Clinton, Warren Disagree With Obama on TPP

By Zach Carter, Amanda Terkel and Ryan Grim, Reader Supported News

04 May 15

illary Clinton is opposed to a critical piece of the Obama administration's Trans-Pacific Partnership, which would give corporations the right to sue sovereign nations over laws or regulations that could potentially curb their profits.

The policy position is contained in her book Hard Choices, and was confirmed to HuffPost by a spokesperson for her presidential campaign. Obama and congressional Democrats are locked in a bitter public feud over TPP -- a deal between 12 Pacific nations -- with much of the controversy derived from concerns it will undermine regulatory standards.

Clinton writes in her book:

Currently the United States is negotiating comprehensive agreements with eleven countries in Asia and in North and South America, and with the European Union. We should be focused on ending currency manipulation, environmental destruction, and miserable working conditions in developing countries, as well as harmonizing regulations with the EU. And we should avoid some of the provisions sought by business interests, including our own, like giving them or their investors the power to sue foreign governments to weaken their environmental and public health rules, as Philip Morris is already trying to do in Australia. The United States should be advocating a level and fair playing field, not special favors. (Emphasis added.)

Obama's TPP deal would be enforced by a process known as "investor-state dispute settlement," which allows foreign companies to attack domestic laws or regulations before an international tribunal if they believe those rules unfairly curb investment returns. Those tribunals can't directly overturn laws, but they can impose hefty fines on the countries they rule against.

Financial watchdogs and environmental activists are particularly concerned the process will be used to stymie future rulemaking with the threat of international fines. Congress often considers trade commitments when debating domestic legislation, at times diluting or derailing it. Foreign countries have halted anti-smoking rules over ISDS lawsuits.

Obama has vigorously defended ISDS against criticism from Sen. Elizabeth Warren (D-Mass.) and others, insisting it is necessary to protect American companies abroad.

"In a lot of countries, U.S. companies are discriminated against, and going through their court system would not give them relief," Obama told reporters on a conference call last week. "The notion that corporate America is going to be able to use this provision to eliminate our financial regulations and our food safety regulations and our consumer regulations -- that's just bunk. It's not true."

The Australian case that Clinton referenced in her book, however, is instructive. The Australian government enacted legislation that would require tobacco products be sold only with plain, simple packaging that includes health warnings -- labeling the tobacco companies objected to. Philip Morris Asia is suing Australia under a different free trade pact, using a similar ISDS provision, arguing that the Australian law is cutting into its profit. It's easy to see how laws in, say, New York City, would be similarly targeted.

On the same conference call, Obama defended the system further:

There are over 3,000 different ISDS agreements among countries across the globe, and this neutral arbitration system has existed since the 1950s. The United States has investment agreements with 54 different countries over the last 30 years. Under these various ISDS provisions, the U.S. has been sued a total of 17 times. Thirteen of those cases have been decided so far; we’ve won them all.

They have no ability to undo U.S. laws. They don’t have the ability to result in punitive damages. ISDS has come under some legitimate criticism when they’re poorly written, because they’ve been used in particular by some tobacco companies in some countries to challenge anti-tobacco regulation. And that’s why we have made sure that some of the legitimate criticisms around past ISDS provisions are tightened, are strengthened so that there is no possibility of smaller countries or weaker countries getting clobbered by the legal departments of somebody like R.J. Reynolds so that they can’t pass anti-smoking legislation. That, by the way, is more of a legitimate concern for the other signatories to the deal who would not be able to manage expensive litigation, than it is an argument that our laws would be challenged.

Indeed, environmental watchdogs are concerned corporations will use TPP to undermine environmental protections abroad. And while ISDS provisions have existed for a long time, companies didn't really take advantage of them until the 21st century. As Warren noted in an op-ed for The Washington Post, less than 100 ISDS cases were initiated between 1959 and 2002, while 58 were filed in 2012 alone. Warren and others are not only worried the U.S. might lose ISDS cases, but that expanding the ISDS regime will prevent governments from enacting future regulations.

There are other ways to enforce trade deals that do not elevate corporations to the same status of sovereign nations. Under World Trade Organization treaties, companies must first convince their home government to accept the case. The governments of the two countries then face off before WTO adjudicators.

Clinton has been cautious about Obama's TPP deal since launching her campaign. In mid-April, a Clinton spokesman issued a statement saying Clinton "will be watching closely to see what is being done to crack down on currency manipulation" and to "improve labor rights, protect the environment and health" in the final deal.

"We shouldn’t be giving special rights to corporations at the expense of workers and consumers," the statement reads.

Obama opposes using TPP to combat currency manipulation -- a tactic by which Japan and China have been able to curb U.S. exports by making their own goods cheaper.

Other potential candidates for the 2016 Democratic presidential nomination, including Sen. Bernie Sanders (I-Vt.) and former Maryland Gov. Martin O'Malley, have been sharply critical of TPP.

Committees in the House and Senate approved legislation last week that would grant Obama "fast track" authority on trade, stripping Congress of its power to amend whatever deal the administration ultimately reaches.

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