TTIP: a Taxpayer Funded Safety Net for the Super-Rich

Few things are more complicated and opaque than the Transatlantic Trade and Investment Partnership (TTIP), a trade deal being hammered out between the EU and the USA. It has been criticized by activists and journalists such as George Monbiot, but Vince Cable asserts there is nothing to worry about. Who is right?

When things get complicated, follow the money. Fortunately we now have a money bloodhound. The economist Thomas Piketty has spent a decade or more producing a huge scholarly work which reveals where the money is. His answer is simple: unless active measures are taken an ever larger proportion ends up in the hands of the already very rich. TTIP will make this even worse.

Piketty shows that the richer the individual, the larger the proportion of his or her wealth is held in paper assets such as stocks, trusts and shares in hedge funds. When paper holdings lose value, for example due to a stock market slump, the super-rich lose out most. TTIP will act as a taxpayer funded compensation scheme that will insulate wealthy shareholders from any risk due to changes in government policy.

The key provision is called the Investor-state dispute settlement (ISDS). The real function of ISDS is to insulate large investors from the risk of losing money due to unexpected policy changes. A sort of safety net for the ultra-rich.

Vince Cable soothingly claims that ISDS is designed to prevent unfair discrimination between domestic and foreign companies, which is true as far as it goes. In Libdem Voice, Nick Thornsby has pointed out since the mid-1990's many free trade agreements have included ISDS provisions. The UK alone is signatory to over 90 such agreements, and no case brought against it has been successful. Should we be reassured?

Two current cases illustrate the dangers of ISDS. In the first, Vattenfall, a Swedish nuclear energy firm, is suing the German government through an ISDS process. After the Fukushima incident in Japan, Germany (rightly or wrongly) decided to phase out nuclear energy, and closed a plant part-owned by Vattenfall. Vattenfall is suing for loss of potential profits. If successful, they will set an astonishing precedent for rich corporations: unlike all other members of society, they will have the right to sue and be compensated for adverse impact of democratically taken political decisions. A second case is that of Philip Morris, the US cigarette manufacturer, which is trying to prevent the Australian government from persuading their populations to smoke less, on the grounds of loss of potential profits.

A current EU factsheet contains the alarming observation "While some [ISDS] tribunals have interpreted the provisions to confirm the right of states to regulate for the public good… other tribunals have not made this sufficiently clear." Should the right of a democratic state to govern depend on the whim of an unelected international tribunal?

If you follow the money it leads to the wealthiest in society. The EU will provide arbitration courts whose proceedings are confidential and are apart from the normal judicial process. They will exclusively benefit corporations that are rich enough to sue governments. Small and medium enterprises won't get a look in, since they won't be able to afford the costs. TTIP will further distort competition in favour of companies with a complex multi-national structure, exactly those already engaging in offshore tax avoidance. The paper assets of the stupendously rich will be insulated from any risk due to changes in government policy, and everyone else will pay.

Note: this article was first published on Libdem Voice