TPP: No Partnership with the Environment

The environment will be a major loser under terms proposed for the latest free trade deal.  The Trans Pacific Partnership (TPP) is a proposed arrangement between New Zealand, the US and nine other Pacific Rim countries, with Japan soon to join.  Its main focus is not trade: it concentrates on limiting how governments can regulate “behind the border” in ways that affect foreign investors.

Of the TPP’s nearly thirty chapters of secret text, the greatest impact on the environment will come from the Investor State Dispute Settlement (ISDS) provisions. Simply put, this mechanism would give foreign companies the ability to sue a government in an offshore tribunal if that company believed its reasonable investment expectations (such as its profits or asset values) had been breached.  That tribunal can force the host government to pay damages to the foreign investor and there is no appeal process.  It ends up privileging foreign companies over local communities and local companies who do not have such rights to sue

These new rights could be used by a foreign entity to seek compensation from a government or local council if it, for example:

  • Changed the conditions of a mining licence
  • Set higher minimum flows for a river
  • Raised the charge on greenhouse gas emissions
  • Set stricter rules on logging of forests
  • Established national legal standards for the environmental protection of water and soil (New Zealand has essentially none).

The promise is that there will also be provisions to allow a government to raise environmental standards in a non-discriminatory fashion, but such clauses have proven unreliable when it comes to interpretation by the tribunals.  This risk – that a government could be successfully sued – means the ISDS provisions have a “chilling effect” on a government’s willingness to take progressive action.  It will tend to freeze low standards when these need to rise markedly.  Other chapters that put pressure on environmental standards include those on: border procedures, transparency, and “regulatory coherence”, while the environment chapter seems likely to offer little, if any, net gains.

Environmental Issues are the Biggest Area for Claims:  Over 85% of the money paid out to date by governments under free trade deals with the US has involved claims over resources and the environment.

ISDS Provisions Are Not Needed:  The Australian Government’s policy is not to enter into any new ISDS arrangements. Only one Australian firm has ever used existing ISDS provisions and no New Zealand firm has.

Bottom Line:  New Zealand should reject ISDS provisions in the TPP, as the Australian government has.


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