The Regional Comprehensive Economic Partnership is being called a new model of trade agreements. Such paeans appear to be premature, and we might better hold off on uncorking the champagne.
It is best to remember that so-called “free trade” agreements are products of neoliberal assaults on any and all efforts to protect people and the environment from the rapacious effort of corporations to profit to the maximum extent and without regard to external cost. “Free trade” agreements are not the cause of neoliberalism; they are a product of neoliberalism.
It is true that the RCEP is less draconian than recent trade deals, and less one-sided in advancing corporate profiteering above all other human concerns than the Trans-Pacific Partnership was when the United States was involved and pushing for the harshest rules. But is that the standard we wish to uphold? “It’s not as bad as the worst agreements out there” really shouldn’t be a cause for celebration.
Much of the same language commonly found in “free trade” agreements is in the RCEP, and what appears to be the most promising development, the lack of the usual “investor-state dispute settlement” process that uses corporate-dominated tribunals that consistently overturn health, safety and environmental regulations, is much less than it appears once we look into the details. And there are no labor or environmental provisions. What we have here is more capitalism as usual, including a dispute process still weighted toward corporate interests.
For readers not familiar with the RCEP, it is a trade deal reached by 15 countries across East Asia and Oceania. Although some commentators believe that China has been the impetus behind the RCEP, in fact it is the 10 countries of the Association of Southeast Asian Nations (ASEAN) that were the driving force. Australia, New Zealand, Japan and South Korea join China and the ASEAN countries — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — in a deal that encompasses nearly one-third of the world’s economy. India was originally a negotiating country, but dropped out, expressing concerns that the RCEP would be dominated by China.
As would be expected, mainstream economists, who as a group act as cheerleaders for capitalism rather than seriously analyze capitalist economies, are cheering the agreement. The Financial Times, for example, breathlessly reported that the RCEP “could add almost $200bn annually to the global economy by 2030,” a number repeated by signatory governments. That despite the fact that Australia, China, New Zealand, Japan and South Korea each already has a trade agreement in place with ASEAN.
Signatory countries were also enthusiastic. China’s prime minister, Li Keqiang, said the agreement is “a victory of multilateralism and free trade.” The New Zealand Ministry of Foreign Affairs and Trade said, “The agreement will help ensure New Zealand is in the best possible position to recover from the impacts of COVID-19 and seize new opportunities for exports and investment.” The Australia Department of Foreign Affairs and Trade said, “Australian farmers and businesses are set to benefit from better export opportunities.”
Unions fear working people face a race to the bottom
Once we turn our attention to those not highly placed, a rather different picture emerges. A bloc of seven trade union federations strongly condemned the RCEP after its signing. Those federations, covering workers in construction, manufacturing, agriculture, transportation, services and education, said, “Instead of furthering a free trade project, countries should be collaborating on reviving their economies and expanding public goods. … RCEP and other trade agreements that protect intellectual property rights threaten the ability to secure a globally accessible [Covid-19] vaccine. … [W]hile [corporate executives] traveling for business will benefit from facilitation of procedures for entry and temporary stay, workers face deteriorating working conditions in a race to the bottom under heightened competition in which migrant workers are facing the worse consequences. Regional cooperation based on a collective intent to promote decent work, quality public services and sustainable and inclusive development are a better solution.”
The seven trade union federations also pointed out that RCEP was shrouded in secrecy throughout its eight years of negotiations, with the text released to the public only after the agreement was signed. (All 15 countries must still formally ratify it.) The intellectual property chapter was leaked in 2015, prompting the Electronic Frontier Foundation to characterize the IP text as “a carbon copy” of the Trans-Pacific Partnership then also in negotiation. “South Korea is channeling the [U.S. trade representative] at its worst here,” the Foundation said in its commentary, speculating that Seoul was pushing draconian IP rules because accepting unfavorable rules in its bilateral trade agreement with the U.S. would put it at a disadvantage otherwise. We’ll return to the intellectual property text, always a key chapter in any trade pact, below.
There are also fears that trade deficits for less developed countries will increase and pressures for privatizations will increase.
A senior economist with the United Nations Conference on Trade and Development, Rashmi Banga, expects that, assuming tariffs are removed on all products trading among RCEP countries, most ASEAN countries will see their imports rise faster than their exports, believing that those countries won’t be able to compete with China.
Kate Lappin, the Asia Pacific regional secretary of Public Services International, a federation of more than 700 trade unions representing 30 million workers in 154 countries, said “free trade” deals such as RCEP “also increase the pressure on governments to privatise, as public services need to be traded and compete on the market. This will have negative impacts on equality, including corrosive impacts on gender equality.” Noting that some measures governments are taking to combat the Covid-19 pandemic would be in violation of the RCEP or other trade agreements, Ms. Lappin said “RCEP will bind the hands of governments in taking measures in the public interest in crises to come, be it health or environmental.”
There could also be problems for manufacturers in small countries because “rules of origin” rules mandate that parts from any signatory country must be treated the same as domestic production.
Bad news for farmers, good news for agricultural multi-nationals
The ability of farmers to maintain control of their seeds is in peril, according to GRAIN, which describes itself as an “international non-profit organisation that works to support small farmers and social movements in their struggles for community-controlled and biodiversity-based food systems.” GRAIN, in analyzing a separate leak of RCEP chapters, said the agreement was in danger of requiring all signatory governments to adopt a seed law designed to provide private property rights over new crop varieties, giving corporations like Monsanto or Syngenta a legal monopoly over seeds, including farm-saved seeds, for at least 20 years; require adherence to the Budapest Treaty, which enforces patents on microorganisms; and make violations of these corporate-friendly rules criminal violations. Australia, Japan and South Korea were described as the “hard-line camp” on these issues.
Those fears remain in place. Article 11.9 of the final text indeed mandates that RCEP governments not already signed onto the Budapest Treaty do so. Adherence to several other international treaties are also mandated. Language concerning adoption of the seed law described in the preceding paragraph (the Act of International Convention for the Protection of New Varieties of Plants, amended in Geneva in 1991) is at Article 11.9, but the language is ambiguous, encouraging governments to sign the Convention and “cooperate” with other signatory governments “to support its ratification.” Also worrisome is Article 11.36, which mandates patents on plants: “[E]ach Party shall provide for the protection of plant varieties either by patents or by an effective sui generis system or by any combination thereof.”
There is also concern about the availability of medicines. A key goal of the United States when it was negotiating the Trans-Pacific Partnership was to undermine government procurement of medicines that reduced the cost of health care and to extend patents and data exclusivity periods for brand-name drugs, impede trade in generic medicines, and place new limits on how drug prices are set or regulated, all in the service of pharmaceutical company profits.
Croakey Health Media, an Australian “not-for-profit public interest journalism organisation,” in a commentary on the RCEP’s potential impact on medicines, feared some of those goals could find their way into the final text. “Early in the negotiations, leaked texts indicated that Japan and South Korea had proposed rules for the RCEP intellectual property chapter that would extend and expand monopolies on new medicines in countries like Cambodia, Indonesia and Thailand,” Croakey said. “These types of rules can delay the availability of generic medicines.”
It appears there is at least some backing off of the worst provisions that had been under discussion. Article 11.8 of the final RCEP text says “The Parties reaffirm the Doha Declaration on the TRIPS Agreement and Public Health” adopted in 2001. The Doha Declaration is an ambiguous document that “affirms” intellectual property rights but also “should not prevent members from taking measures to protect public health.” How the text will be interpreted will likely determine how far it will be possible to go in attacking government health care systems.
It should be stressed that grassroots organizations had no chance to affect any aspect of the RCEP text as the negotiations were secret throughout.
Lots of language customarily found in trade agreements
The text of “free trade” agreements is always dry and technical, even neutral-sounding. It is in the interpretation, and what certain phrases actually mean, that determine their outcome. So let’s take a very brief look at some of the text, and what it might mean.
Chapter 10, covering investments, is crucial to understanding the similarities to existing deals. Article 10.1 on “covered investments” contains the standard list of what is covered typically found in “free trade” agreements, including “claims to money or to any contractual performance related to a business and having financial value” and “intellectual property rights and goodwill.” There is an important exception, however — the chapter does not apply to government procurement, “subsidies or grants provided by a Party” or “services supplied in the exercise of governmental authority.” What that means is that the RCEP theoretically reduces the ability to attack or force privatization of government-owned enterprises, a consistent goal of U.S. trade negotiators in agreements the U.S. is involved in, and a goal generally shared by multi-national corporations seeking new markets. But this clause could potentially be negated by the heavier market pressures that could lead to privatizations, as discussed above, and once a government enterprise is privatized, the clause is no longer relevant.
The investment chapter contains the standard clause that “Each Party shall accord to investors of another Party treatment no less favourable than that it accords, in like circumstances, to investors of any other Party or non-Party.” Article 10.5 follows up with language that is also typical: “Each Party shall accord to covered investments fair and equitable treatment and full protection and security, in accordance with the customary international law minimum standard of treatment of aliens.” Although these passages are bland, neutral-sounding phrases, this language has often been used as key points of attack for multi-national corporations seeking to eliminate government health, safety, labor or environmental regulations. As always, “customary international law” has been established by a series of rulings by the corporate-dominated secret tribunals that hand down unappealable decisions, decisions that are used as precedent for further such decisions. The expectation of profits by a corporation as a “right” superseding health and environmental regulations has been repeatedly handed down.
Further language routinely found in “free trade” agreements stipulate that capital controls are prohibited, and, in Article 10.13 of the RCEP, “No Party shall expropriate or nationalise a covered investment either directly or through measures equivalent to expropriation or nationalisation.” What will constitute an illegal “expropriation”? How this clause will be interpreted is crucial. In existing “free trade” agreements, government regulations protecting health or the environment are frequently overturned because complying with such regulations would reduce profits, and thus constitute “expropriation” because corporate profits are presumed to be an entitlement by the tribunals sitting in judgment. Will the repeated examples of such rulings in, inter alia, the North American Free Trade Agreement, be replicated here?
In Chapter 11, covering intellectual property rights, there is no mandatory schedule for when those rights expire; this constitutes a small victory. The chapter also states that signatory governments “may establish appropriate measures to protect genetic resources, traditional knowledge, and folklore,” a right not ordinarily granted in “free trade” agreements.
But in the Financial Services Annex of Chapter 8, language similar to that found in other trade pacts requires that foreign financial services firms be given free reign to operate, even to take over a country’s banking system. Specifically, “Each host Party shall endeavour to permit financial institutions of another Party established in the territory of the host Party to supply a new financial service in the territory of the host Party that the host Party would permit its own financial institutions, in like circumstances.” Again, what seems neutral-sounding on the surface has specific meanings when interpreted by a tribunal in the context of “customary international law.”
Corporations will continue to be elevated above governments
And that brings us to Chapter 19, covering dispute settlement. Article 19.4 leaves us little doubt, reiterating that “This Agreement shall be interpreted in accordance with the customary rules of interpretation of public international law” and that adjudicators “shall also consider relevant interpretations in reports of WTO [World Trade Organization] panels and the WTO Appellate Body, adopted by the WTO Dispute Settlement Body.” No specific tribunal for the settlement of disputes is mandated, and the intent appears to be to have ad hoc panels rather than panels seated by one of the tribunals ordinarily used in trade disputes in existing trade agreements. Nonetheless, Article 19.5 gives right of forum selection to the complaining party — i.e., the corporations that will be suing governments — so the use of the tribunals can’t necessarily be ruled out. When seating an ad hoc panel, the complaining corporation and the respondent government are supposed to mutually agree on the three members of a panel but if they can’t agree, the WTO director-general will complete the panel — given the role of the WTO in imposing draconian pro-corporate rules, this clause can hardly be considered neutral.
And so who will sit on the panel and adjudicate the case? Article 19.11 designates those who “have expertise or experience in law, international trade, other matters covered by this Agreement, or the resolution of disputes arising under international trade agreements.” In other words, the same corporate lawyers who sit as judges on the tribunals that adjudicate cases brought under existing “free trade” agreements. If the WTO director-general seats panelists, those must not only meet the requirements stated above but additionally “be a well-qualified governmental or non-governmental individual including an individual who has served on a WTO panel or the WTO Appellate Body or in the WTO Secretariat, taught or published on international trade law or policy, or served as a senior trade policy official of a WTO Member.”
Under most existing “free trade” agreements, one of three tribunals is used, most commonly the International Centre for Settlement of Investment Disputes (ICSID), an arm of the World Bank. ICSID is the forum that was used in NAFTA and is used to adjudicate disputes under dozens of bilateral trade agreements, and is responsible for a long list of outrages declaring environmental and health regulations illegal. Conflicts of interest are blatant in these tribunals — corporate lawyers who specialize in defending multinational corporations in trade disputes alternate between appearing as counsel for corporations and as judges handing down the decisions.
This process is summed up well on a Bilaterals.org page answering “frequently asked questions”:
“In effect, ISDS creates a parallel business-friendly judicial system exclusively for transnational corporations. The power rests upon for-profit arbitrators who come from the corporate sector and face unverifiable conflicts of interest. They have no sovereign legitimacy and are not accountable to the public. The decisions they make can be inconsistent between one another and cannot be appealed. Plus, the arbitrators effectively serve as judge and party, because the same appointed arbitrators who plead the case for the parties make the decision. Imagine a football match where the referee plays for one of the teams! With ISDS, this becomes a possible scenario. So much for justice.”
RCEP rules not mandating ICSID or one of the other tribunals is a cosmetic change. Governments continue to tie themselves to rules and precedents that elevate multi-national corporations above national governments, and thus elevate corporate profiteering above all other human considerations. There will still be panels seated to adjudicate disputes, but instead of using ICSID or another permanent forum, there will be ad hoc panels, which will, as noted above, have the exact same criteria for seating judges. The Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union pioneered this cosmetic change, intended to make the one-sidedness of ISDS appear somewhat less blatant, and will also be used in some disputes covered by NAFTA 2, the U.S.-Mexico-Canada agreement.
Thus the “investor-state dispute settlement” (ISDS) process is very much in place in the RCEP. That should not come as a surprise. “Free trade” agreements arise because multi-national corporations scour the globe searching for the places with the lowest wages and least regulations in order to maximize their profits over all other considerations. As capitalist competition intensifies, corporations must match the moves their competitors make in order to remain in business, and adopt still more harsh policies to stay ahead. Once production is moved overseas, and supply chains are spread into ever more locales, tariffs and rules protecting domestic production are barriers to be removed. Trade deals at first mainly dealt with technical issues or tariffs, but as the relentless grasping for profits becomes ever more intense, regulations safeguarding health, labor, the environment or safety are seen as barriers to profit-making, and corporations seek to sweep them away, too.
Later trade agreements had much more to do with erasing regulations than with actual trade rules, which was reflected in the draconian rules the U.S., often assisted by Japan, sought to impose in the Trans-Pacific Partnership. That the RCEP has less draconian rules is not a cause for celebration — the rules are still plenty tilted in favor of multi-national capital and will inevitably be wielded as a cudgel by those beneficiaries. A rational trading system requires a rational, democratic economic system, not the dictatorship of capital.