30. July 2014

US preferences in regulatory coherence

The simple addition of a RC chapter is indicative of US desires and is preferential for the US. Because RC will be looking to establish regulatory bodies within each nation that deal specifically with issues relating to regulating requirements along with monitoring and advising trade partners, it will benefit all trade partners. However, the US is the only countries within the TPP that already has a specific national independent regulatory body – the US Office of Information and Regulatory Affairs. Thus, the US would be obligating partners to create agencies in coordination with them, implementing the US system of regulatory oversight on a region basis. While also being the only nation spared the costs of opening a new national agency.

With greater clarity over legal regulations, companies and investors with high calibre legal representation will have the ability to take inconsistencies up within the Investor State Dispute Settlement (ISDS) framework that is currently on the table at TPP negotiations. This would allow for foreign companies to take countries to court over legislation that does not comply with the terms the investor agreed to upon entering the market. The US is the second largest source of foreign investment in the world – only the EU has higher outflows of foreign direct investment (FDI) – US companies and investors will therefore also benefit the greatest from greater transparency in regulations surrounding services and investment.

Australia is currently attempting to eliminate the option of having ISDS within international agreements because they say it hampers their ability to regulate sectors like tobacco. Phillip Morris currently is threatening Australia through Australia-Hong Kong investment treaty because of recent Australian legislation passed eliminating labelling on cigarette packages. Australia is now fighting aspects of RC that deal with ISDS in order to “preserve the right of Australian governments to make laws in important public policy areas,” according to the government’s Trade Policy Statement.

Sectoral annexes on RC are rumoured to have been added to the TBT and Sanitary and Phytosanitary (SPS) measures chapters. Attaching RC to SPS is viewed in the US as a mechanism for slashing barriers based on food safety and animal and plant health. “Our goal is simple,” USTR Ambassador Ron Kirk told the House Ways and Means Committee in March 2011, “we want to work together to address their legitimate food safety concerns and expand markets for safe and wholesome food from the US.”

Incorporated in the US SPS approach would be proposals on harmonizing regulations on sectors such as biotechnology and pathogen reduction treatments in meat processing. Currently the US has more liberal policies on biotechnology, cultivation of GMOs, and hormone treatments for meat than any other nation in the partnership. Therefore, including initiatives to liberalise these sectors would be to the greatest benefit of the US because it would open up new markets for US products. The US has also appears to have interest in attaching RC annexes to electronics, wines and spirits, textiles, medical devices, and pharmaceuticals, according to Inside US Trade sources.

Member states deny that RC would interfere with the right of governments to regulate but say that it would instead expand internal regulatory systems so as to better coordinate among TPP partner countries.

 RC is an entirely new and unique provision that the TPP will take on in more detail than any other trade agreement has done thus far. By tackling RC, TPP negotiations are cutting across issues, recognizing that the greatest remaining barriers to trade between these Pacific nations are connected horizontally and cannot be properly dealt with by bottlenecking issues into sectors. As members attempt to take on issues of regulation, they spark debate over rule and sovereignty of national domestic lawmaking. While RC is supposed to be about encouraging sovereignty, nations have allowed basically no transparency over negotiations, thus leaving society in the dark over texts that could fundamentally alter their domestic legislative processes.