A Third of Global Trade and No Discussion in Aussie Media?

Currently under negotiation is a free trade agreement that is arguably worse than the Trans Pacific Partnership and will be implemented in Australia in the near future. The agreement covers a full third of global GDP and half of global trade. Given that it includes both China and India, along with 14 other nations, it also encompasses almost half of the world’s population. The agreement is called the Regional Comprehensive Economic Partnership (RCEP).

Seems a little weird that internet searches turn up more discussion from Indian media outlets on the RCEP than Australian outlets, given that Australia is also a party to the agreement. So, given the vacuum of information in Australia, let’s try and sum up the main reasons why this agreement benefits investors and corporations, but not you.

Investor-State Dispute Settlement

Investor-State Dispute Settlement or ISDS is supposed to be a process of resolving disputes between investors and sovereign governments. The reality of this process is that they strip governments of national sovereignty and hand it to foreign investors.

This is done by allowing foreign investors to sue governments when they feel that their investments have been hurt by the actions of government. But instead of going to the court system, the case is heard by a tribunal of lawyers. A lawyer may represent a corporation in one case and in the next case be a part of the tribunal evaluating a claim. The tribunals do not have to follow precedent and have no means of appeal, which taken together is a serious implication for independence and can compromise the sovereignty of nations.

There are currently 983 ISDS cases (at the time of this article being written) being fought worldwide under a multitude of more than 3000 agreements, treaties and documents intended to protect investors or businesses. These cases can only be fought by massive corporations, like agribusiness, big pharma, tobacco and mining companies, due to the costs involved in fighting them. Cases are fought and won using fraudulent, altered and faked documents and the cases are frequently worth billions of dollars. Some have even called the frontier of ISDS law the ‘Wild Wild West’ of international law.

Remember when Australia implemented plain-packaging laws over cigarettes? Philip-Morris tobacco fought Australia all the way to the High Court. And when it was thrown out of there, they used an ISDS clause in an Australia-Hong Kong free trade agreement so that they could try to get compensation as a result of the alleged loss from the new laws. While the attempt ultimately failed, Australia only managed to recoup half of the $24 million spent on defence of its laws. The legal loophole available to Philip-Morris would not have been available to an Aussie company.

While the RCEP has had ISDS clauses removed from its final version recently, it remains a (unlikely) possibility that these could be added by universal agreement among the parties in the future (2 years down the track on review). But this raises questions as to why we signed onto the Trans Pacific Partnership-11 (after the USA pulled out), which includes ISDS clauses or why we are continuing with ISDS provisions under the Hong Kong and Indonesia Free Trade Agreements currently under review.

Increasing Pharmaceutical Costs

Part of the RCEP deals with extension of intellectual property rights that gives monopoly over patents for extra time, in some cases for up to an extra 30 years. South Korea and Japan have been pushing for extra time over monopoly on patents in the negotiations for RCEP. Japan is the foremost actor in this issue, having focused on pharmaceuticals as an area of export GDP growth since 2013.

What this does is stop other pharmaceutical companies from making replica or ‘generic’ drugs that can be sold for a much cheaper price by introducing competition. This will obviously have a huge impact upon the poorer and developing nations, particularly India who is the biggest source of low-cost generic medicines in the world.

This will also, naturally, impact Australians, most significantly low-income Aussies by allowing pharmaceutical companies to maintain high prices on their drugs for longer.

Stepping on Farmers/Agriculture

Also included in the RCEP are provisions relating to acquisition of land. Under the RCEP, big agribusiness will find it easier to transfer land from small operations. Specifically, the agreement affords big foreign business more rights and prevents governments from instating new tariffs or hardening their trade where they see fit.

One way that it does this is by forcing governments to afford foreign companies ‘national treatment’. This means that foreign multinationals are treated the same as domestic companies, forcing governments to open up land acquisitions to investors from other RCEP nations. This is likely to come at a greater cost to small scale producers and indigenous communities in developing nations.

Governments would have to lower or remove tariffs on a range of goods, allowing for competition with local business by large multinationals. There are also ‘standstill’ and ‘ratchet’ clauses included in the agreement, meaning that governments will have to freeze their levels of market opening and cannot turn back after further market liberalisation. These measures mean that governments cannot use new tariffs or regulations to try and protect domestic industry or small-scale producers from foreign interference or takeover.

Also of concern to farmers are protections being handed to agribusiness over seeds. The RCEP talks of expanding the rules to match the International Convention for the Protection of New Varieties of Plants (UPOV). This would make it illegal for farmers to hold onto protected or unique varieties of their plants, forcing them to buy new generic seeds and deepen the reliance on agrochemicals.

Base image screenshot from Google Images


This is only a small overview of the problems with the agreement, the final text of which has yet to be released. I have not included knock on effects from this incursion into democracy, like the fixing of lower government revenue by restricting trade taxes. This would translate to lower government spending or higher domestic taxes in order to maintain necessary public programs. (Or these public programs would need to be handed to private enterprise)

I am certain that upon release there will be myriad more problems, most of which will be borne by wider society and small business actors, particularly in the developing world. There is a reason that outside of business circles that these agreements are called ‘investor rights agreements’ rather than free trade agreements.

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