The free trade agreements : contempt for citizens, sovereignty for multinationals

Sixth version, updated and expanded

8 January by Robert Joumard

They are called TAFTA, TiSA, TTIP, TTP, CETA – and many other names beside. Everything is done so that nobody understands anything and so that citizens will not be interested. For greater clarity, here we are summing up the very numerous partial analyses that are available, as well as some of our own insights into the different proposals for ‘free trade’ agreements. To put it more precisely, for business freedoms, the best known treaty being the one between the European Union and the United States as well as the parallel one with Canada, the Trade in Services Agreement, as well as three proposed treaties between the European Union and Africa. We shall also consider other treaties on free trade, bilateral and multilateral investment treaties that have been in force for years, particularly NAFTA (North American Free Trade Agreement). In fact, at the beginning of 2014 there were already some 3,300 bilateral or multilateral agreements on investments or free trade treaties in the world, of which 1,400 have been signed by Member States of the European Union. The European Union itself has already signed about fifty trade agreements and is currently negotiating a dozen of them.

These treaties have not raised much interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. among the citizens of France. However, the proposed treaties between the European Union and powerful economic bodies have raised and are currently raising stiff opposition. This was very much the case in 1998 for the Multilateral Agreement on Investment, or MAI, the objectives of which were the creation of a free trade zone for services, the elimination of regulations in the field of public procurement contracts, intellectual property and opportunities for personal profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. . It was also the case for the Anti-Counterfeiting Trade Agreement (ACTA) that aimed at reinforcing intellectual property rights. These two treaties had to be abandoned.

The World Trade Organization (WTO WTO
World Trade Organisation
The WTO, founded on 1st January 1995, replaced the General Agreement on Trade and Tariffs (GATT). The main innovation is that the WTO enjoys the status of an international organization. Its role is to ensure that no member States adopt any kind of protectionism whatsoever, in order to accelerate the liberalization global trading and to facilitate the strategies of the multinationals. It has an international court (the Dispute Settlement Body) which judges any alleged violations of its founding text drawn up in Marrakesh.
) is based on a treaty and since 1995 it has been bringing together some 160 states that represent almost all of the world’s GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
and international trade. Its objective is to eliminate customs duties by stages and, more generally, any obstacles for doing business and making profits. Within the organization’s framework, the General Agreement on Trade in Services (GATS) aims at getting rid of regulations on the tertiary sector of the economy. The WTO and GATS were to evolve through cycles of negotiation but they have been blocked since 2001 because of the opposition of the emerging countries.

Nevertheless, in their efforts to impose the freedom of business as the main norm in international relations, business leaders and neoliberal politicians have launched the negotiation of more restrictive treaties. The most advanced one is that between the European Union and Canada (CETA). Negotiations have been going on since May 2009 and they ended in September 2014. It seems, however, that Germany and France want to modify it, after its massive rejection by European citizens and unions and even by companies involved in private arbitration courts. The treaty between the European Union and the United States (TTIP, TAFTA) has been under negotiation since July 2013. It raises the question of the reliability of the United States that scarcely respects the North American treaty that it signed with Mexico and Canada twenty years ago. Its signature does not commit the individual states of the USA but only their federation, in contrast with the European Union.

The TiSA negotiations started in February 2012. The objective was to open up the tertiary sector to greater international competition and to prevent any public intervention. Fifty countries are involved, with the European Union and the United States representing two-thirds of world trade. All the large emerging countries have been carefully kept out and, in actual fact, an anti-BRICS (Brazil, Russia India, China, South Africa) alliance is being forged.

In accordance with the Lomé conventions, signed during the 1970s, the countries of Africa, the Caribbean and the Pacific were exempted from customs duties when they entered the European Union market, while they were allowed to impose taxes on imports from the European Union. In order to reform these old agreements that no longer correspond to the neoliberal political line of the Union, negotiations have been under way for over a decade. They have produced three treaties for the freedom of business that were initialed at the end of 2014 between the European Union and West Africa, East Africa and Southern Africa.

At the same time an agreement on Trans-Pacific Partnership was under negotiation since March 2010 between twelve countries from America, Asia and Oceania, including the United States. It was initialled in October 2015. Many other treaties of lesser importance are being negotiated in parallel. All of them are very similar and share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. many common characteristics, which we shall now analyze.

The first of these characteristics – the freedom of business being the first declared objective – is the elimination of customs duties. These are already very low between the EU on the one hand, and between the United States and Canada on the other, except for certain agricultural or transformed products. Opening up the market to US production will mean the massive entry of the cheap products of US agribusiness (hormone beef, chickens washed in chlorine, GMOs, animals reared on animal feed), which will be followed by an intensification of European industrial agriculture. As a consequence there will be an enormous loss of jobs in the agricultural sector.

The elimination of customs duties between the Union and the African countries affected by the three negotiated treaties will mean net losses for the latter countries. The Western African countries will thus lose 56 billion euros between 2020 and 2035. Whether or not they ratify the EU/African treaties, African countries will be sold down the river, while the less developed ones will be even more affected if they are ratified because they will thus lose the greater part of their customs rights. The Western less developed countries should loss 26 billion euros but, without free-trade agreements, do not loss anything thanks to the EU’s Everything-but-Arms initiative. The EU/African treaties are therefore demanding that African countries that sign reduce their budgets on education, health, agriculture and infrastructures. And these budgets are already very small. The treaties should therefore result in an increasing food deficit, in pushing their already fragile industries towards collapse, a rising unemployment, a decrease of intra-African trade, the explosion of irregular migration into the EU, and an increasing trafficking of arms and drugs.

As the artisans of the EU/US treaty admit, the first objective of most of the free trade agreements is not, in fact, to mitigate the customs constraints, which are anyway insignificant, but to impose the “elimination, reduction, or prevention of unnecessary ‘behind the border’ non-tariff barriers to trade in all categories.” And that means anything that is considered to interfere with trade, business and profit, such as regulation and finance, the fight against global warming and the exercise of democracy. This is to be achieved by harmonizing – i.e. rewriting – technical norms, regulations and laws in all kinds of fields and giving priority to the rights of multinationals over social and environmental rights. This aim of maximizing the profits of multinationals means the end of public services once these treaties come into force.

No hierarchy of rights has been formally introduced. However, the insistence on organizing the supreme right of trade and of the multinationals and the flagrant differences in the language according to whether it is a question of the rights of business or of other rights creates a de facto hierarchy, supported by the fact that only the rights of multinationals are mandatory at the international level. These treaties, in practice, provide the means for reducing the right of states to regulate and giving the multinationals the overall say-so.

All norms, all regulations, all laws are potential targets, from the simple decision of a municipal council to articles in Constitutions. The harmonization of norms that result directly from the treaties, the regulatory convergence and the mutual recognition of norms will result in harmonizing downwards, because, as we have seen in the past, the ‘harmonization’ to which free trade agreements tend to bring about are based on the lowest common denominator.

The norms and laws are different between Europe and North America and between Europe and Asian countries, because their values are different. Thus, the precautionary principle does not exist in the United States, where there is only risk if it is patent and established. In Europe, it is the contrary : the green light is given only when it has been proved that there is no danger. Hence, before being put on the European market, new products must be subjected to in-depth re search, including genetically modified food products that are characterized as such. In the United States none of this is required.

The regulatory efforts of labour law – the definition of work norms – have been ongoing for nearly a century in the framework of the International Labour Organization (ILO) to protect fundamental rights and the general interest. The member states of the European Union have ratified most of the 189 ILO norms. The United States has ratified only eleven. EU wage earners may well fear an erosion of the rights that they presently enjoy.

These treaties include arrangements that prohibit public authorities from favouring local supply sources for their procurement contracts. In addition, most of the designations of origin are not recognized by the EU/Canada treaty.

The United States propose, also in the framework of the GATS, that all services can be supplied directly by any business that is based in any of the countries that have ratified the treaty. For example, a foreign company could analyze an X-ray made in France and transmit its analysis to a doctor practising in France. Obviously, the patient would hardly have the means to question an erroneous analysis. The last documents leaked from TiSA negociation show that states pursue their secret discussions in order to take ever further the lowering of standards and social and environmental rights and the weakening of the states facing the power of the multinationals, in contradiction with the positions taken at COP21.

As extraordinary as it might seem, considering the fall-out from the world financial crisis, the EU/US treaty like the Trade in Services Agreement (TiSA) tries to de-regulate the financial markets still further. Essentially it takes up the arrangements of the defunct Anti-Counterfeiting Trade Agreement (ACTA) concerning privacy and intellectual rights.

The treaties for business freedom redefine services in function of their potential for marketing by the multinationals and not in function of needs. They are based on juridically restrictive powers that institutionalize the rights of multinationals and proscribe any intervention by the state and other public authorities in a broad range of sectors that are indirectly linked to trade.

Among these targets are the obligations to provide universal service : in other words all that a state considers would benefit the population as a whole : health, education, communication, etc. So these are deliberate attempts to give priority to the profits of business and to the richer countries of the world. The treaty supporters have devised five mechanisms for carrying this out : national treatment, the most-favoured nation, the negative list, the standstill and ratchet.

Each of these free trade agreements which is being negotiated envisages the setting up of a ‘Regulatory Cooperation Forum’, that is, an official committee composed of ‘experts’ who are permanently responsible for analyzing current and future legislation in light of its impact on business – all of which will be sheltered from public scrutiny. None of these forums will have any obligation to respect impartiality and they will be composed essentially of multinational representatives. Citizens and their elected representatives will only intervene at best at the end of the process, without having access to details of the dossier. We shall therefore have a non-elected body with legislative powers to propose or refuse regulation in all kinds of fields. This will constitute privatization of the right of initiative in regulation and legislation as well as of the expertise of government and of parliament. Hence this is a fundamentally democratic problem. And, as icing on the cake, these forums will have the power to modify the annexes of treaties : ‘experts’ can therefore modify a treaty which, in the juridical hierarchy is superior to constitutions and, of course, to European directives and national laws.

The third declared objective in the free trade agreements is to set up a private ‘justice’ to arbitrate the disputes between the multinationals and the states, which would constitute an extraordinary regression in legal history. In this type of private arbitration court, the cases are ‘judged’, not by professional judges but by three arbitrators : one designated by the government or the territorial authority accused, another by the accusing multinational and the third (the president) designated by the two parties concerned. It goes without saying that the lawyers that compose this arbitration courts are not accountable to anyone. Light-heartedly inverting the roles, they can also serve as judges as well as pleading the cause of their powerful clients. Their private status in no way excludes any conflict of interests. Their decisions are immediately applicable : there is no appeal procedure, for example in the EU/Canada treaty. If the state does not wish to accept the decision of the private arbitration court, the multinational can demand that the state hosting its headquarters confiscate the assets of the condemned state.

It is a pseudo-justice that scoffs at the fundamental principles of just and equitable law, particularly the principle of equality which is directly linked to that of equality before the law, the principle of gratuitousness (which does not exclude limited legal costs) and the principle of neutrality, the corollary of the requirement for impartiality. The absence of law always benefits the more powerful – in this case the multinationals : “between the strong and the weak, between the rich and the poor, between the master and the servant, it is freedom that oppresses and the law that sets free.”

This mechanism is already at work in numerous bilateral treaties, above all in the twenty years of the North American Free Trade Agreement (NAFTA). An analysis of some 550 listed disputes throughout the world that are being dealt with by these private arbitration courts shows that they favour the economic interests of the multinationals at the expense of the rights of citizens. The arbitration courts are, in fact, super parliaments that invalidate decisions that are made democratically.

The fear of having to confront these attacks, of having to spend dozens of millions of euros to defend themselves, and of risking to pay hundreds of millions, if not billions of euros in damages and interest, influences the regulatory margin that the states dispose of in dealing with social and environmental issues and the protection of consumers, among other things. This is the paralyzing effect of the mechanism on the will to legislate. It is above all the governments of the weaker countries, as well as local authorities, that are affected as they do not possess the necessary means. But all lawmakers can be influenced if not paralyzed if they are going to see their decisions subsequently annulled.

The Investment Court System proposed now by the European Commission for TTIP negotiations contains marginal improvements but does not provide for the safeguards of a public justice system. It does not remove the fundamental flaw of the arbitration system, which consists in bolstering a category of “supercitizen” taking up a specific duty and dispute-settlement mechanisms specific for their own purposes.

The multinationals are already protected by effective judicial systems. And, if it is necessary other solutions exist, like insurance being taken out by the investor, the Court of Justice of the European Union, or international public tribunals, to develop. These arguments have led several countries to refuse private arbitration courts : Bolivia, Ecuador, Venezuela, South Africa, India, Indonesia, even Australia.

We shall now examine the guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). of rights that are proclaimed by these treaties and their promoters, especially those in the EU/US treaty, before dealing with the expected economic and social benefits.

The drafts of the treaties – at least those that we know – emphasize common values and the guarantees intended to protect us from their harmful aspects, but at different levels of language, according to the issues. On the concept of the state, the United States and Europe do not share the same values at all : in the United States, the state is not the guardian of the common good, of the general interest. But in Europe it is. Nor do we have common values concerning the relationships between private businesses and political parties or on norms on work, the environment, international justice, protection and respect for cultural diversity. To believe that we do seems to consider that the harmonization of regulations is only a technical problem, whereas all harmonization of regulations translating different values into practice is fundamentally political.

Guarantees on health, environment and social questions that are given by the negotiation mandate of the EU/US treaty are cleverly couched in juridical and administrative doublespeak to give the impression that there are guarantees, without making them mandatory, as opposed to the rights of business. These guarantees are therefore illusory.

Growth, job creation and higher incomes are the arguments used by the free trade agreements : that they will be the consequence of the expected increase in trade and foreign investments. The gains are however derisory, as is shown by the few figures that the European Commission puts forward, which are the result of most of the socio-economic impact studies. The EU/Canada treaty will increase the GDP of the European Union from 0.01 to 0.08 per cent after seven years, while the treaty with the United States will increase GDP from 0.3 to 5 per cent from ten to twenty years’ time.

Contrary to the claims of the theoretical models used in these studies, many researchers and institutions like the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 180 members in 1997), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.
United Nations Conference on Trade and Development
This was established in 1964, after pressure from the developing countries, to offset the GATT effects.
show that liberalization does not promote foreign investments and they even show that trade grows more outside than within the countries of the free trade agreements. As for the modelling on trade, on the GDP and on jobs, the relevance of the neoclassical model used buy these studies appears very questionable. This has been proved by facts : the gains predicted by modelling before the signing of the free trade agreements between the three North American states, as well as the one between the US and South Korea, have no relationship with reality, as measured a few years after these treaties had been implemented. There is loss of jobs and of wealth, and loss of the influence of SMEs as compared to large multinational companies.

Using a more appropriate model the most recent study demonstrates that the EU/US treaty should result, within the EU, in diminished economic activities, income and employment. It will increase financial instability and reduce still further fiscal receipts and the share of wages in value added. The treaty will even lead, according to this study, to European disintegration rather than integration. France, together with the other North European countries will be the most affected : reduction of 0.5 per cent of the GDP, loss of 130,000 jobs and an average decrease in wage income of 460 euros a month…

Finally, many are concerned about the potential detrimental impact the free trade agreements may have on the enjoyment of human rights, whether civil, cultural, economic, political or social.

The last characteristic of treaties is the lack of transparency of the negotiations as far as citizens are concerned, in contrast with the fundamental role being played by the large multinationals. The mandates to negotiate that have been given for each treaty by the member states of the European Union to the Commission have been rendered public very rarely. Sometimes the beginning of negotiations is not even announced. No negotiated document has been made public.

These negotiations are the result of long-term efforts by ultraliberal circles, politicians and directors of multinationals, working through many common bodies. The political authorities on both sides of the Atlantic have in fact facilitated the creation of the numerous political lobbying organizations of the large multinationals, like the Transatlantic Business Dialogue, the Transatlantic Business Council and the Canada Europe Roundtable for Business. These organizations first worked on the main lines of the treaties with the same political authorities, then they were associated with the actual negotiations. They play two roles : first and foremost in the name of their corporations and, at the request of the EU political actors, contributing direct to their decision-making process and writing the regulations themselves, but also offering a private negotiation framework for resolving the conflicts of interest between the corporations.

The treaties are not published until, at best, the negotiations have been concluded. They are extraordinarily long – the EU/Canada treaty takes up more than 1,600 pages – and they are very complex. They treat very diverse subjects, from public services to the environment, not to mention the labour law, the organization of justice and the sale of women’s bras. Therefore they do not respect the reversibility of laws that prohibit linking independent decisions between them. They have the characteristics of constitutional types of treaty and are almost irreversible.

The results of the many studies that we have summarized forces us to question the vocabulary used by the free trade agreements. The words and expressions utilized currently have a more or less positive popular meaning, such as ‘competition’, ‘opening to competition’, ‘free trade’, etc. When analyzed it appears that the real sense of these expressions have little to do with their common usage and that they are expressions of political marketing, chosen to ‘sell’ political projects. They can be summed up in just one expression : the absolute freedom to do business and make profit, the more the better, whatever the consequences are on the society and our ecosystem.

So as to avoid confusing political marketing with information, we therefore propose translating these neoliberal expressions into everyday language. For example, ‘competition’ becomes ‘absolute freedom to do business and make profits’, ‘market’ becomes ‘assembly of the multinationals and other speculators’, ‘free trade treaty (or agreement)’ becomes ‘freedom of business’ or ‘treaty of allegiance to multinationals’, ‘investment’ becomes ‘opportunity for personal profit’, and ‘investor-state dispute settlement’ becomes ‘group of private arbitrators to regulate the disputes of multinationals with states’.

The general conclusion is that there is a need to compare the declared objectives of the treaties for business freedom with their underlying objectives before tracing paths for citizens themselves to take over their future rather than leave it to the tender mercies of the multinationals. The derisory nature, indeed if not clearly negative, of the socio-economic benefits that may be expected show that the objective of the free trade agreements is not growth and jobs, or even to protect investments or promote international trade. Their only objective and it is a fundamental one, is to guarantee the priority of the rights of multinationals to do business and make profits.

Abolishing customs duties and ‘non-tariff barriers’ means giving power to a few to annul laws, it is to accept renouncing to make political choices for society, in terms of the quality of food products, environmental norms, the freedom of expression, the protection of personal information, access to health care, energy, social and agricultural policies, etc. Abolishing these so-called barriers means renouncing all this in the name of maximum profits for multinational corporations, submitting democracy to private regulation and to a few special powerful interests.

To draw up the right to do business and to make profits as a yardstick for everything, with values superior to all else, is to abandon one’s fundamental sovereignty, that is, the power to decide one’s future collectively. It is to give this power – the power – only to the shareholders of the great multinational corporations.

But, just like Dracula who, once exposed to the light, wilts and dies, the free trade agreements have difficulty in resisting the light, that of public opinion. The first arm is thus to give out information on these treaties. While there is no reason to accept these treaties for the freedom of business that are called ‘free trade’ agreements, trade treaties are perhaps necessary. Alternatives do exist, for example on the basis of alternative trade mandates drawn up by the many networks and organizations around the world, in Europe as elsewhere. These alternatives respond to current questions, both in terms of development, the sharing of the results of everyone’s labour and the preservation of our ecosystem. They will facilitate the trade in goods and services, without submitting the general interest to the profits of special interests.


Translation by Victoria Bawtree updated by the author

Source : Attac-Rhône




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