“Voodoo economics”: how TTIP could go up in smoke

EPA/LAURENT GILLIERON

A company sign is seen outside the international headquarters of the US tobacco company Philip Morris, in Lausanne, Switzerland, 30 September 2013. Philip Morris announced the same day that it would cut its Switzerland workforce by 170 jobs.

Philip Morris’ lawsuit agains Uruguay could be a dangerous precedent for Europe.


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Technical negotiations between experts will restart next week in Brussels around the Transatlantic Trade and Investment Partnership (TTIP) negotiated by the the EU and the USA.

However, one TTIP clause, the one concerning arbitration, will cast a long shadow over the negotiations, especially in light of the recent announcement by the tobacco giant Philip Morris that it will carry on with its lawsuit against the state of Uruguay.

Ten years ago, the WHO launched its anti-tobacco convention. However, Uruguay was sued by Philip Morris who argues that Uruguay’s anti-smoking legislation devalues its cigarette trademarks and investments in the country and asks Uruguay for compensation under the bilateral investment treaty between Switzerland and Uruguay. (A multinational, but initially an American company, Philip Morris is based in Lausanne, Switzerland.)

Philip Morris planned a lawsuit already in 2010, in front of the International Centre for Settlement of Investment Disputes (ICSID), which is under World Bank jurisdiction. Philip Morris is thus clearly trying to create a juridical precedent at a time when the EU is negotiating TTIP with the US.

The EU Parliament has already decided to impose a harmonisation of the rules governing the selling of tobacco. The cigarette producers will thus be forced to cover at least 65% of a cigarette packțs surfaces with images of lungs cancer and slogans such as: “Smoking Kills”. All 28 EU countries should start applying the new regulation starting from 2016. Philip Morris has already declared that the new regulation is harming its commercial interests.

Philip Morris lost already in Australia, after attacking the government for the new legislation imposing anonymous packing. The High Court of Australia rejected in 2012 the legal challenge by tobacco companies against Australia’s plain packaging of tobacco laws. Poor African country Togo, on the other hand, had to renounce a similar measure under legal threat from Philip Morris.

There are widespread concerns in Europe about allowing U.S. multinationals to use so-called investor-to-state dispute settlement mechanisms to challenge Europe’s food, labor and environment laws on the grounds that they restrict free trade.

The United States will not accept a deal without that.

On Saturday, Germany’s economy minister Sigmar Gabriel warned against overblowing expectations for an economic boost from TTIP.

Some experts say TTIP could generate $100 billion a year in additional economic output on both sides of the Atlantic.

“I don’t believe in the wondrous calculations for economic growth from (the trade deal) TTIP,” said Sigmar Gabriel, also chairman of Germany’s Social Democrats (SPD) which shares power with Chancellor Angela Merkel’s conservatives.

“All the estimates about its impact … give an impression of voodoo economics,” Gabriel told Focus weekly.

There is another worrying aspect of the TTIP negotiations, the main one being their secrecy: the famous ISDS, Investor-state dispute settlement, which already exists bilaterally.

Even a country like Germany had to suffer from an ISDS case with the Swedish energy company Vattenfall, which launched a 1.4 billion euro claim against the Berlin government for strict restrictions that were imposed on a coal-fired power plant it was planning to build on the banks of the River Elbe. They didn’t even have to solve that in court. The outcome in such cases is arbitrated by a trio of business lawyers with the power to settle such a dispute.

Asked by New Europe about the legal risks of a full-blown TTIP, Bart Staes, leading Belgian Green politician and a veteran MEP said:

“We have to be very critical of this. Certainly, food and agriculture should not be subject to free trade. Food and agriculture belong to the very essence of a culture. In both the agreement that we signed with Canada, and the TTIP that we negotiate with the USA, we see that food and agriculture became part of the haggling. There is a big difference between the USA and the EU in the manner of dealing with food security. That is why we find it unacceptable that those negotiations are held in total secrecy.”

The Philip Morris vs. Uruguay case is thus followed with much interest and anxiety.

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