27 October 2003

Free-trade clause would be a dangerous weakening of the law

US corporations are not afraid of using these new rights to protect their investments, particularly from laws designed to protect the environment and public health. For example, in 1997, the Canadian Government imposed a ban on the import and interstate transport of MMT, a fuel additive containing manganese. The ban was imposed because of public health concerns. Ethyl Corporation, a US chemical company which produces MMT, sued the Canadian Government, arguing the ban was an expropriation of its investments and was therefore illegal under NAFTA. The claim was for $US251 million in compensation. The Government eventually settled the case by reversing its ban on MMT and paying $US13 million in legal fees and compensation to Ethyl Corporation.

It is highly likely the Australian-US FTA will include an investment chapter that would permit US companies to bring similar legal actions against the Australian Government. The US Government is pushing for the inclusion of a NAFTA-style investment chapter, and the Australian Government has quietly slipped a similar investment chapter into the recently signed Australian-Singapore FTA.

These new rights for US corporations go far beyond those enjoyed by Australians. In most cases, Australian law recognises the right to compensation only when property is taken by government. The FTA will extend the right to compensation for US companies when an Australian law seeks merely to regulate the use of property.

This is a dramatic departure from a legal principle that was designed to protect private property interests from unjust government acquisitions, while also balancing the need of Australian governments to freely regulate the use of property in the public interest. The FTA rules threaten this balance.

The nasty SAFTA chapters are Chapter 11, especially Article 6 and Chapter 8. It's worth considering what a USFTA might look like. Australia and Singapore negotiated in relative parity. That is not the case with the US.

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