Trade and Development Policy News: November 2015 edition
Report on Trade in Services Agreement (TiSA) Postponed to January
Last week, the TiSA negotiators met again in Geneva. The European Union has been chairing the latest round of talks. Beforehand, the EU's negotiating team announced that it was keen to make serious progress. Its objective was that all participating countries should improve their liberalisation proposals.
In parallel, the European Parliament is negotiating the TiSA report, which is proving to be a long-drawn-out process. This is why committee approval has been postponed until January.
Investor protection via the back door: the Free Trade Agreement with Vietnam
On 2 December 2015 the European Commission signed a Free Trade Agreement with the Socialist Republic of Vietnam. This is problematic for two reasons. Firstly, the agreement includes the controversial issue of investment protection. The second problem is the dire human rights situation in Vietnam.
The Free Trade Agreement with Vietnam contains a revised chapter on investment protection. Unfortunately however, this revision has not addressed the fundamental problem: Foreign companies still have more rights than Vietnamese companies and citizens. It still contains a system of incentives that favours arbitration decisions in favour of investors. For example, before and after their work in the arbitration tribunal, judges can also work for companies as international lawyers. Companies are allowed to sue, but they cannot be sued. The more often companies sue, the more often judges can claim lucrative daily fees for their work. This is another fundamental flaw in the reform.
These kinds of tribunals are particularly problematic for developing countries because they make it more difficult to push through regulations on environmental and worker protection. When investors file claims against such regulations, governments may find themselves faced with huge demands for compensation-so they simply dispense with such environmental and worker protection rights from the outset. For example, an investment tribunal ordered Ecuador to pay EUR 2.3 billion to an oil company whose profits were based on breaking environmental regulations. This amount is as much as the country’s annual health care budget.
The human rights situation in Vietnam is also problematic. There is no free press, no independent political parties, no independent unions and no independent civil society. If we take the example of its neighbour Cambodia, we see that land grabbing increased after signing a trade agreement with the EU. Investor protection has made things worse in Cambodia, for if necessary international investors can assert their land rights via a parallel, international justice system. Meanwhile, the people who have been displaced have no rights and there is no-one to speak up for them either at home or abroad.
For all these reasons I have called for the Commission to carry out a human rights impact assessment for the Vietnam agreement. The European Commission has rejected this, despite the fact that it has also been requested by the European Ombudsman, Emily O'Reilly. Anyone who speaks out on human rights has to walk the talk. Human rights are much more than mere decoration for a free trade agreement.
For an analysis of the new investment protection, an article by Prof. Gus van Harten can be found here. My press release on this issue can be found here.