Trade rules threaten workers’ rights and public services

Why does the PSI believe that trade agreements constitute a threat to quality public services?

Trade and investment agreements have already had a significant impact on workers and on access to quality public services. The new generation agreements pose an even greater threat. There are four ways that the agreements diminish quality public services: by diminishing government revenue required to invest in public services; by increasing costs for governments; by removing and restricting regulations on service providers; and by severely curtailing the potential for municipalisation.   

A central purpose of new-generation trade and investment agreements is the removal of any regulatory constraints on foreign investment and the placement of regulatory constraints on governments’ capacity to intervene in the economy. The agreements are not merely about tariffs or duties, they go beyond the border and impose restrictions of governments’ ability to regulate across the economy including in relation to labour, professional standards, health, environmental protections, and access to services.

“In most countries health, education, childcare, water, energy, sanitation, road building have all been commercialized at some point, which means that, unless they are explicitly excluded, they must be open to foreign investors and subject to the agreements deregulatory requirements.”

Trade agreements seek to expand market access and liberalize trade in services, the key policy ingredients required to advance privatization. They generally require any service that has either been supplied in part on a commercial basis or in competition with commercial service provider. In most countries health, education, childcare, water, energy, sanitation, road building have all been commercialized at some point, which means that, unless they are explicitly excluded, they must be open to foreign investors and subject to the agreements deregulatory requirements. Once a public service comes within the scope of the agreement, foreign investors must be subsidized to the same extent that public subsidies are provided and regulations must not be “more burdensome than necessary”—a broad and dangerous term.

Trade agreements use a ratchet mechanism to ensure that regulation of services is reduced over time: provisions move forwards in increments that cannot be reversed, and governments cannot introduce new regulations that may be essential in the future. This will have two significant impacts. First, it will prevent governments taking back control of service provision, even in the case of market failure.  Second, it will prevent governments from addressing the growing influence of digital data, introducing new initiatives to combat environmental harms, or regulating for unforeseen risks. It could also preclude the introduction of minimum staffing levels and qualifications in areas such as nursing, childcare, community service and care for the aged, regardless of evidence supporting such minimum rations.

The pernicious Investor State Dispute Settlement (ISDS), a dispute resolution mechanism in free trade agreements, threatens attempts to reverse privatization—or re-municipalise public services—even when essential to meet human rights obligations. For example, when an Argentinian government cancelled water contracts because the contractor had, for many years and after numerous notices, failed to provide clean water to poor communities, they were sued (link, p.18). The tribunal recognized that the right to clean water exists but concluded that human rights must be “counterbalanced against investor rights” and found in favour of the investor.

“At least 24 countries have been sued by corporations using the Investor State Dispute Settlement (ISDS) provisions for introducing or attempting to apply taxes to foreign corporations.”

In addition, the ability of governments to raise revenue to invest in public services is significantly threatened by trade agreements. Tariff and excise make up a significant proportion of revenue in several countries negotiating agreements in the region. At least 24 countries have been sued by corporations using the Investor State Dispute Settlement (ISDS) provisions for introducing or attempting to apply taxes to foreign corporations. The size of ISDS awards, as well as the costs of defending a suit, have significantly depleted government funds in many countries. In at least nine cases the awards or settlements have exceeded US$1 billion. Ecuador was required to pay US oil company Occidental US$2.3 billion which exceeded the country’s annual healthcare budget (link).

In March 2018, 11 Asia-Pacific countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam) signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11) which regulates trade and investment. How will the agreement affect workers in Asia and the Pacific?

The TPP-11 is likely to have a range of impacts on workers, from limiting labour regulations, cutting the numbers of public employees, enabling increased outsourcing within and beyond borders. Trade agreements are designed to enable capital to locate the cheapest possible labour creating a race to the bottom in wages and conditions around the world. The limited protections for workers within the TPP-11 are weak and experience demonstrates that labour chapters in trade agreements are incapable of addressing labour rights violations. PSI is of the opinion that the ILO is the most appropriate body to enforce labour rights obligations.

The regulatory constraints placed by the TPP-11 may prevent governments from introducing new labour regulations that award workers more security, bargaining power, payments or safety provisions. Using ISDS, a foreign corporation (Veolia) commenced proceedings against the Egyptian government after it raised minimum wages. Other cases have been brought against governments for failing to protect investments from demonstrations and blockades and the South African government was sued for introducing affirmative action provisions in investment. 

Limits on government procurement contained in the TPP-11 provide further restraints on a government’s capacity to stimulate local employment. 

“Signatory countries are restricted from requiring a local presence, meaning that investors can provide services from places with the lowest wage costs.”

The TPP-11 provides for increased labour migration without labour-market testing requirements across a range of sectors. When investors and agencies can sponsor visas, migrant workers are open to exploitation. When investors are able to bring in migrant workers, the potential to unionize and organize workers is significantly diminished as workers face threats of deportation. When investors are able to bring in migrant workers without labour market testing, the entire workforce experiences downward pressure on wages, conditions and job security. Signatory countries are restricted from requiring a local presence, meaning that investors can provide services from places with the lowest wage costs. 

Several of these countries are also engaged in the negotiations over the Regional Comprehensive Economic Partnership (RCEP), described as a mega trade agreement between the Association of Southeast Asian Nations (ASEAN) and Australia, China, India, Japan, New Zealand and South Korea covering many different issues such as goods, services, investment, competition, intellectual property, economic and technical cooperation, e-commerce and law. Some critics say that it will limit governments’ ability to regulate social and environmental standards. What is your view on RCEP?

The limited information available about the content of the RCEP, gleaned from leaked documents, reveals that it is very similar to the TPP-11, with identical content in many chapters and without some chapters including the labour and environment chapters. The inclusion of India, ASEAN countries and China mean its potential to do harm is even greater, as those countries include huge populations of workers who require increased quality public services and stronger labour rights protection. The inclusion of intellectual property provisions replicated from the TPP-11 threaten access to generic medicines across the world given the vast majority of essential generic medicines come from India and China.

What can workers do to influence trade negotiations?

Experience tells us that unions have been instrumental in preventing some harmful agreements from proceeding. The Trade in Services Agreement (TISA) and the Transatlantic Trade and Investment Partnership (TTIP) have faced enormous opposition and stalled as a result. The repeated attempts to extend the number of issues dealt with at the WTO has also been blocked. We know that when unions join with other social movements it is still possible, albeit increasingly dangerous, to make our concerns heard.

"We need to mobilize and demand an open and democratic process to properly debate and understand the consequences of secretive negotiations."

To effectively mobilize an opposition to trade agreements, we first need workers to understand what’s at stake. Our first challenge is to make the threat clearer to union members and the public. Together we are stronger, so we need to collaborate, and we need to find allies. Students, farmers and users of public services must be part of our alliances. The RCEP is being negotiated by countries that offer no civic space for mobilization. But where possible, we need to mobilize and demand an open and democratic process to properly debate and understand the consequences of secretive negotiations. It won’t be easy, but the union movement has shown many times that when we are united, we can win. ###

For more information about the regional work by FES in Asia on trade, labour and social dialogue contact Veronica Nilsson, programme manager at the FES Office for Regional Cooperation in Asia.