THE BLOG

Why Trade Deals are Privatising Government

11/11/2013 10:59 GMT | Updated 23/01/2014 15:53 GMT

Today, the EU and US will start the second round of negotiations on what could be the biggest trade deal ever seen. They present us with a stark choice: do we want the rules that govern our society to be decided by government, or by big business?

Key to this is a thing called an 'investor-state dispute mechanism' (ISDS), which allows companies to sue states if they feel their investment has been negatively affected by government policy decisions. This is what Philip Morris is using to sue Uruguay and Australia for their policy of plain packaging on cigarettes. Philip Morris argue the policies are an infringement of their 'intellectual property' rights - i.e. they are not able to use their logo on the packets. It is what Vodafone is using to sue India for changes to its tax policy and what Churchill Mining are using to sue Indonesia for taking them off a mining contract following a campaign to save an area of rainforest because it is home to some of the world's last remaining Orang-utans.

The cases will be heard behind closed doors, by three commercial lawyers and may directly challenge government policy making. Current investment treaties are so vaguely worded that the decisions rely heavily on the opinion of these lawyers - there is often little continuity between decisions, making it difficult for countries to predict the outcome of cases.

What's interesting is that the argument has always been that ISDS is needed because poor old investors need protecting from weak or unreliable legal systems when they benevolently seek to invest their hard-earned cash overseas. Yet there are moves to include ISDS in the EU-US deal, where it is difficult to imagine that the legal systems are not sufficiently robust.

The above might be enough to make you think this kind of mechanism should be avoided at all costs. However it's also important to recognise that it would have a direct impact on our daily lives.

For example, right now it matters what we think about NHS privatisation. If the current commissioning set-up (as of 2012 Commissioners have to open services up to full competition) turned out not to work, in theory, we could lobby our MPs to change it. Under ISDS, that would cease to be possible. The huge and powerful US health industry could throw its significant resources behind a case and argue that changes to our policy of opening up the NHS to private companies had hurt their investment. This could see the government shelling out millions, if not billions of dollars. The threat of this kind of payout is on its own enough to make governments think twice about policy change.

The same applies to a whole raft of issues: who we want to control internet access, whether or not we want to have Genetically Modified Organisms (GMOs) in our diet, what kind of banking system we want.

Given its 'special relationship' with the US, the UK will play a key role in these negotiations but also stands to be most impacted. Yet politicians are certainly not bringing the debate to the public. With such far-reaching implications, it is time that that people in both the EU and the US were properly involved in deciding whether they want this deal and what should be included.