This week, San Diego is hosting the latest round of talks over the Trans-Pacific Partnership.

Australia and New Zealand are at loggerheads over this secretive new trade treaty spanning the Pacific Rim. The rift between the neighbours over the Trans-Pacific Partnership was revealed after the investment chapter of the agreement was leaked to the public.

Australian Trade Minister Craig Emerson has argued that the Trans-Pacific Partnership is the first step toward a regional free trade agreement in the Asia-Pacific. But Australia, it appears, has refused to submit to the “investor-state” tribunal system in the negotiations over the agreement.

New Zealand Prime Minister John Key’s response was unequivocal: “I think we’re all in or all out.”

“An exclusion solely for Australia, not for everybody else, is unlikely to be something that we would support,” he added.

Since the leak of the investment treaty, the United States Trade Representative sought to expand the membership, and pressed Canada and Mexico to join the negotiations at the G20. Australia has welcomed the new entrants, as has New Zealand.

The leak of the investment chapter, and the San Diego talks this week, have sparked a wider debate about the agreement. There’s much concern in the Australian and the New Zealand parliaments about the anti-democratic nature of the treaty – with its secrecy, absence of regulatory scrutiny, and lack of wider public participation. There’s also some anxiety about the impact of the agreement on investment, public health, industrial relations, the environment, and intellectual property.

The leaked investment chapter

The investment chapter leaked earlier this month fuels these concerns. The treaty provides that no party may expropriate or nationalise a covered investment except for a public purpose, and with prompt, adequate, and effective compensation.

The chapter also establishes an investor-state dispute settlement system: one that enables corporations from one country to take legal action against the government of another country for alleged breaches of the agreement.

In its trade policy statement, the Gillard government notes that it has previously sought such clauses “at the behest of Australian businesses” but promises that it will “discontinue this practice”. It has also said it doesn’t support greater rights for foreign companies than domestic ones, conscious that Big Tobacco has brought a contrived and capricious action against Australia’s plain packaging regime under the Hong Kong-Australia Bilateral Investment Treaty.

In contrast, the New Zealand government has acquiesced to the investment chapter and is taking Australia to task about its reservations. But following the leak of the investment chapter, New Zealand Trade Minister Tim Groser has given an assurance to Parliament that the government won’t sign any international trade deals that compromise New Zealand’s sovereignty. The New Zealand Greens have complained that their government is misleading the public over the Trans-Pacific Partnership.

Looking at the details of the leaked text, it’s clear Australia and New Zealand would be better off leaving the negotiating table of the Trans-Pacific Partnership.

Public health

The investment chapter contains vague safeguards such as: “the parties recognise that it is inappropriate to encourage investment by relaxing its health, safety or environmental measures”. The key question is whether such safeguards – in respect to health, industrial relations, and the environment – will be meaningful and effective or insubstantial and spectral.

In its trade policy statement, the Gillard government emphasises that it hasn’t and won’t “accept provisions that limit its capacity to put health warnings or plain packaging requirements on tobacco products or its ability to continue the Pharmaceutical Benefits Scheme”. For its part, New Zealand has expressed an interest in following Australia’s lead in implementing plain packaging for tobacco products.

Trade Minister Craig Emerson has observed that “Australia will not permit outcomes which limit the availability of generic drugs, or any which compromise Australian health policy.”

But there’s still disquietude about the impact of the proposed treaty on public health in Australia and the region.

Australia and New Zealand have been tardy about providing access to generic drugs. The two countries have still not taken legislative action to implement their international obligations on patent law and access to essential medicines under the Doha Declaration on the TRIPS Agreement and Public Health 2001, and the WTO General Council Decision 2003.

Industrial relations and the environment

Trade Minister Emerson has also said there would be safeguards for industrial relations as well as the environment.

Trade unions are alarmed at the inclusion of an investment chapter that provides “excessive rights to multinational corporations at the expense of regulators and ordinary citizens.”

Then there’s the environmental impact of the treaty. The Sierra Club, which lobbies for better environmental protection in the United States, has observed the investment chapter would undermine environmental law and policy. There is also a concern that investment chapter could be deployed against climate change regulations.

Intellectual property adventurism

Disturbingly, the investment chapter defines investment broadly – including intellectual property rights. The treaty transforms intellectual property rights from privileges designed to promote the “progress of science and the useful arts” into instrumental tools for foreign investment. This means companies could challenge, frustrate and even block intellectual property reforms under the investment chapter of the Trans-Pacific Partnership.

At the Dallas negotiations for the Trans-Pacific Partnership, there were divisions between the United States and other participants over the intellectual property chapter in the agreement. The chapter will cover copyright law, trade mark law, patent law, customs and border measures, and intellectual property enforcement.

The United States has promoted an ambitious chapter – with standards above and beyond those in the TRIPS Agreement 1994, the Australia-United States Free Trade Agreement 2004, and even the Anti-Counterfeiting Trade Agreement 2010.

There’s particular concern about an extension of the term of copyright, parallel importation restrictions, tougher digital lock rules, evergreening of drug patents, and draconian penalties for piracy and counterfeiting.

The magazine Inside U.S. Trade reported that Australia, New Zealand, and Singapore have proposed replacing some elements of the United States proposal on Intellectual Property enforcement with language drawn from the Anti-Counterfeiting Trade Agreement 2010.

But why is the Australian government promoting a template based on the Anti-Counterfeiting Trade Agreement 2010, given that the Joint Standing Committee on Treaties has strongly criticised the treaty, and the treaty has been widely discredited by five committees in the European Parliament?

Australia should not face a Hobbesian choice between a template based on the discredited agreement and the maximalist agenda of the United States on intellectual property. Instead, the government should focus on domestic intellectual property law reform, focusing on the Australian Law Reform Commission Inquiry into copyright exceptions.

New Zealand stands to lose even more than Australia in terms of intellectual property law because it has been hitherto circumspect about signing a free trade agreement with the United States.

Instead of capitulating to the United States, Australia and New Zealand should try to forge a balanced approach to international intellectual property, taking into account the principles of the Washington Declaration on Intellectual Property and the Public Interest.

A Dangerous Investment

The Trans-Pacific Partnership is perilous for Australia and New Zealand alike.

Australia has good grounds to be anxious about the shocking and disturbing investment chapter. New Zealand’s ultimatum on the investment chapter should be ignored. There are concerns about the wider impact of the Trans-Pacific Partnership upon public health, industrial relations, and the environment. The proposals for the intellectual property chapter are diabolical.

The Trans-Pacific Partnership needs to be revised and rewritten before it deserves serious consideration by countries in the Pacific Rim.