By: Prof Luke Nottage, Sydney Law School
The Trans-Pacific Partnership free trade agreement, signed on 4 February 2016 among 12 Asia-Pacific economies, faces a rocky road to ratification. In the run-up to the US presidential election in November, both Donald Trump and (for now) Hillary Clinton say they are opposed.
Yet Australian Prime Minister Turnbull urged President Obama to put the FTA to a vote in Congress during the ‘lame duck’ session before inauguration the new President is inaugurated, to counter the spectre of protectionism but also for broader geopolitical reasons. The Abe Government, fortified by its mid-year Upper House election victory, would surely then ensure ratification by Japan, thus bringing the TPP into force within the two-year window from its signature. (Beyond that, it can still come into force but only if all 12 countries complete ratification.)
However, back home in Australia, the Turnbull Coalition Government faces its own challenges in enacting tariff reduction legislation needed before it too can ratify. After the 7 July general election, although the Government was returned with a razor-thin majority in the lower House of Representatives, it has a reduced minority in the upper house (30 out of 76 Senators). It would therefore need votes from at least nine other Senators, yet the (nine) Greens Senators will never vote with the Government given their Party’s implacable opposition to FTAs. Of the 11 other cross-bench Senators, Pauline Hanson’s ‘One Nation’ (four) Senators are notoriously xenophobic, while the Nick Xenophon Team (three) Senators favour more support for local manufacturing.
Accordingly, the Government will more likely have to court votes from the Labor Opposition. Yet the latter has generally not been cooperative in Parliament, perhaps hoping something will happen in the lower House to trigger a new election. And in June, Labor had reiterated that if elected, it would not countenance ‘new’ FTAs that added the option of investor-state dispute settlement (ISDS) – in addition to inter-state arbitration provisions – to better enforce substantive commitments aimed at encouraging more foreign direct investment (FDI). The TPP provides for ISDS, like almost all FTAs nowadays, and this continues to generate broader public debate – as does FDI more generally. My recent co-authored econometric study outlined below examines more generally the links between ISDS-backed treaty commitments and FDI, which can inform ongoing policy debates in Australia and further afield.
Continue reading “TPP and Foreign Investment: Does ISDS Promote FDI?”