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Concern over trade deal’s investor dispute mechanism

Concern over trade deal’s investor dispute mechanism

A civil society organisation has raised concerns about the proposed Regional Comprehensive Economic Partnership (RCEP), claiming that one provision of the sweeping trade agreement would limit the Kingdom’s ability to draft socially beneficial policies.

The call came ahead of a meeting to be held in Laos on Friday that will bring together the 10 members of ASEAN plus six other Asia-Pacific countries – Japan, China, South Korea, India, Australia and New Zealand – with the aim of hammering out lingering concerns about trade, investment, economic and technical cooperation, competition and intellectual property rights.

According to Ly Pisey, program coordinator for United Sisterhood Alliance, a local NGO that advocates for garment worker rights, the investor-to-state dispute settlement (ISDS) mechanism outlined within a leaked draft of the RCEP trade deal would allow corporations to sue individual governments who breach the multilateral free-trade agreement. The ISDS provision would set up a dispute mechanism that is bound by international law with international arbitral tribunals.

“This mechanism would allow investors to hold power over the government that would take away the social development of the country for the sake of economic development,” she said, adding that this provision would be most damaging to least developed countries (LDCs) like Cambodia, Laos and Myanmar that are still struggling to draft adequate worker protections.

According to her, the free-trade agreement would further harm civil society negotiations with the government on such things as wages and health care.

“For a country as small and poor as Cambodia, this part of the agreement does not make any sense,” she said.

David Van, the local representative of business advisory firm Bower Group Asia, said it appears that the RCEP is developing a framework similar to that of the controversial Trans-Pacific Partnership (TPP) agreement.

NGOs objected both to the mechanism of ISDS in TPP and the secrecy by which it was negotiated, which left civil society and the “public grieved over the surrendering of a country sovereignty to corporations that dictate terms of dispute settlement”, he said.

Van said it was important that respective governments are given leeway in future dispute settlement procedures, because if the trade deal is enacted it “is critical [for] governments to defend national interests”.

“But it cuts also both ways in the event of any dramatic nationalisation of any given sector by any given government,” he added.

Chan Sophal, director of the Centre for Policy Studies, said it was important for Cambodia to pursue free-trade agreements that replace the EU’s Everything But Arms (EBA) scheme, which will no longer apply to Cambodia in a few years.

“Foreign direct investors in Cambodia are mostly in the export sector,” he said. “So seeking free export markets for them is a must, generally speaking. However, terms and conditions need to be studied properly.”

Analysts believe the TPP has put pressure on the RCEP countries to finalise an agreement by the end of this year after missing its 2015 self-imposed deadline.

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