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The EU-Thailand False Terminology Agreement

‘The European Union has requested full protection on its investments in Thailand in exchange for extending favours to Thai businesses under the proposed Thai-EU Free Trade Agreement (FTA).’ (Bangkok Post, 21 September 2013)

Something doesn’t add up here.

This is a Free Trade Agreement, right?  And the opposite of free trade is protectionism, yes?  And as part of the EU-Thailand FTA, the EU is demanding protection (the opposite of free trade) for investment (which isn’t trade in the first place).  Hmm.

What is happening here is little more than globalized extortion.  Let’s look at one example of ‘investment protection’ to see what wickedness these agreements can cause.

In order to protect the health of its citizens, and to fulfil its binding obligations under the WHO Framework Convention on Tobacco Control, the Australian government passed a law on plain packaging of ciggies.  Predictably, this wasn’t to the liking of the tobacco companies, who saw this as another dent in their business, and one of them, Philip Morris, took the government to court. 

The High Court of Australia heard the case and threw out the company’s demands for compensation for an act that would save Australian lungs but hurt tobacco company profits. 

Now this was Philip Morris Australia and Philip Morris international didn’t see this as the end of the story.  All big companies are pathologically schizophrenic and appear under multiple aliases all over the world, sometimes hiding behind nothing more substantial than one brass plate among thousands on some shyster lawyer’s door jamb.  Enter Philip Morris Asia, registered in Hong Kong.

When the Australian packaging law was being enacted, Philip Morris Asia bought shares in Philip Morris Australia.  For Philip Morris globally, this was just shuffling money from one account to another.  But for PM Asia to buy shares in PM Oz represents ‘foreign investment’ of just the sort the EU wants protected.  Not that this purchase of shares created any Australian jobs or did anything else for the Australian economy.  But it counts as ‘investment’.

Philip Morris could now open a new line of attack from its Hong Kong entity, by invoking the Hong Kong-Australia Bilateral Investment Treaty (BIT).  This is a stand-alone agreement that resembles what the EU demands should form part of the EU-Thailand FTA.  Now not all BITs, or the BIT bits of FTAs, are the same, but Philip Morris had carefully chosen Hong Kong because that BIT allowed what is called ‘domestic judicial review’. 

This means that it doesn’t matter what your courts have decided, or what your democratically-elected government has chosen as policy, or what your laws say, or even what your constitution demands.  This can all be negated by an Investor-State Dispute Settlement (ISDS) panel.

These arbitration panels are built into BITs, which say that instead of going to the Thai courts to dispute what is legal and what is not, which is what Thai people and companies have to do, foreign investors (and only foreign investors) can go to international arbitration. 

The reason given by governments when they cave in to such degradations of their sovereignty is that unless they agree, foreign investors, who have limited confidence in the impartiality in the Thai courts (a lack of confidence shared by at least half the Thai population, incidentally), will choose not to invest in Thailand and bugger off to somewhere that will accept that their own courts are second-best.

But second-best to what?  Imagine a court system where the judge in one case is the counsel for a private company in the next, all while serving as an ‘advisor’ persuading governments what a cracking good thing ISDS is and writing BITs for them, and while penning academic papers that demonstrate the superiority of ISDS (and serving on the editorial boards of academic journals to ensure no contrary opinions get aired), and while sitting on the boards of just the international corporations that sue governments through ISDS.  And all the time they can ignore labour laws, human rights and environmental protection.

And pull $1000 an hour for their expertise.  (Countries that have actually managed to win ISDS cases have been lumbered with million-dollar legal fees.)

You can’t turn around in the ISDS system without falling over more conflict of interest than you’d find even in a Thai cabinet. 

But does it work?  Does Thailand get more investment if it sidesteps its own judicial system and lets the corporate lawyers decide things?  Opinion is divided.  The corporate lawyers predictably say of course it does, chorused by anyone who recognizes that their interests are similarly aligned, from the UK Ambassador on down.  The UN Conference on Trade and Development is more cautious: ‘The ISDS mechanism … has in practice raised concerns about its systematic deficiencies’.  And FTA Watch Thailand finds that businesses themselves put investment protection way down the list when deciding where to plunk their money.

So can we expect the Thai negotiators on the EU-Thailand FTA to dig in their heels over this issue?

No, no, no.  This seriously misunderstands what goes on in these sessions. 

The Thai and EU trade negotiators are not arguing the case for people of Thailand against the people of the EU.  There are scores of European civil society organizations making exactly the same arguments as Thailand’s FTA Watch, for one thing.

The EU-Thailand FTA is not a fight between the EU and Thailand.  It is a fight between ‘investors’, Thai and EU, against the rest of us.  There is no shortage of Thai ‘investors’ who in their Thai operations regard labour laws as a pain in the bottom line, human rights as an irrelevance and the environment as something to be trashed with impunity.  If they’ve grown big enough to think of investing in the EU, they see investment protection as a perfectly lovely idea. 

And I put ‘investors’ inside quote marks for a reason.  This debate is littered with misleading vocabulary.  ‘TRIPS Plus’ sounds quite positive to the 99% of the public who haven’t got a clue what it is; a better name might be ‘TRIPS on illegal steroids’.  ‘Data exclusivity’ echoes the advertising language of an upmarket condo developer, whereas ‘keeping stuff secret that could harm public health’ would be more enlightening.

And so it is with ‘investor’. 

Investment is a necessary step in almost any economic activity.  Somebody normally has to stump up some cash before you can start doing business and if it’s of any size, you need a correspondingly large sum.  So if an investor provides the wherewithal to start a business that generates employment and produces socially useful goods and services while respecting labour laws, human rights and the environment, as an honest and dutiful corporate citizen of the country, then that might qualify as what Buddhism calls ‘right livelihood’.

But investors don’t all front up money to do these things.  They front up money for anything that will make them more money, from speculating on the stock exchange, to playing the international finance markets that produce not a single thing, socially useful or not, to peddling a legal drug that brings disease and death to thousands.  These are not ‘investors’ and I am saddened that the anti-FTA protestors have gone along with this misrepresentation when English has a perfectly good word for it.

The word is ‘capitalist’.  What the EU is demanding, and Thailand will probably agree to, is not investor protection, but capitalist protection.

 


About author:  Bangkokians with long memories may remember his irreverent column in The Nation in the 1980's. During his period of enforced silence since then, he was variously reported as participating in a 999-day meditation retreat in a hill-top monastery in Mae Hong Son (he gave up after 998 days), as the Special Rapporteur for Satire of the UN High Commission for Human Rights, and as understudy for the male lead in the long-running ‘Pussies -not the Musical' at the Neasden International Palladium (formerly Park Lane Empire).

 

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