Secretive TPP threatens health, regulation, and democracy

I'm pleased today to have a guest post from Professor Susan K. Sell, one of the leading authorities on the incorporation of intellectual property rights into trade negotiations.

The Obama administration currently is pressing Congress for Trade Promotion Authority (“Fast Track”) to help it conclude the Trans-Pacific Partnership (TPP) negotiations. The President sees TPP as a central pillar in his “pivot to Asia”.  However, both the process and the substance of TPP are badly flawed and the office of the United States Trade Representative (USTR) needs to be more accountable to the American people.

The TPP negotiations are five years old yet the only substantive information citizens have gotten about them has come from Wikileaks.  Provisions in the TPP will have far reaching effects on public health, labor, the environment, data privacy, and Internet use.  Congress and the public have been shut out, and the USTR has relied on its 600 or so “cleared advisors” that represent global corporations.  The USTR has insisted upon utmost secrecy, and a look at the chapters on intellectual property and investor-state dispute settlement raise alarm bells that the public needs to be aware of.   It is likely that the USTR knows that if it released the texts that the public would reject the agreement. If TPP is so good for Americans why not let them know what is in it?

The USTR touts the TPP as a trade agreement for the 21^st century, but it is less about trade and more about regulatory harmonization.  The chapter on intellectual property aims to increase intellectual property protection far beyond what is required in the Agreement on Trade-Related Intellectual Property (TRIPs) in the World Trade Organization. The plurilateral forum is the US’s way of getting what it knows it would be unable to achieve in a more transparent multilateral venue.  Ironically, Obama’s signature legacy – the Affordable Care Act to reduce the costs of medical care – directly will be threatened by the TPP. Health care costs will sharply increase if the intellectual property provisions of TPP go through. Big Pharma and medical device makers have played a significant role of crafting the provisions which include: making surgical and diagnostic procedures patentable; requiring states to get patent owners’ consent before approving generic drugs for market; limiting parallel importation; requiring that pharmaceutical companies be involved in domestic drug pricing decisions; limiting compulsory licensing; incorporating 12 year terms of data exclusivity for biologic drugs; and seizing trans-shipments of drugs. Other provisions would permit patentability for second uses of known drugs, and for reformulations of drugs that do not enhance therapeutic efficacy (e.g., tablet to a gel cap).  The end result will be to increase the costs of medical care and reduce access to a more affordable alternative. USTR’s “cleared advisors” will gain the rents that they seek.

While the intellectual property chapter aims for upward regulatory harmonization (at the expense of public health), the Investor-State Dispute settlement provisions aim for downward regulatory harmonization. Investor-State Dispute Settlement provisions give private investors the right to sue governments directly for regulatory changes that reduce the expected value of the investment. ISDS bypasses domestic courts and a tribunal of three private lawyers decides cases. There is no right to appeal ISDS rulings.

Several well known ISDS cases highlight the dangers these provisions pose to sovereignty, democracy, and public health. Under ISDS in NAFTA, pharmaceutical giant Eli Lilly is suing the Canadian government for $500 million. Canadian law features a policy of post-grant opposition under which a party can challenge a patent that the state has granted. Under this mechanism the Federal Court of Canada invalidated patents on two Eli Lilly drugs, ruling that they did not meet the criterion of patentability. Eli Lilly appealed this ruling all the way up to the Supreme Court of Canada and lost on both appeals. Now the company is using the ISDS channel to override the Canadian Supreme Court and secure a taxpayer payout of $500 million.

This important case is a bellwether; if Eli Lilly is successful then it will spread and embolden foreign investors aggressively to challenge and trump domestic public health laws. Under ISDS clauses in bilateral agreements, Philip Morris is suing Uruguay and Australia for their public policy efforts to curb tobacco use such as plain packaging of cigarettes. The firm is demanding compensation for these countries’ efforts to regulate its lethal products. Under ISDS foreign investors can sue over labor policies such as increasing minimum wages, and environmental policies such as fracking bans if such regulatory changes reduce the expected value of their investments.

President Obama will need Trade Promotion Authority to finalize the TPP. Some in Congress oppose it. Populist politicians like Senator Elizabeth Warren decry the special access that members of Wall Street and global corporations have had to the process while democratically elected representatives, citizens, and consumers have been shut out. On the right, Tea Party conservatives object to Obama’s Executive branch overreach.  Congress should reject Trade Promotion Authority and make USTR accountable to citizens and elected representatives through good transparency policies. USTR must not be allowed to negotiate in secrecy and appear to be thoroughly captured by the so-called 1%. Congress should not trade away our democracy.

Susan K. Sell is Professor of Political Science and International Affairs at George Washington University.  She is author of Private Power, Public Law: the Globalization of Intellectual Property Rights, and co-editor of Who Governs the Globe?