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Fair trade?

Why we care (a lot) about trade agreements.

April 2015

Within the next few months, we could see the end of negotiations on perhaps the most important multinational trade deal in Australia's history: the Trans-Pacific Partnership (TPP).

We're often asked why CHOICE is interested in trade agreements like the TPP. The simplest answer is that when free trade works in the way it's meant to, it's good for consumers – it delivers markets that drive competition and innovation, giving consumers access to better products at better prices.

But modern agreements are no longer just about free trade in goods. They increasingly focus on trade in services and the protection of intellectual property. This means, for example, that the major priority for the United States government is often to protect the patents of large US-based pharmaceutical companies or the copyright of Hollywood studios.

For Australians, this could mean waiting longer for cheaper generic medicines to become available, or facing tough penalties for minor copyright infringement. Perhaps the most alarming element of many new agreements – including the TPP – is the inclusion of Investor–State Dispute Settlement (ISDS) provisions. These allow corporations to take action against a government for loss of profits.

The current action by tobacco giant Phillip Morris against the Australian government's plain packaging legislation provides a live example of this. Based on an ISDS clause in a 1993 investment treaty between Australia and Hong Kong, Phillip Morris is arguing that by preventing them from putting logos on cigarette packets, the government is liable for reduced profits from its Australian investments. The intent of plain packaging was to reduce rates of smoking, which was always going to reduce tobacco companies' profits. But this is a valid objective, and treaties that purport to be about international trade should not curtail the right of governments to legislate in the public interest.

CHOICE believes that ISDS clauses have no legitimate role in trade agreements to which Australia is party. The other great concern is the way these deals are negotiated – behind closed doors, with no public or parliamentary engagement until the deal is done. In contrast, over 600 advisers from stakeholder groups have access to the TPP process in the US. The European Union has gone even further, publishing key sections of the Trans-Atlantic agreement it's currently negotiating with the US. When these agreements have such far-reaching implications, they deserve a public conversation. If it can work for the EU, it can work in Australia.

Alan Kirkland, CEO
Twitter: @AlanKirkland