It’s something that all the major presidential candidates — on both sides of the aisle — can agree on: The United States should not ratify the TransPacific Partnership trade agreement. Even Hillary Clinton, who was Secretary of State during the bulk of the agreement’s confidential negotiations, doesn’t think the TPP is a good idea anymore.
Now, a group of environmental advocates is pressuring Congress to reject ratification of the 12-nation agreement, which they say would allow 9,000 companies operating on U.S. soil to sue the government for imposing environmental regulations.
Under the agreement’s investor-state dispute settlement clause, corporations can sue states for thwarting economic expectations. The clause, known as ISDS, allows companies to file claims for damages or lost revenue incurred by rejected permits or a changed regulatory landscape. The claims are heard by three-member tribunals, often made up of corporate lawyers, that operate independently.
Handing foreign companies equal — or even slightly advantageous — ground against the U.S. government, in an extra-judicial tribunal system, is not as far-fetched as it sounds. TransCanada, the company that tried to build the Keystone XL pipeline, represents just one example of how the TPP would work. The company has filed a claim under NAFTA for $15 billion in damages, alleging that U.S. denial of the permit was “arbitrary and unjustified.”
“For years, environmental and environmental justice groups have been warning against the threat of the TPP,” Ilana Solomon, director of the Sierra Club’s Responsible Trade Program, told ThinkProgress. The Keystone suit is “really the tip of the iceberg in terms of what we could see if TPP were to pass through Congress.”
The Sierra Club was one of dozens of environmental groups who sent a letter to Congress on Wednesday, calling for opposition to both tar sands development and the TPP.
Among the groups standing with the Sierra Club are Bold Nebraska and the Indigenous Environmental Network, grassroots organizations that helped catalyze the popular movement against Keystone XL, a proposed pipeline that would have brought oil from Canada’s tar sands into the United States.
“The Obama Administration’s rejection of the Keystone XL pipeline was an execution of its legal right, done amidst widespread evidence that the project would hurt communities and the environment,” the letter says. “It is therefore egregious that, under NAFTA, TransCanada can demand billions of dollars for a sound policy decision that is squarely within the U.S. law.”
But the Canadian tar sands developer isn’t the first company to use ISDS to extract cold, hard cash from countries it couldn’t get sweet crude from.
In 2012, a tribunal at the World Bank ordered Ecuador to pay Occidental Petroleum $1.7 billion for cancelling an oil contract. The amount was later negotiated down to a measly $980 million — or about 1 percent of the country’s GDP.
In another ISDS case that is still pending, Lone Pine Resources sued Canada after Montreal enacted a fracking moratorium that put the oil and gas developer’s plans to frack under the St. Lawrence River on hold.
“What ISDS is doing is it is favoring a group in society above others,” said Marcos Orellana, director of the Human Rights and Environment Program at the Center for International Environmental Law. “And the group it favors are the corporate interests.”
He said that under ISDS, foreign corporations are more protected than domestic counterparts and the rule of law is thwarted. “There is an end run on national judiceries,” Orellana told ThinkProgress. “ISDS has no place in an international democratic order.”
Moreover, just the threat of a claim using ISDS would have a chilling effect, opponents to the TPP say. In fact, according to a survey of Canadian regulators, officials “changed their decision-making” because of ISDS and were more likely to be concerned about ISDS the more they knew about it. In addition, some of the officials said they “saw the trade ministry and the regulatory assessment process as creating undesirable obstacles for environmental decision-making.”
While there are several places in the United States that have already banned fracking outright, there are plenty others that might consider a ban in the future. And changing the rules might trigger suits under the TPP. For example, BHP Billiton, an Australian oil and gas company, owns 1.5 million acres across several shale formations in Texas, Arkansas, and Louisiana. If those states acted to restrict fracking after TPP ratification, U.S. taxpayers could be on the hook for any lost revenue to the Australian company — regardless of why the restriction was put in place.
But the White House is pushing hard to get the TPP ratified before President Obama leaves office.
The U.S. Trade Representative, Michael Froman, who led negotiations for the Americans, has been touring the country, ginning up support for the deal. This week, he was in Minnesota, saying the deal would boost agricultural exports — a big win for the high-producing state. Last month, he was in California, at the Monterey Bay Aquarium, touting the deal’s wildlife protections with Rep. Sam Farr (D-CA).
Farr broke with some of his fellow Democratic representatives to approve fast-track authorization for the deal, which allowed Obama to present the TPP on a straight up-and-down vote.
But it’s unclear when that vote will come. Some think that given the current environment, it will be hard for Obama to push his landmark trade deal through. Still, the TPP is widely supported by corporate interests, and will likely be considered during the lame duck session, when politicians are less worried about the electorate.
“We feel confident that the politics on this trade agreement are so toxic that we don’t see it getting the support it needs,” the Sierra Club’s Solomon said. She pointed out, though, that opposition is not a slam dunk. “We still have a challenge of just not enough people knowing about the agreement.”