clock menu more-arrow no yes

Wikileaks reveals one of the most controversial chapters of Obama's big Asia trade deal

US Trade Representative Michael Froman and President Obama speak to leaders of other TPP countries in November 2014.
US Trade Representative Michael Froman and President Obama speak to leaders of other TPP countries in November 2014.
Getty Images
  1. Wikileaks has leaked a chapter related to investment from the Trans-Pacific Partnership, a massive trade deal the Obama administration is negotiating right now.
  2. The chapter deals with investor-state dispute settlement, one of the most controversial aspects of the deal.
  3. ISDS is a common part of modern trade deals. It allows companies to sue foreign countries whose new policies hurt those companies' interests.

Critics say ISDS could cost taxpayers

Wikileaks on Wednesday released what it claims is a 56-page draft chapter from the Trans-Pacific Partnership, which is currently being negotiated between the US and 11 other nations. The chapter, dated January 20, includes provisions outlining how companies can challenge foreign countries' laws — a process known as investor-state dispute settlement, or ISDS.

Under ISDS, a foreign investor who thinks a law in a given country is hurting its business can enter arbitration against that country before an international arbitration panel chosen by both parties.

TPP proponents, which include both President Obama and many congressional Republicans, say the dispute settlement mechanism is a way to prevent countries from discriminating against foreign firms. Indeed, the leaked chapter lays out that a country must give foreign investors treatment "no less favorable than that it accords, in like circumstances, to its own investors."

But opponents, including some congressional Democrats, say it gives corporations too much power. Massachusetts Sen. Elizabeth Warren has argued that, among other things, ISDS undermines sovereignty by allowing foreign companies to attack US laws and regulations outside the US court system. Warren also fears ISDS could weaken environmental and labor laws.

TPP provisions have been kept secret

While the trade ambassador's office has publicized the basic objectives it is trying to achieve in the trade pact, only certain government officials and stakeholders have been allowed to see what is in the TPP drafts themselves. The Obama administration and TPP supporters say secrecy must be maintained in order to allow negotiations to run smoothly.

"As soon as you reveal your position and put it in print, then it's much more difficult to modify it and be flexible later," Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, explained to me last year.

TPP opponents believe secrecy allows governments to push through provisions that constituents would dislike. Over the past few years, some of the most controversial provisions have been leaked to the public. In addition to the investment chapter released this week, chapters on the environment and intellectual property, for example, have been released.

For its part, the US Trade Representative's office is remaining silent on the leak.

"We don't comment on alleged leaked documents," said a USTR spokesman in a statement. "U.S. investment proposals in trade agreements are the result of a multi-year, public consultation process that is available online."

ISDS rules are not new

ISDS provisions are common in international trade agreements — they're currently a feature of more than 3,000 trade agreements, and the US is party to 51 of them, as the New York Times reports.

Seventeen ISDS cases have been brought against the US over the years (four are pending), and the US has yet to lose one of them. Proponents point to this statistic in arguing that ISDS works, because it shows that US laws prevail and that ISDS does not cost taxpayers any money in payouts to foreign companies.

However, the TPP — whose countries are responsible for around 40 percent of global GDP — could expand opportunities for firms at home and abroad to use those provisions. According to the nonprofit organization Public Citizen, one of the TPP's staunchest opponents, the TPP would give 9,000 foreign companies opportunities to launch ISDS cases in the US and 18,000 US companies opportunities to do so abroad.

The ISDS tribunals can't change a country's laws. However, TPP opponents say when a country loses it can both cost taxpayers money and create pressure to change a particular regulation.

Latest leak doesn't show big changes

The leaked ISDS language doesn't contain a lot that distinguishes it from the ISDS provisions of other recent US trade pacts, says one expert.

"As compared to US and Canadian practice over roughly the past 10 years, there really isn't too much that is radically new," says Lise Johnson, head of investment law and policy at the Columbia Center on Sustainable Investment at Columbia University, in an email to Vox. "There are some tweaks here and there, but the basic model of investor-state dispute settlement those countries have been pursuing is still reflected here."

Among the most notable aspects of the chapter are those areas it excludes. For example, one footnote stipulates that Australia will not be subject to ISDS. The chapter also includes a few exceptions, including for Canada's film industry and Australian subsidies for medical care, as Reuters reports.