By Lambert Strether of Corrente.
In this post, I’ll continue the focus on TPP goverance issues — apparently, we have “governance” these days, instead of government — by continuing to look at the Investor-State Dispute Settlement (ISDS) system (Chapter 28), and by taking a fresh look at the Trans-Pacific Partnership Commission (Chapter 27). In each case, to get perspective, I’ll take a comparative view: First, by seeing what USTR Michael Froman’s TPP FAQ says about the text, and then by reading the text itself. We’ll see that Froman’s FAQ is… Well, perhaps “a tissue of lies” is a bit strong, even if Froman’s relationship with the truth is at best non-custodial. Let’s stick with disinformation. Unfortunately, our famously free press seems to be taking Froman’s FAQ at face value, thereby falling into absurdities. Finally, I’ll look at — or, more precisely, for — a document that perhaps should be playing a key role in determining what the administration, as opposed to the rest of us, thinks the text means.
But first, let’s get a sense of the scope of the effort before us in the coming weeks and months. The TPP is a big document:
Photo of 5,554pg TPP on Sessions’ desk. B/C of Fast-Track, it can’t be filibustered, amended or given a treaty vote. pic.twitter.com/jrj883vDRe
— Sen. Jeff Sessions (@SenatorSessions) November 9, 2015
5,554 pages does seem like rather a lot; ObamaCare, for example, is only 906 pages (I downloaded it to check). And even though page-printing and counting exercises are often frowned-upon as political theatre, a reader would have to blast through ~61 pages a day to read the whole thing in 90 days. And that’s 61 pages a day of dense, technical prose crafted by international trade sherpas and corporate lawyers. So when the White House congratulates itself on “Why Transparency Matters in Securing the Most Progressive Trade Deal in History,” take that with a dose of salts, eh?
Froman’s FAQ and the ISDS
Here’s what Froman’s FAQ has to say about the ISDS (PDF) and Chapter 28 :
Right to regulate
New TPP language underscores that countries retain the right to regulate in the public interest, including on health, safety, the financial sector, and the environment.
Over at Vox, Ezra Klein explains this:
The Obama administration considers itself in sympathy with ISDS’s critics — they agree that ISDS suits have been used to attack reasonable laws and regulations, and they think they’ve reworked the process to protect against abuses.
(I haven’t noticed the administration being “in sympathy” with critics, especially from the left, about much of anything, ever, so this is quite remarkable. Perhaps Klein buried the lead?)
The effort begins in the preamble, which states that all parties to the deal:
Recognize their inherent right to regulate and resolve to preserve the flexibility of the Parties to set legislative and regulatory priorities, safeguard public welfare, and protect legitimate public welfare objectives, such as public health, safety, the environment, the conservation of living or non-living exhaustible natural resources, the integrity and stability of the financial system and public morals.
The idea here is that this language rules out corporations using ISDS as a way to challenge basic, progressive lawmaking. USTR officials note that this language is binding on the ISDS tribunals — it is the context in which all cases must be considered
Seems legit. Unfortunately, the FAQ is deceptive, and Ezra Klein falls for it, and then regurgitates whatever the USTR officials fed him. NC readers already know differently:
From TTP’s Chapter 28, “Dispute Settlement, Article 28.11, “Functions of Panels” (“panel” is TPP’s word for ISDS tribunal):
3. The panel shall consider this Agreement in accordance with applicable rules of interpretation under international law as reflected in Articles 31 and 32 of the Vienna Convention on the Law of Treaties (1969).
The International Investment Law Centre of the University of Cologne has been “putting together, in the form of a digest, the decisions and awards of international arbitral tribunals” since 2011. Here’s the digest of the Vienna Convention, and what it has to say about preambles in Article 31 (“General rule of interpretation”):
An IIT’s [International Investment Treaty] preamble is relevant for its interpretation
Although a statement in a preamble , it sheds light on the object and purpose of the treaty
So, fine words like “recognise their inherent right to regulate” butter no parsnips, if they’re included in a Preamble. They do not “create a legal obligation.” (The preamble is not even a “provision,” as the FT seems to imply in paragraph 3, if provisions are contained in the articles of the agreement proper, as opposed to its preamble.) “Shedding light” and “relevant to its intepretation” make the FT’s “process” “harder” only in the most tenuous sense; in particular, since interpretation can take place only after a suit is brought, the Preamble does nothing to protect States from the chilling effect of corporations simply threatening to sue them, for billions, before extremely expensive panels.
As we see, the Preamble does not “rule out” anything, and is not “binding,” at least in the sense that USTR would like us to believe it is; the Preamble does not “create a legal obligation.” So Klein’s reliance on both the Preamble and USTR officials is charming, but as journalism, it doesn’t even rise to the level of micro-aggression. Klein goes on:
Similar language can be found in the ISDS chapter, though the AFL-CIO’s Drake notes that neither the laundry list of worthy causes in the preamble nor the relevant chapter mentions labor standards or workers’ rights.
Well, if “similar language” does exist, I can’t find it after rereading Chapter 28 (“Dispute Settlement”), though perhaps readers will correct me. Nothing on “welfare,” nothing useful on “public,” nothing useful on “regulation.” Standards writers do try to use consistent language throughout a text, so I’d like to know what Klein means by “similar.” Here’s what I found:
ls$ pcregrep .elfare TPP-Final-Text-Dispute-Settlement.txt ls$ pcregrep .ublic TPP-Final-Text-Dispute-Settlement.txt 60 days of the publication of the proposed measure, without prejudice to the right to make such requests at any time public, unless the disputing Parties agree otherwise; release to the public any written submission, written version of an oral statement, to the public within 15 days thereafter, subject to the protection of confidential information. ls$ pcregrep .egulat TPP-Final-Text-Dispute-Settlement.txt Party to make available personnel of its government agencies or other regulatory bodies who ls$
Again, the TPP is a major international agreement. Is it too much to ask that Klein, and the press, take this story seriously?
Froman’s FAQ, the Trans-Pacific Partnership Commission, and TPP as a “Living Agreement”
Now let’s turn to the Trans-pacific Partnership Commission. This is a more difficult case than ISDS, for two reasons: First, there’s been little press coverage of it. Second, although Froman’s FAQ misrepresents the Commission, what the Commission really is (or will morph or metastatize into) is far less clear than what ISDS is.
So here’s what Froman’s FAQ has to say about the Trans-Pacific Partnership Commission and Chapter 27:
Trans-Pacific Partnership Commission
The Administrative and Institutional Provisions chapter establishes the Trans-Pacific Partnership Commission to ensure that the Agreement is properly implemented.
As the TPP goes into effect, participating governments will need to assess and guide implementation, and address any concerns that may emerge from business, civil society, and government agencies themselves. This chapter sets out the institutional framework enabling them to do so, by establishing the Trans-Pacific Partnership Commission, composed by Ministerial or senior level officials, to oversee the implementation of the Agreement; and by defining the tasks the Commission will fulfill, the rules for its decision-making, and other general rules regarding the operation of the Agreement.
Seems legit. I mean, what could go wrong with an “institutional framework” designed to “address any concerns” with “general rules,” especially when that institution is going to write those rules?
Starting with press coverage, TPP is often described as a “living agreement” (or “living document”). This phrase does not appear in the text of the TPP itself (I won’t bore you with the results of pcregrep [Ll]iving *.*, but suffice to say that the “living” things are animals, or workers, or trees, and not agreements or documents). So I don’t know where the phrase originates, or even if it originates from officialdom. The first usage I can find is from the Congressional Research Service, March 20, 2015:
The TPP has been envisaged [by whom? and where?] as a ‘living agreement,’ one that is both open to new members willing to sign up to its commitments and open to addressing new issues as they evolve.
Summarizing, then there are two reasons for TPP to be a “living agreement.” The first is the accession of new members, and the second is to address new issues. For each, the Trans-Pacific Partnership Commission provides the institional platform.
On new members, the Congressional Reseach Service continues:
The accession process raises the question of whether a country, especially one with political or economic heft, can be expected to simply join an agreement already negotiated or whether it should have input on the existing agreement, especially if the goal is to produce a free trade area for the Asia-Pacific, or beyond. Yet, reopening the agreement’s substantive provisions with each new entrant—as opposed to its market access provisions which presumably would need to be negotiated with each existing member anyhow—offers up its own difficulties. The WTO accession process, whereby countries agree to the established WTO trade rules but negotiate on market access, could serve as a template.
Because nobody wants to relitigate the whole deal every time a new member joins. And that’s how the National Hog Farmers understand TPP as a “living agreement.”
All the leaders look at TPP as a “living” agreement that can bring in new member countries as time goes on, with Indonesia, the Philippines, South Korea, Taiwan and Thailand showing interest.
On new issues, this is what Politico has to say:
TPP: IT’S ALIIIIVE [that’s reassuring]: In case you’ve heard that TPP is a “living agreement,” but don’t really know what that entails, here’s what’s up: The parties have formed a TPP Commission, tasked with the broad goal of “updating and enhancing the agreement.”
And that’s how the Japanese understand TPP as a “living agreement.” The Nikkei Asian Review:
[Japan’s minister for economic and fiscal policy, Akira Amari] described the TPP as “a living agreement” that is highly sophisticated and balanced, one that will penetrate and provide a new standard for trade and investment rules in the 21st century in the Asia Pacific region. “Japan will continue to show leadership, taking a proactive role in establishing the world’s trade and investment rules.”
At this point, let’s turn to Senator Jeff Sessions, who was, we might recall, the only Senator with the courage to read any part of the TPP into the record when it was still in its locked and guarded room. Sessions takes a more sinister but nevertheless coherent view of the TPP as a “living agreement” and of the Trans-Pacific Partnership Commmision. From the Congressional Record of November 10, Senator Sessions explicates the text:
Section 27.1 outlines the creation of this Commission and who is a member. The agreement states that “each party shall be responsible for the composition of its delegation.” In other words, we are empowering the Trans-Pacific Partnership countries to create a new congress of sorts–a group with delegates that goes and meets and decides important issues that can impact everyday lives of Americans. The American representative in this Commission, which will operate in many ways like the U.N., will not be answerable to voters anywhere. How long will their terms be? How will they be chosen? Will there be any restrictions on lobbying, any requirements of transparency? Can they always meet in secret? Are there any ethics rules? The answer is, it will be whatever the TPP countries decide it will be.
Section 27.2 lists several powers of the Commission which should be expected in any regulatory body. It is granted the power to oversee the implementation of the TPP and the power to supervise the work of relevant working groups under its jurisdiction. However, then the section states this: Under the rules, the Commission shall “consider any proposal to amend or modify this Agreement,” to change the agreement. They get to change the agreement. We can ratify this, but they get to change it whenever they deem appropriate. Also, the Commission shall “seek the advice of non-governmental persons or groups on any matter falling within the Commission’s functions” and “take such other action as the Parties may agree,” while considering “input from non-governmental persons or groups of the Parties.”
According to the U.S. Trade Representative’s own Web site, the living agreement provision is in the TPP:
. . to enable the updating of the agreement as appropriate to address trade issues that emerge in the future as well as new issues that arise with the expansion of the agreement to include new countries.” It says it is to deal with trade issues and new issues. Are those issues nontrade? Are they environmental issues? Are they labor agreements or other kinds of things that are unrelated directly to trade? I think it is clear this would allow that to happen.
Senator Sessions’ construction of the text should be at the very least concerning. Perhaps our famously free press might consider digging into the real expectations for an international body, not answerable to any voters, that gets to write its own rules? Perhaps the House and Senate might even consider holding some hearings? Because Sessions isn’t the only person concerned. Here’s the CATO Institute:
Despite being neutral to the operation of each party’s constitutional systems, this agreement [TPP] will inevitably entail some limitations on regulatory autonomy.
Cato’s prose is very dry. Pause to consider what “some limitations on regulatory autonomy” might mean in practice. Continuing:
As previously described, the European Union and the United States are not limiting themselves to concluding a traditional FTA-plus agreement (one that obligates the parties to go beyond their WTO commitments, reciprocally). In fact, they are striving to develop a new model of economic integration based on a permanent international regulatory cooperation mechanism. Although TTIP falls short of establishing an internal market between the two sides of the Atlantic (i.e., no joint decision-making power is foreseen), it is set to create the conditions for prompting a new awareness in the minds of the respective regulators: that of the extraterritorial impact of their existing and proposed regulations.
And pause to consider what a “a new awareness in the minds of … regulators” of “extraterritorial impact” might mean. Continuing:
Moreover, in the process of creating a permanent mechanism, TTIP will become a “living agreement” where new areas of cooperation can be identified without the need to re-open the initial international agreement or to modify each others’ institutional frameworks.5
And the crucial footnote:
In a word, yikes. In more words, it looks like Sessions’ intepretation of the text is — hold onto your hats, here, folks — a lot more colorable than Froman’s FAQ, unless you’re a Martian who interprets the words “general rules regarding the operation of the Agreement” to mean “Yes, really, that general.” General enough to over-ride treaties which, remember, are the law of the land under Article VI of the United States Constitution.
Where is the Secret “Guidance Document”?
In a letter sent to President Obama by Senator Sessions on June 5, 2015, before the text of the TPP was published, we see this passage:
Reviewing the secret text, plus that accompanies it, reveals that this new transnational commission—chartered with a “Living Agreement” clause—would have the authority to amend the agreement after its adoption, to add new members, and to issue regulations impacting labor, immigration, environmental, and commercial policy. Under this new commission, the Sultan of Brunei would have an equal vote to that of the United States.
This is the only mention of this “the secret guidance document” I have ever seen. (But you’ve seen the size of the thing; it makes sense that there would be a guidance document prepared for it.) But I think such a guidance document, if disclosed, would make the TPP agreement much more transparent to the people, their elected representatives, and the press. Maybe some kind soul would throw it over the Naked Capitalism transom?
In their interesting and useful book, Phishing for Phools, George Akerlof and Robert Shiller lay out the concept of a “phishing equilibrium”:
If we have some weakness or other — some way in which we can be phished for fools for more than the usual profit — in the phishing equilibrium someone will take advantage of it. … Economies will have a phishing equilibrium in which every chance for profit more than the ordinary will be taken up.
Akerlof and Shiller define phishing as inducing a mark to make a decision “NO ONE COULD POSSIBLY WANT” (caps in original); for example, smoking cancer sticks. Or surrendering your national sovereignty to an unaccountable body.
So, if we look at ISDS and the Trans-Pacific Partnership Agreement, we see extra-ordinary opportunities for profits and rents that accrue to the owners of large corporations, in weakening regulations States put in place to protect the public. We should therefore assume that the TPP has been written to optimize those opportunities, by the lobbyists and corporate lawyers beholden to those owners. And those who didn’t fall off the turnip truck yesterday should view USTR Michael Froman’s disinformation campaign — as shown by the radical discrepancies between his FAQ and the actual text of the agreeeent — as phishing.
Here is a contact list of Democrats who voted for the Trade Promotion Authority (“Fast Track”). If you don’t want to be phished, you might consider calling them — or even visiting the local office in the district — to share your concerns.
 Froman’s Freqently Asked Question is a straw man:
Is it true that Investor-State Dispute Settlement (ISDS) would allow corporations to override laws, including environmental and public health regulations?
That’s never been the issue, and if indeed the administration is “in sympathy with ISDS’s critics,” they never invested any time in actually understanding their critique:
PLUM LINE: Is it theoretically possible to write ISDS in a way that precludes it from overriding regulation?
WARREN: It doesn’t directly tell countries to repeal regulations. It imposes a financial penalty, which has caused countries to change their regulations…[ISDS mechanisms] never had the authority to override regulations. What they had was the authority to impose a monetary penalty directly against the government and its taxpayers. That’s the point at which governments have backed up and said, “we can’t afford this, we’ll just change the law.”
Corporations won’t override the laws as such; they’ll use their financial muscle to get governments to do it for them. Of course, the Commission is another matter.
 The ISDS is an unaccountable system of private tribunals designed, among other things, to neuter Article III of the United States Constitution. But if the Trans-Pacific Partnership Commission is the legislative branch to ISDS’s judicial branch, then where’s the executive?
 There might actually be a third: “Regulatory Coherence.” But that is a topic for another post.
 The claim that the Sultan of Brunei would have an “equal vote” is not strictly not true; Chapter 27 states that the Commission will operate by consensus. What that means in practice, we don’t know, since the Commission has not yet defined its own rules, but there are all kinds of decision rules in consensus.
 I believe the Japanese for that is “highly sophisticated and balanced.”