Australia’s medicine subsidies, Canadian films and culture plus capital controls in Chile would be carved out from investment protection rules being negotiated in a Pacific trade pact, according to a draft text released by Wikileaks on Wednesday, reports Reuters. An investment chapter, dated Jan. 20, from the 12-nation Trans-Pacific Partnership (TPP) deal was released amid controversy over rules allowing companies to sue foreign governments, which critics say should be dropped from the pact.
The 55-page draft says no country can treat investors from a partner country differently to its own investors, lays out compensation to be paid if property is expropriated or nationalized and sets out the process for resolving disputes. A footnote says that investor-state dispute settlement (ISDS) rules do not apply to Australia, which omitted them from a free trade agreement with the United States 10 years ago, although the draft includes a note saying: “deletion of footnote is subject to certain conditions.”
The exemptions sought in the draft would protect countries from being sued by foreign corporations that complain they do not get the same treatment as domestic firms because of certain government policies. Countries including Canada, New Zealand and Australia want a free pass for foreign investments requiring special approval, often for sensitive local sectors such as banking, transport or communications.
Australia is seeking to exclude medical programs such as the Pharmaceutical Benefits Scheme, which provides subsidized medicines, and Canada wants to exempt cultural sectors including films, music and books. A separate annex states that Chile’s central bank should have the right to impose capital controls if needed and maintains restrictions on foreign investors’ transferring the proceeds of sales out of the country.
Chile, along with other emerging markets, has seen large inflows of foreign investment, which can push up currencies and destabilize the local economy and financial markets. The release of the text came on the day that U.S. Trade Representative Michael Froman briefed Democrats on Capitol Hill about the investment rules, which are opposed by some lawmakers.
Critics of the rules argue they give companies too much power to sue governments. But business groups argue they are necessary to stop unscrupulous governments from discriminating against foreign investors. TPP countries hope to wrap up negotiations on the deal, which would cover 40 percent of the world economy, by mid-year.