History shows the heavy price of free trade

Trade Minister Andrew Robb claims the recently concluded free trade agreement with South Korea will mean cheaper imports of cars and better access for Australian exports of car parts and, eventually, beef. But cheaper imported cars come at the price of an Australian car industry. Toyota made it clear one of the factors influencing its decision to leave was ''increased competitiveness due to current and future free trade agreements''.

The proponents of the North American Free Trade Agreement made similar promises of cheaper consumer goods in the US and more jobs in Mexico.

Twenty years on, the US public interest group Public Citizen has documented what a calamity that agreement has been, including the loss of more than a million jobs in the US, downward pressure on wages and increasing income inequality.

The lower prices for consumer goods in the US has been outweighed by job losses and wage declines. Food standards in the US have fallen as imported meat and poultry no longer has to meet US food standards

In Mexico, more than a million farmers and another million workers dependent on the agricultural sector have lost their livelihoods due to the export of subsidised US corn. There has been a dramatic reduction in wages for farm workers as well as downward pressure on wages in Mexico's border maquiladora factory zone due to an influx of displaced rural workers.

The price of consumer goods in Mexico has increased much faster than wages, leading to a lower standard of living and increased illegal immigration pressures as well as other problems associated with extreme poverty.


Robb also defended the investor-state dispute settlement provisions in the Korea-Australia freetrade agreement that enable foreign investors to challenge government regulations and policies in international tribunals if they interfere with investor expectation of future profits.

Robb argued that such provisions were a ''safeguard in countries with unreliable legal and political systems'' but was he referring to Australia or South Korea? Similar provisions are contained in the Trans-Pacific Partnership agreement being negotiated between Australia and 11 other Pacific Rim nations including the US, Japan, Canada and New Zealand.

The government claims ''explicit safeguards make clear that government's capacity to pass laws and regulations in the public interest in areas like health and the environment is not diminished'' but aren't all Australian government laws and regulations made in the public interest? So why allow foreign companies to sue the Australian government?

More than $3 billion has been paid by governments - that is to say, taxpayers - to corporations in investor-state disputes under existing US trade and investment agreements alone.

For example, US-based Ethyl sued Canada for $250 million for banning MMT, a toxic petrol additive. The ban was based on the public health and environmental risks posed by MMT, which is not used in most countries and even banned in the US in reformulated petrol. The case was settled for a lesser sum and Canada withdrew its ban.

After Chevron polluted the drinking water of tens of thousands of indigenous people in the Amazon with its waste products, an Ecuadorian court ordered the company to pay $18 billion for clean-up and damages. This decision was affirmed in an appeals court in 2012. Nevertheless an investor-state tribunal, citing the US-Ecuador bilateral investment treaty, ordered Ecuador not to enforce the ruling. This was even though the treaty came into effect years after the pollution occurred and Chevron had left Ecuador.

Last year Lone Pine, a US-chartered mining company, sued the Canadian government for $250 million for a ban on fracking in Quebec on the St. Lawrence River. It claimed the ban was ''arbitrary, capricious and illegal revocation of the [company's] valuable right to mine for oil and gas''. The government said the ban was in response to an environmental assessment that showed the fracking was dangerous, as well as in response to public concern.

NSW regulations preventing coal seam gas recovery near residential areas could be subject to lawsuits if the TPP goes ahead with investor-state dispute settlement provisions. More recent treaties have the sort of ''safeguards'' to protect government regulation in the public interest that Robb was referring to, but they are vaguely worded and dispute settlement cases are heard by tribunals of three private-investment lawyers whose decisions, although they trump all national courts, are beyond appeal. These tribunals tend to be concerned with assessing potential damage to investments rather than protection of public interest.

More than 500 investor-state disputes have been launched globally, 90 per cent of them since 2000. No country, however reliable its legal and political systems, is immune from them and even where cases are won by governments, it can cost millions of dollars to defend them. After all, the tribunal members are paid by the hour and have no reason to keep them brief.

It is time free trade treaties were subject to the public interest test, rather than being negotiated in secret by trade ministers and their business advisers, to promote selective business interests.

Professor Sharon Beder of the University of Wollongong is the author of Suiting Themselves: How Corporations Drive the Global Agenda.