up a significant share of its domestic market (as defined by consumption levels), including not only fluid milk, but also possibly butter, cheese, yogurt or the milk powders and proteins used to make other foods.

The American goal for dairy market access was nine or 10 per cent, a figure that prompts dairy industry folk to use words like "enormous" and "annihilation." But even if Canadian negotiators successfully push back, an offer of even half that would be huge. It's far more than the concession made in the 2013 Canada-Europe Comprehensive Economic Trade Agreement, which was roughly two per cent.

Two days ago, these reports were being flatly denied by Canada’s Trade Minister Ed Fast.

Canada is only weeks ago from an election in which seats in the dairy-producing provinces will be crucial. If that wasn’t deterrence enough for Canada to cave in on dairy, it is also under similar Japan/US pressure within the TPP for iot and Mexico to cave in on the auto parts issue. Morerover, the opposition Liberals ( whio are leading in the polls) are saying they wont ratify a TPP deal that disadvantages Canada.

Keep in mind that all we’re talking about here is not whether New Zealand has a new deal on dairy – it is only about who is providing it. Overall, I give more more credence to the other set of reports that emerged over the weekend indicating that it is the US that is unilaterally imposing an ‘unbalanced” deal on its own dairy producers, by exposing them to New Zealand imports without corresponding access for its dairy markets in Japan or Canada.

The evidence about the New Zealand dairy deal is on the ( expensively paywalled) Inside Trade publication. I can’t link you directkly to it, but Inside Trade is such an excellent and uniquely authoritative source that any New Zealander or corporate interested in the TPP should certainly avail themselves of the one month free trial offer available on its website. If you do so, the two articles to look for are (a) the artyicle about the memo summarising the current state of TPP negotiatioins that has been written and circulated by the House Ways and Means Committee Ranking Democrat Sandor Levin, and (b) the separate article about the US deal on dairy with New Zealand, and the furious response by US dairy industry leaders.

Reportedly, Levin will pay a crucial role in the TPP ratification process in Congress.

As such, and in stark contrast to New Zealand politicians, he recognises a duty to inform. Released only last Friday, his memo not only identifies those areas (eg tobacco regulation) where Congress has been blocked from getting adequate information, but he helpfully summarises the current stumbling blocks in the main TPP problem areas such as conservation, labour standards, intellectual property, medicines, capital controls, SOEs, and in the language of the investor-state dispute settlement provisions - which have evidently been seriously affected by the recent Canadian Bilcon case, which has just laid Canada open to a $300 million damages suit by a family of foreign investors. On the US/NZ dairy deal, Inside Trade’s coverage of the Levin memo says this :

Another new revelation made by the document is that the U.S. dairy industry has warned members of Congress that it believes the emerging dairy market access deal will give too many unilateral benefits to New Zealand in the U.S. dairy market, without achieving sufficient access to U.S. export markets like Canada and Japan.

This is repeated in the Inside Trade article devoted to the US/NZ dairy deal. Some key passages:

The U.S. dairy industry this week warned Congress that U.S. trade negotiators are considering an “imbalanced” dairy market access deal in the Trans-Pacific Partnership (TPP) that would unilaterally eliminate U.S. tariffs on key dairy products imported from New Zealand without securing sufficient access for U.S. exports to Canada and Japan, and threatened to oppose the TPP if that is the outcome.

Key dairy exports for New Zealand include milk powder and butter. The U.S. dairy industry has long taken the position that at any further opening of the U.S. market to dairy imports from New Zealand must be balanced by new access for U.S. exports in Canada and Japan.

Apparently, the work on this deal began straight after the last TPP round failure in Maui. During the first week of this month, US dairy industry leaders gave the US Trade Representative Michael Froman “very specific information” on how to bridge the TPP gaps on dairy.

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They subsequently held discussions with their industry counterparts in New Zealand, Canada, Japan and Mexico, and provided the resulting information to USTR, but the “promised consultation on specific numbers” was not held, the note said.

“In the absence of any positive developments we are aware of in the dairy discussions since Maui we want you to know that we must oppose a TPP deal that contains an imbalanced dairy agreement,” they said. “At this critical point in the negotiations process we need to communicate this situation fully to our members -- your constituents -- on whose behalf we have been attempting to work with USTR throughout this process. We appreciate your close cooperation with us on these challenging issues.”

The Levin memo picks up those concerns. Levin noted that Canada has also begun exploring offering new access to its dairy market for TPP countries :

“Nevertheless, the [US] dairy industry remains seriously concerned, as it also remains disappointed with the status of the Japan and Canada negotiations and concerned by increased access to the U.S. market for dairy imports from New Zealand,” Levin wrote.

Whether it is Canada that is conceding unilaterally or the US that is doing so, one thing is clear : New Zealand has won a specific carve-out for greater dairy access, and it knows exactly what it is because our dairy industry leaders have been heavily involved in formulating it. Groser’s coyness to RNZ on Friday about whether or not he will attend the ministerial meeting in Atlanta set for September 30- October 1st this week is – as mentioned – mere politicking. He’s keeping a low profile to avoid further inflaming North American dairy producers, while domestically he is busily encouraging the media to reduce expectations so that he can maximise the impact of the final deal. These are not valid reasons for denying the New Zealand public the information they deserve on matters that affect them seriously.

Investor-State Disputes. The Levin memo contains fascinating detail on the investor/state dispute settlement (ISDS) rules under which disgruntled investors can sue sovereign countries. As mentioned, the Bilcon outcome is shaping the final form these rules will take. You can find a good summary of the Bilcon case (and the concerns about state soveignty that it raises) in this report in the Toronto Globe and Mail.

Basically, the giovernment iof Canada became liable when it sought an environmental impact review of the effect of a quarry that it had agreed to in principle :

The Bilcon decision has raised a number of concerns about the investor-state dispute settlement provisions that are commonplace in international agreements, ranging from the North American free-trade agreement, to the Canada-China foreign investment agreement, to the proposed Trans-Pacific Partnership currently under negotiations.

A dissenting member of the panel – University of Ottawa law professor Donald McRae – warned that the ruling represents a “significant intrusion” into domestic jurisdiction and will “create a chill” among environmental review panels that will be reluctant to rule against projects that would cause undue harm to the environment or human health.

There is a growing concern in legal circles that the arbitration panels are expanding their mandate – including substituting their decision-making role for domestic courts – and that they cannot be appealed, Toronto trade lawyer Larry Herman said Tuesday. The Bilcon decision “will feed ammunition to those who oppose international arbitration as a form of dispute settlement,” he added.

It’s the second high-profile NAFTA loss for Canada. Last month, Ottawa was ordered to pay Exxon Mobil Corp. and Murphy Oil Ltd. $17.3-million after a NAFTA panel ruled that Newfoundland and Labrador had violated the trade agreement by imposing retroactive research-spending requirements on its offshore oil producers.

As the Levin memo indicates, TPP member countries are now trying to shut the stable door on the ISDS provisions to try and ensure that the Bilcon findings will not be repeated elsewhere. Here’s Inside Trade on the Levin report again :

These [changes] include "clarifications" being added to language on the so-called "minimum standard of treatment" (MST) for investors that would ensure that investors bear the burden of proof in alleging a breach of this standard.

The new language also ensures that "upsetting an investor's expectations, without any further evidence, is not a violation of the provision," the memo says. It explains that these changes "appear to address some of the shortcomings" that have been apparent in past investor-state dispute settlement (ISDS) cases, such as one brought by Bilcon over a proposed quarry in Canada. "But other serious shortcomings remain," it adds. "For example, any action that an ISDS tribunal may consider 'arbitrary' could still be found to constitute a breach of the MST obligation."

One of the key controversial elements of the Bilcon award was that, according to critics, the tribunal's majority essentially equated a violation of domestic Canadian law with a breach of the MST. In other words, it found that the Canadian authority that rejected Bilcon's proposed quarry acted arbitrarily by exceeding its mandate under Canadian law. It is not clear whether or how the changes mentioned by Levin would address this issue.

Few members of the New Zealand public are aware of the Bilcon ruling, or of the risks that the ISDS provisions contained in the TPP will pose in future for the national sovereignty of this country. Such has been the information blackout imposed on the TPP process over the past five years, no informed public debate on how far the TPP should be allowed to go in this respect has been possible.

Footnote : Bilcon’s victorious lawyer was the Canadian trade lawyer Barry Appleton. In the late 1990s, I interviewed Appleton for the Listener about the MAI, an ancestor to the TPP that was the first example of how global protest action could be co-ordinated via the Internet to defeat a multinational investment pact. Appleton was later interviewed by Kim Hill on RNZ, where he shredded a local academic apologist for the MAI. Appleton knows both sides of the investment fence. He’s worked for corporates, and for protest groups.

The memorable takeaway quotes from my discussions with him were that politicians have no idea about how international trade tribunals work, how their precedents have been derived, and how these precedents ( some of which were formed in the Iran /US compensation cases of the 1980s) are interpreted. As a result, he said at the time, even honest politicians are making commitments that render their countries vulnerable to all kinds of risks and liabilities. Again, this is an argument for open disclosure, so that greater opportunity will exist for unforeseen implications to be discerned, debated and acted upon – before it is to too late. With the TPP ministerial meeting due to conclude in Atlanta on Thursday, it may already be too late.

Since Appleton’s Bilcon victory seems central to how the TPP member countries are shaping the final ISDS rules, it would be useful if someone in RNZ ( hello Wallace) could interview Barry Appleton, afresh.

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