Germany Bucking Toxic, Nation-State Eroding Transatlantic Trade and Investment Partnership

We’ve inveighed against the dangers of two Orwellianlly-branded “trade” deals, the TransPacific Partnership and its ugly twin, the Transatlantic Trade and Investment Partnership. Both negotiations have been shrouded in a deeply troubling level of secrecy, with their draft terms being given classified status and Congressmen kept largely in the dark as to their content (summaries provided by the US Trade Representative aren’t remotely adequate, since as in all contracts, much hinges on exact language).

The business press in the US has tended to amplify Administration messaging, that both deals are moving forward. In fact, as we’ve covered in some detail, the TransPacific Partnership is in quite a lot of trouble, and as we’ll discuss below, the Transatlantic Trade and Investment Partnership is also going pear shaped.

So far, it’s the TransPacific Partnership that has gotten the press in the US, due in part to its strategic role (it’s meant to isolate China) as well as the heated opposition of some of the intended partners to key terms (such as Chile and Malaysia to provision that would prevent them from having the sort of capital controls that reduced the damage that they suffered during the financial crisis).

Congress, in a remarkable show of spine, has gone into opposition over the TPP due to the Administration’s refusal to provide remotely adequate information about the negotiations, as well as concern over what they can see of the provisions.

The controversy over the TPP increased when Wikileaks exposed some draft chapters, one on intellectual property and the other on the environment. They which how bad the deals were as well as how the “partners” oppose many of the sections of the drafts.

But heretofore, the assumption has been that the Transatlantic Trade and Investment Partnership is moving towards completion, and the only risk is whether Congress will dig in its heels as it has with the TPP. That assumption now looks questionable, since Germans are wildly opposed to the deal, and the souring of US/German relations over US wiretapping and spying (and its refusal to commit to a big change in conduct) means the German government is much more likely not to stand up to the US and refuse to go along with provisions that are destructive to national interests, namely, secret “investor” panels that supercede national laws and regulations.

By way of background, we described how these panels work in a 2013 post:

Even though no one has seen the exact language of the text, since it is being kept under wraps, both deals are believed to strengthen and extend investor rights, which means give them easier access to the courts. Consider this description from a July presentation by Public Citizen:

What is different with TAFTA [pending Trans Atlantic Free Trade Agreement] (and TPP) is the extent of “behind the border” agenda

• Typical boilerplate: “Each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements.” …

• These rules are enforced by binding dispute resolution via foreign tribunals with ruling enforced by trade indefinite sanctions; No due process; No outside appeal. Countries must gut laws ruled against. Trade sanctions imposed…U.S. taxpayers must compensate foreign corporations.

• Permanence – no changes w/o consensus of all signatory countries. So, no room for progress, responses to emerging problems

• Starkly different from past of international trade between countries. This is diplomatic legislating of behind the border policies – but with trade negotiators not legislators or those who will live with results making the decisions.

• 3 private sector attorneys, unaccountable to any electorate, many of whom rotate between being “judges” & bringing cases for corps. against govts…Creates inherent conflicts of interest….

• Tribunals operate behind closed doors – lack basic due process

• Absolute tribunal discretion to set damages, compound interest, allocate costs

• No limit to amount of money tribunals can order govts to pay corps/investors
• Compound interest starting date if violation new norm ( compound interest ordered by tribunal doubles Occidental v. Ecuador $1.7B award to $3B plus

• Rulings not bound by precedent. No outside appeal. Annulment for limited errors.

And that’s alarming in light of some of the cases already brought before these panels in existing trade agreements like NAFTA. For instance:

Eli Lilly is suing the Canadian government for not having the same extremely pro-drug-company patent rules. It is seeking $500 million in damages for two drugs that Canada approve to be sold as generics. If Eli Lilly prevails, other drug companies are sure to follow suit.

Vattenfal, a Swedish company, is a serial trade pact litigant against Germany. In 2011, Der Spiegel reported on how it was suing for expected €1 billion plus losses due to Germany’s program to phase out nuclear power:

According to Handelsblatt, Vattenfall has an advantage in seeking compensation because the company has its headquarters abroad. As a Swedish company, Vattenfall can invoke investment rules under the Energy Charter Treaty (ECT), which protect foreign investors in signatory nations from interference in property rights. That includes, according to the treaty’s text, a “fair and equitable treatment” of investors.

The Swedish company has already filed suit once against the German government at the ICSID. In 2009, Vattenfall sued the federal government over stricter environmental regulations on its coal-fired power plant in Hamburg-Moorburg, seeking €1.4 billion plus interest in damages. The parties settled out of court in August 2010.

Phillip Morris threatened suit against Australia for its plain cigarette packing rules and is suing Uraguay for anti-smoking regulations

Now consider what this means. These companies are not suing for actual expenses or loss of assets; they are suing for loss of potential future profits. They are basically acting as if their profit in a particular market was guaranteed absent government action. And no one else enjoys these rights. Consider highly paid workers in nuclear plants. Will they get payments commensurate with the premium they’ve lost over the balance of their working lives from the phaseout of nuclear power? Will cigarette vendors in Australia get compensated for the decline in their sales? Commerce involves risk, which means exposure to loss, yet foreign investors want, and seem able to get, “heads I win, tails you lose” deals via these trade agreements.

And it’s even worse than you imagine once you understand how these panels work. Recall how Public Citizen mentioned the role of the panelists who go between working for the companies and serving on the panels? A small and tight-knit group has disproportionate influence (click to enlarge):

Screen shot 2013-11-13 at 6.23.31 AM

Consider the implications of the fact that the 15, and the larger community of panel “regulars,” work both sides of the street. They draw cases that go before the trade panel, as well as hear them. Thus it’s in their interest to issue aggressive rulings in order to facilitate more cases being filed.

Not surprisingly, this self-reinforcing system is, as expected, producing more claims even before its gets its hoped-for turbo-charging through the pending trade deals:

Screen shot 2013-11-13 at 6.27.38 AM

Back to the current post. You may have noticed the suit against Germany for phasing out nuclear power. That has brought the issue of the investor panels to the attention of the press and public. In the Huffington Post, Larry Cohen describes the widespread opposition to the Transatlantic Trade and Investment Partnership in Germany:

As negotiations move forward on the Transatlantic Trade and Investment Partnership (TTIP), a wide range of German elected and civic leaders are in disbelief that the U.S. remains serious about including Investor-State Dispute Settlement (ISDS). From the German perspective, that’s a failed 20th century approach….

By most benchmarks, Germany is the most successful large economy in the world, with a rising standard of living, an educational system that creates real opportunity to move from school to work, a deep economic safety net, and worker participation in economic decision making….

Much more could be said about the divergent paths of our two nations in the past 60 years. But thanks to a suit brought by the Swedish energy firm Vattenfall against the German government, opposition to ISDS is nearly universal…

Ironically back in the U.S., proponents of TTIP and the more imminent Trans Pacific Partnership (TPP) criticize those of us who oppose ISDS as anti-trade Neanderthals. But in my discussions with German leaders last week, it is clear that the U.S. looks like the Neanderthal by supporting ISDS, coupled with dramatic increases here in economic inequality and nearly unlimited influence by corporate America in all aspects of our lives. If [US Trade Representative Michael] Froman proceeds with ISDS in the final version of the TPP, Germans and most other Europeans will never trust a future TTIP, even if there are ISDS carve outs for certain national legislation. They can read the handwriting on the TPP wall very clearly.

Yves here. This is priceless. Even though Japan and other prospective TPP partners have serious reservations about the investor panels, along with numerous other provisions, Froman appears to be operating as if he can bulldoze them, when the Japanese media indicates that this is a non-starter (and if Japan is not in the deal, there is no deal). But the US messaging (and the US media readings are likely to get more play in Europe than the Asian accounts) are that the talks are on track. So the overhyping of the state of play with the TPP may backfire with the TTIP talks. It would be delicious to see the Obama Administration hoist on its propaganda petard.

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  1. salvo

    “with a rising standard of living, an educational system that creates real opportunity to move from school to work, a deep economic safety net, and worker participation in economic decision making….”

    to anyone living on Hartz IV here in Germany this has to sound like mockery

    1. mellon

      Since the right to sue countries derives from the relationship between investor and state, all Germany’s saying no to ISDS would do would be to protect Germany from the creation of new future ISDS suits against IT- it would not, for example, prevent suits against the US, say if the US adopted single payer, by “injured” German firms, limiting the corporate “rights” of German companies, nor would it defuse suits already in progress or suits based on investment deals undertaken while Germany endorsed the theory. In short it dis little or nothing for Americans. Suppose we have a rogue leadership that is determined to weasel another huge bailout payoff for their investors out of ISDS, – I doubt if they would give up for anything- they are determined to do it.

      For example, by the US undertaking to be the next Saudi Arabia in this TTIP energy deal and then – oops- having to back out for some reason after its started. **Ka-ching** Huge payoff necessary!

      1. hunkerdown

        For ACTA, unanimous consent from all member states was required for accession to the agreement (and I think Latvia or Bulgaria was the first to decline, but memory may be failing me). I don’t know whether that’s the case here or still; if so, Germany might well be able to say no for all of Europe.

    2. bmeisen

      a few on hartz 4 – the ones who find just about everything a mockery. there are people for whom hartz 4 is genuinely bitter, people who would be less dependent but aren’t, often because of lack of child care, an area where the german solution is flawed though still better than that of the USA. a substantial portion of hartz 4 cases are effectively middle class germans who become unemployed in late middle age. hartz 4 logic provides a form of early retirement, often softened by a working spouse. and there are relatively recent immigrants who have little security other than a system of justice and hartz 4.

      germany has 6% unemployment – effectively full employment. public health care and subsidized housing, free relatively good education from 1 – 16+, a functioning democracy, 5-6 weeks of paid vacation for workers – at the start, not after 25 yrs. this highly industrialized economy is even commited to renewables. they’ve hauled the ddr economy out of the ditch and they did it without the east germans rioting. it’s a golden age, right now. typically the germans are the last to acknowledge it.

    3. Dan B

      I’m in Berlin doing research and talking to many Ph.D.s and graduate students. They all tell of declining support for higher education, the social welfare system in general, a lack of decent jobs -a lot of adjunct teaching like in the US, and so forth. Indeed, they’d laugh sardonically at the rising standard of living script. They instead talk of how neoliberalism is playing out much like in the USA, just not as cravenly thus far.

      1. bmeisen

        how much are they paying for their advanced degrees? i can’t imagine the state universities in berlin charging tuition. maybe your kommillitoninnen are mad about registration fee increases – might be €500 per semester thesedays, which should include a mass transit pass, like for berlin zones AB, nicht schlecht. ask them how much a worker has to pay for 8 monthly transit passes, or even better how much a freelancer has to pay – german employees in large urban centers like berlin often have job tickets that are attractively priced.

        typical ami exchange students pay your institutions in the usa several tens of thousands of dollars for an educational experience that german students pay vitually nothing for. the typical american college student also finishes with about 25 k in debt, which very very few bafög recipients experience. and the fact that 3 million americans have 100k or more of educational debt is incomprehensible to your average german. german students are right tofight tooth and nail against tuition – free public education is the way to go, and germany offers useful lessons, especially for americans.

  2. praedor

    ANY President that signs off on ANY such trade deals that effectively guts much of the US Constitution and throws out any thought of passage of laws for the greater good of citizens rather than corporate profits truly deserves impeachment, then trial for treason. Any Congress that ratifies any such nation/Constitution-destroying trade deals deserves to be burned to the ground and all pro voters literally hung from lamp posts. All so-called “free trade” deals have been horrific nation, environment, worker safety, worker rights-destroying monstrocities. TTP and TTIP would promise to be THE final nails in nationhood, environmental protection, private property rights (unless you are a corporation), worker rights and protections, and all public health and safety coffins. It is THESE deals alone that make me willing to consider impeachment of Obama. He is pushing these so damn hard it is damning as to his true intentions and interests.

    1. Mark P.

      ‘Any Congress that ratifies any such nation/Constitution-destroying trade deals deserves to be burned to the ground and all pro voters literally hung from lamp posts.’

      Talk is cheap. What ya gonna do?

      That’s the barely-concealed attitude of many at the top now. And you know, they have a point ….

      1. mellon

        People are like little ants. We’ve been asleep at the wheel while they have been preparing these schemes for years, literally day and night. Completely obsessed by it.

      2. Oregoncharles

        Cracked record here:
        Vote Green!

        At the very least, it sends a message, and should put some fear in the corrupt Democrats.

        To be fair: at this point, congress is refusing to pass Fast Track. That’s a fairly effective way to derail these agreements from here. They need LOTS of pressure on that point (and our Oregon senators haven’t been very good on this. Wyden’s a sell-out, as usual, but he’s not the one up for re-election).

        On this particular point, Republican control of at least the House may be a good thing, even though these “trade” agreements are essentially reactionary in nature. Their desire to thwart the president is so pervasive that they’ll very likely take the bait, where Dems would be under pressure to support their guy. It also helps that he’s now truly a lame duck, and so unpopular (40%) that he’s a campaign liability.

        As to lynching congressmen: hasn’t happened yet, even in Greece.

        1. hunkerdown

          The PPACA was originally the product of a conservative think tank. Adding a web store to it let the libertine creative class believe it was theirs. The GOP, having pushed the Democratic Party out of power, could likewise “take over” the project, rename it, put their own stamp on it (a carve-out for family planning medicines, perhaps), call it fixed for American greatness, rally the troops and that’s all she wrote. They could do much the same with the old bipartisanship story even if they don’t take control.

          They *could*. Which doesn’t mean they will, but if they’re looking for some thrust for 2016, the right number of zeroes could set the whips to work and GOP resistance to the bill could conveniently melt. “Jawbz” doesn’t even have to be a realistic consequence of the action for which the promise is made. If anything, “jawbz” seems to be used more like a threat than a promise these days.

  3. Fíréan
    Opposition to the TTIP ( also known as TAFTA, GMT, PTCI or APT ) is wide and diverse, from across the full political spectrum on both national and local levels, and includes hundreds of non governmental organisations including environmental groups, unions etc., also of differing political orientation. There are as many websites and blogs covering all aspects from those differing perspectives. Though some persons in Brussels have expessed the opinion that the “Greens” are the only opposition, see website, this is far from the truth.
    Demonstrations, meetings and other protestations have been ongoing since at least last year. ( video interviews on website in english language) ( english language text/links etc) ( one mn’s crusade through France to elighten the people.) ( Raoul-Marc Jennar in english)

    just some link examples.

      1. Fíréan

        Political parties opposing the TTIP of traditionally labeled left and right orientation and the Greens made gains in the last EU elections.

  4. Paul Tioxon

    Jon Huntsman, former US Ambassador to China, and all around reasonable Republican and Impossible Dreamer for a run at the presidency, now heads up this outfit: THE ATLANTIC COUNCIL. The above link goes right to their TTIP regular update on negotiations, and other news that they see relevant to these talks by a wide spectrum of stakeholders, from the AFL for labor to environmentalists for Green goods.

    1. Carolinian

      Big NATO front group….seem to have more than a paw in Ukraine mess. From Wikipedia

      The Council often hosts events with sitting heads of state and government, including Georgian President Mikheil Saakashvili, Ukrainian Prime Minister Arseniy Yatsenyuk, and Latvian President Vaira Vīķe-Freiberga.

      The first two are of course point of the spear against Russia

    2. neo-realist

      Huntsman–anti abortion and pro Paul Ryan plan for “reforming” social security. I don’t know if he was all that reasonable, unless one counts working under a DINO president as reasonable.

  5. Brian

    ” … means the German government is much more likely *not* to stand up to the US… ”

    I’m guessing that’s a typo?

    1. Brooklin Bridge

      It would be delicious to see the Obama Administration hoist[ed] on its [own?] propaganda petard.

  6. jfleni

    RE: Germany Bucking Toxic, Nation-State Eroding TTIP

    Barry and his posse of buttkissers KNOW they MUST profess their well-paid ideology, even if it is ridiculous and self-defeating! The world has not seen anything like that since the days of Michail Suslov and his rigid and rabid Commie dogma in the former USSR.

    Like Suslov, Dogpatch-DC dogma will fail castrophically; but at least the fast bucks will be left over, which is A-OK with Barry and his posse!

  7. Middle Seaman

    For a Democratic president Obama will, in the end, achieve most of the ideals of the old Republican party. For a Democrat who became a candidate through the help the Left offered by savaging Hillary, the fake left looks even more pathetic than ever before.

    And we all sit on our hands.

    1. Steven Greenberg

      I don’t feel badly about savaging Hillary. I did not know that Obama would do everything that I was afraid that Hillary would do. I am still trying to keep Hillary out of the Presidency. I’d much prefer Elizabeth Warren this time around.

  8. John

    It is not looking good. Karel de Jucht, the Belgian EU trade commissioner, is running around here on college campuses trying to sell the deal. From what I can see it ain’t working. Germans are moving strongly against it. What seems to be the sticking point is the American food situation. They don’t want any part of it. The Green Parties are leading online campaigns against the trade deal to get a referendum.

    Not looking good for Team Obama. No single European head is sticking their neck out to the scale of Obama.

  9. mellon

    Q.) Why did Bill Clinton give a speech for Achmea? (NL insurer that sued the Slovak Republic for trying to switch to single payer, and if the definition of winning is stopping single payer, they won See > search on Achmea v. Slovak Republic for the cases)

    A.) To make $600,000 in one afternoon?

  10. Doug Terpstra

    It’s very little comfort that Congress is so far opposed to the TPP, even less the spongey reassurances of Harry [Reed]. Below a very high threshold, public opinion means nothing at all to most members, who we know can be bought cheaply and easily and will sell out national sovereignty and the middle class faster than a street whore on crack.

    They’ve certainly earned their single-digit approval rating. What surprises me, given his statements against rigged trade SHAFTA schemes, is that the president’s rating is still so high, at 29%!, a testament to his remarkable deception skills.

    This is not defeatist cynicism. It’s a realistic assessment of the formidable challenge required to defeat this monstrosity in a post-democratic country. The oligarchy is clearly intent on global dominance and Congress is an extremely low hurdle to clear, absent massive public opposition, which looks unlikely.

  11. Jesper

    Vattenfall and also the current Swedish government has a lot to answer for – Vattenfall is 100% owned by the Swedish government. State owned company suing another state….. & also, Vattenfall is lobbying German legislators for legislation that is unlikely to be approved in Sweden by Swedish legislators.

    Russia and Gazprom would never use such methods? Or? But I suppose as long as ISDS benefit some western companies it’ll be worth it? Or?

  12. susan the other

    Well, at the rate we are going we aren’t going to have any exports to sue over. That would be fine with me. If trade requires all this draconian enforcement, it should be telling us something: We don’t really need trade. Just a few things now and then. The rest is just baloney. And the TPP is double baloney considering that even if it slips past the Japanese public, we are still going to trade with China. Errr… sell them our treasuries.

    1. hunkerdown

      Services are the thing the US exports, and by “services” I mean permission slips from rentiers, who can steal as many of those from the public as they like and have the public enforce them at the public’s own expense.

  13. obedientdissident

    I seem to remember that I overheard a newsprogram (literally while walking past the TV) where I heard Merkel stating the keywords ‘TTIP important exports’. And exports is a holy word…

  14. RBHoughton

    This TPP / TTIP stuff is intelligible historically.

    When Britain lacked the strength to continue operating its financial economy it passed the baton to USA. Now America is starting to wane, great capitalists seek for some other institution on which to secure their wealth. None of the BRICS are appropriate – they are all more or less concerned for their populations and social responsibilities – the only alternative is to directly empower the merchants to rule the planet and that can only be done quickly whilst America still has the power to demand performance.

    This has nothing to do with democracy or any other system of political management – the relevance of Congress is not indicated – its just the owners of the country securing themselves against devaluation.

  15. Berdoo Boy

    Yes, the plans must have been in the works for years. Now, with California’s top-two elections, voting Green Party causes fear to no one.

    1. hunkerdown

      Tim Draper’s on to something, I think. Not having conservative SoCal tied to fighting liberal NorCal in policymaking, winner-take-all, is an excellent idea.

      On the other hand, Nancy Pelosi might have a LOT to worry about come dotcom bust 2.0.

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