If It Walks Like a Duck: Park Administration’s Privatization

On March 7th, Dae-Han Song, the ISC Policy and Research Coordinator, visited Jejun Joo the Executive Director of the National People’s Movement to Block the Privatization of health Care and Strengthen its Public Character to interview him about the current efforts by the Park Administration to privatize public corporations – in particular hospitals – and the anti-privatization struggle.

President Park’s Reasons for Privatization
First, Korean public corporations are actually carrying a lot of debt. This debt skyrocketed during the Lee Administration. During his administration, he pushed through the massive 4 River Project. In addition, because of the 2008 Subprime Mortgage Crisis, the economy was doing poorly and inflation was rising. To stop inflation, the Lee Administration forced utility prices low. Thus, debt started to accumulate in the public sector. It went from 249 trillion won in 2007 to 493 trillion won in 2012. It is expected to rise to 570 trillion won in 2017. Compared to our slightly over 1 quadrillion won GDP, 570 trillion won is huge. That’s just the debt from the public corporations. If we include government debt, then it exceeds GDP. If we include household debt then we are talking about over 2 quadrillion won in debt. If we were a household, we’d long be bankrupt. So this debt needs to be addressed. Second, by beating up on the management and employees of these public corporations by accusing them of poor management and getting paid too much, the Park Administration wants to create an image of being reformist. Third, it wants to weaken unions and get rid of all those who oppose her policies. 

So what’s the solution?
In order to solve the public debt problem, you need to address its causes. It doesn’t make any sense for the Park Administration to solve the debt problem by stripping worker benefits that don’t even make-up 5% of the debt, while doing nothing about the 90% of debt. The main reason for the deficits had to do with failed government projects [37.2% of the debt] like the Incheon Airport railroad and the Development project around Yongsan Station. Even if these projects are ineffective and costly, the public corporations still take them on. The heads of these public corporations are directly appointed by the president and act as rubber stamps. To decrease the debt, we have to first stop this practice of parachute appointments. When confronted with a bad project, the head of these public corporations needs to say no. Yet, while the Park Administration says it promotes reform, it continues to directly appoint those that enact its policies unquestioningly.

Privatization of Health Care and South Korea’s Current System
There are three pillars to Korea’s public health care system. First, all medical treatment must be non-profit. This means that whatever surplus is generated must be reinvested in the hospital whether through wage increases and/or expansion and improvement of facilities. Second, all Koreans are enrolled in the national health insurance. Finally, all hospitals must accept national health insurance.

It’s because of these three pillars that health care is relatively affordable in Korea. If we actually compared Korea’s health care system to that of other OECD countries based just on the proportion of beds in public hospitals and the proportion of the government’s health care spending, we would be at about the same level as the United States. In fact, South Korea has a worse ratio of hospital beds in public hospitals than the US does. The only reason why health care is cheaper than in the US is because of these three pillars.

Extraction of Profits, Foundation for Privatization
Korea already has a Samsung Hospital and a Hyundai Hospital. They are two of the five largest hospitals in the country. They have the potential to make several billion won. But, under the current system they can’t. That’s what’s so frustrating to these chaebols [Korean style conglomerates]. Currently, they can establish for-profit subsidiary corporations for some non-medical treatment services and products such as a funeral parlor, the cafeteria, or parking services. Park Geun Hye wants to expand this to include vital hospital elements such as the hospital building and equipment. For example, Lee Kun Hee, the Chairman of Samsung Electronics, could establish a subsidiary corporation to build hospital facilities and then rent these facilities to his hospital. The subsidiary company would then serve as a vehicle by which to extract profits from the hospital through rent since he would control both the subsidiary corporation and the hospital. Hospitals would effectively be for-profit. Prices would skyrocket and service quality would deteriorate. You would then see the rise of mega hospitals. Finding investors wouldn’t be difficult given the high potential for profit. Eventually, these hospitals would demand the abolishment of the universal acceptance of national health insurance: the national health insurance’s strict guidelines limiting medical treatment and medicine prices would limit potential profits. If these two pillars collapsed, then it would destabilize the third pillar, the national health insurance. Once all three collapsed, then the public nature of the health care system would disappear negatively impacting the lives of common people.

New Markets for a Capital in Crisis
From the point of view of capital, the opportunities to make profit have worsened. Before, the chaebols could make great profits by manufacturing and exporting cars, electronics, shipbuilding, and petrochemicals. Now with the world economy getting worse, except for automobile and electronics production, profits have all fallen. The economy doesn’t look like it will be getting better any time soon. So then what will capital do? It will look for new markets where profits can be made: the service sector. This is their way of overcoming their crisis.

Impact on Health Care Workers
There’s a misconception being propagated that when a mega hospital is created lots of great paying jobs will also be created. But what you will see is the collapse of small neighborhood hospitals. What of the doctors and nurses in these small hospitals? The creation of large mega hospitals may benefit the 1% of doctors and nurses but will have a negative impact on everyone else.

Current Struggle
One characteristic of the Park Administration is its unwillingness to engage in discussion with the National Assembly regarding issues and policies that will deeply impact the lives of people such as railroad privatization. This is because the National Assembly contains nearly 140 opposition party members opposed to the privatization of the railroad or health care. It’s not a majority [the National Assembly contains 300 seats], but is a significant enough force; to avoid such confrontation, the Park Administration is bypassing the National Assembly and working through the executive. Unlike Lee Myung Bak who tried to enact wholesale privatization through legislation, she is trying to privatize little by little through presidential decrees and orders to the ministries. Given that the municipal and regional elections are going to happen in June, we can expect the Park Administration to resume its attempts at privatization after that election. The Association of Doctors will go on strike for one day on March 11th and then for six days from March 24th to the 29th. The strength of these strikes will be important in pressuring the Park Administration.

How Can This Be Stopped?
The most important thing is the media black-out on this issue. The media is not covering this issue on its entirety. None of them are criticizing the Park Administration; rather they are all focusing on only her positive aspects. So, we need to let the people know what is really happening. We need to let people know that the Park Administration health care policies are taking us on a road to a US style health care system: the if-you-don’t-have-money-then-you-just-have-to-die system.

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21st Century Socialism, Latin America, and Venezuela

“We certainly don’t want socialism in America to be a carbon copy. It must be a heroic creation. With our own reality, in our own language, we must give life to the Indigenous-American socialism.”
– Jose Carlos Mariategui

21st Century Socialism has been characterized as a “heroic creation” to achieve “full human development.” In contrast to Soviet 20th century socialism’s top-down government, 21st Century Socialism is centered on the full realization of participatory democracy driven by the creativity, energy, and needs of people. The Bolivarian Revolutionary process in Venezuela is at the forefront of theorizing and realizing 21st Century Socialism. Referred to as “el processo” (the process) by its proponents, the Bolivarian Revolution towards 21st Century Socialism has been an evolving process with challenges, advances, and accomplishments. To understand the realization of 21st Century Socialism, it is important to understand Latin America history, and in particular Venezuela and its current process.

The Monroe Doctrine and Post-Independence Latin America
After Latin America gained its independence from Spain and Portugal, in 1823, James Monroe issued the Monroe Doctrine declaring that Europe was not allowed to intervene in the affairs of the Western Hemisphere. While serving as a warning to Europe to not intervene in the newly liberated countries, it also laid the foundation for the US intervention that would immediately follow: the Mexican-American War; the Platt Agreement effectively turning Cuba into a colony of the United States; military-political intervention in Honduras, Nicaragua, Panama, Venezuela, Haiti, Guatemala, El Salvador, Chile, and others. This period is marked by direct military and CIA interventions in the forms of overt coup d’états and assassinations to protect US geopolitical and investment interests at great cost and death to people.

In the 1980s and 90s, US domination began to involve indirect economic pressure and manipulation through the IMF and the World Bank. The “Washington Consensus” with its policies of privatization, the curtailing of the state in development and social welfare, and the opening up of domestic markets to international capital was first introduced by General Augusto Pinochet after a US supported coup d’état against the democratically elected Salvador Allende. The IMF and World Bank became another tool for US domination in the area. In the 1980s, debt in Latin American countries ballooned as a direct result of colonialism, US monetary policy, and the global economic recession. Many countries had to take IMF bail-out loans and in exchange were forced to accept structural adjustment programs. These structural adjustment programs rather than being about long-term development, were about paying back the loans by opening up domestic markets to foreign investors and reducing social spending. In other words, greater exploitation fo the local population by foreign companies and the cutting of social welfare for the population. The left tide sweeping Latin America today is a backlash to the years of pain and suffering brought on by these structural adjustment programs. It is here that the chapter on 21st Century Socialism begins.

Venezuela and Dictatorship
Punto Fijo Pact and Civilian Dictatorship
Formal representative democracy in Venezuela began in 1958. Yet, before the presidential election a pact between the three presidential contending parties was made at Punto Fijo (the Punto Fijo pact). In this pact, the competing parties promised to share power. At first an attempt to stabilize the representative democratic process, it later formed the basis of a two party dictatorship by the ruling parties Democratic Action (AD in Spanish) and COPEI (the Christian Democratic Party) that would rule until Chavez came into power.

The shock that would bring down this two party dictatorship and bring Chavez into power came in 1986: The halving of the global price of oil plunged Venezuela deep into debt. To receive rescue loans from the IMF, Venezuela was forced to accepted structural adjustment programs which included severe austerity measures. “Bread riots” erupted much like in other Latin American countries forced to adopt such austerity measures. Near Caracas, an increase in the public transportation fare sparked a rebellion which spread to the rest of the country and became known as Caracazo. The government used the military to harshly repress the rebellion killing 300 to 3,000 protestors. It was this event that would sow the seeds of dissent within the ranks of the military and eventually lead to a rebellion led by Hugo Chavez.

A Hero Emerges
Realizing disgruntlement among soldiers forced to kill civilians, Hugo Chavez began to organize within the armed forces for a rebellion in 1992. The coup d’état failed; Chavez was captured and, while calling for the surrender of soldiers still fighting the government took full responsibility for the action and made his “we have not succeeded for now” speech. He immediately became a hero as the leader of the rebellion against the perpetrators of Caracazo.

From Reformist to Socialist
1998 Presidential Election
Chavez’s reformist campaign slogans of anti-corruption and anti-poverty and his calls for a new constitution appealed to those tired of the Punto Fijo dictatorship. The middle class came out to support him. Chavez won with 56.2% of the vote. After winning the 1998 presidential election, Chavez immediately initiated the process for a new constitution. The people voted for a National Constituent Assembly that would draft the new constitution. A referendum approved the new constitution with 71.78% of the vote.

The new constitution included greater democratic participation through the recall referendum (the ability to recall elected officials through a referendum) and various human rights such as: “free education up to the tertiary level [i.e. post-high school], free quality health care, access to a clean environment, right of minorities (especially indigenous people) to uphold their own traditional cultures, religions, and languages, among others.” With a new constitution, a general election was convened in which all elected officials would re-run for election under the newly established Fifth Republic. Chavez was re-elected with 59.76% of the vote and his party won 104 out of the 165 National Assembly seats. Fearing the erosion of their power due to the new election results and the enactment of presidential decrees to implement the new constitution, the ruling class would attempt a coup d’état in 2002 which would push Chavez further towards the left.

2002 Coup d’état and 2003 Oil Stoppage
The coup d’état lasted forty seven hours during which the president of the Venezuelan Federation of Chambers of Commerce (FEDECAMARA) took power aided by some elements of the military. He abolished the national government and constitution. Before being foiled, the United States and Spain recognized the new president even as Latin American leaders were condemning it. The coup came to an end when the people took to the streets demanding the return of Chavez and, with the collaboration of some in the armed forces, placed him back into power. A lesson was learnt: at the slightest threat to its power, the ruling class had attempted to topple Chavez; the people had come down from the hill slums and defended the revolution. Chavez realized that the people were the driving force and defenders of the revolution.

The failed coup d’état was followed with a strike at the state company PDVSA that included the management, the professional workers. The oil stoppage would expand into a larger strike by businesses that would shut down their businesses in protest. Supported by the United States, through its quasi-NGO arm – the National Endowment for Democracy – this oil stoppage and business stoppage attempted to sabotage and sow discontent by making miserable the lives of people. The oil stoppage sent the Venezuelan economy into an economic recession. The oil and business strike finally ended with an agreement between Chavez and the opposition (brokered by the Organization of American States) in which attempts to remove Chavez would be done through a recall referendum.

The opposition lost the 2004 recall referendum with 58% voting for Chavez. Its intransigent position and the growing involvement of the urban slums – who had begun to experience improvements in their lives through the social missions – further encouraged Chavez’s radicalization. After winning the 2004 recall referendum, on January 2005, Chavez would declare that his government would build “socialism of the 21st century” and laid out a seven year road map: the 2007-2013 Simon Bolivar National Project: First Socialist Plan.

Characteristics of 21st Century Socialism
Protagonism is central to 21st Century Socialism. People through their energy, efforts, and creativity are to be the protagonists in building a new society. This is in contrast to 20th Century Socialism in which a strong central government enacted change from the top down. In 21st Century Socialism, political, economic, and productive power is given to the people so that they themselves can transform their communities and society. Because 21st Century Socialism is being birthed within capitalism, its realization requires: reforming the current representative democratic system to function at its full potential while carving out ever larger revolutionary democratic spaces for peoples’ protagonism; democratizing production to meet people’s needs and make them its protagonists; and a new ethic of communalism that celebrates diversity, the social being, people’s needs, and accountability.

Even as ever greater efforts are enacted to realize the full potential of representative democracy –through institutions and practices such as a transparent and verifiable voting system and the people’s recall referendum (which allows voters to recall all elected officials including the president) – it is also carving out ever greater political and economic spaces for people’s protagonism through the commune system. At the root of this commune system is the community council where a group of 50-100 rural families or 100-200 urban families in a geographically contiguous area come together to govern and develop their community. They harness the creativity, energy, and knowledge of its members to develop projects desgined to meet the community’s needs. Through government-community spaces called social battle rooms, community councils also serve as vehicles by which a community can directly interact with government officials to identify, carry out projects, as well as implement government policy and projects fitted to a community’s particular characteristics and vision. These community councils come together to form communal cities which together then form communes.

While participatory democracy places political power in the hands of the people, ending capitalism and bringing socialism requires a transformation of the production process itself. The guiding tenet in this transformation is producing to meet people’s needs through worker and community participation and endogenous (i.e. internal) development. The three vehicles by which Venezuela seeks to expand its productive capacity (after years of using oil money to import all its needs) while making this transformation are: state enterprises, mixed private-state enterprises, and cooperatives.

State enterprises are composed of the key strategic sectors of the economy such as PDVSA, the oil company, and CANTV, the telecommunications program. Product prices are affordable; profits are reinvested into community and national programs; workers are organized into worker councils. Mixed private-state enterprises attempt to harness and direct the productive capacity of the private sector. Worker cooperatives are the ultimate form of workplace democratization as ownership and control is placed in the hands of workers. These cooperatives are often formed from businesses that went bankrupt due to participation in the 2003 oil and business strike or whose owners liquidated the business by taking out loans against it that they were not planning on paying back. After being repossessed by the government, they are handed down to the workers.

The second element of production is endogenous development. This mode of development is in direct contradiction to the IMF and World Bank development strategy of attracting foreign direct investment and technology while cutting back on social welfare. Instead, endogenous development harnesses people’s creativity, energy, and knowledge and Venezuela’s own resources to develop. Money is invested in social missions to improve people’s livelihoods as a form of endogenous development: Profits from state enterprises are invested in education, health care, and jobs for people. It is through well educated and healthy people that development will occur.

People are the driving force behind 21st Century Socialism. Yet, even as they build a new world, they are still the products of the current capitalist one. Even as great advances are made in Venezuela – the eradication of illiteracy, the halving of extreme poverty, the expansion of health care – inefficiency, inefficacy, sexism, racism and corruption have yet to be eradicated. They remain: a legacy of oil dependency, capitalist induced individualist self-interest, patriarchy, colonialism, and a mass population whose spirit has been deformed by poverty and oppression. Thus, a new socialist ethic to create new socialist people is necessary. This new socialist ethic is being created by meeting their basic needs, educating them, and keeping them accountable.

As the 2007-2013 Simon Bolivar Plan states, “for the realization – rather than the annulment – of a new ethic, it is necessary to overcome the misery of material and spiritual poverty.” The various social missions nourish people’s material and spiritual poverty and enable them to not just survive but to imagine and create something better. School curriculums are also changed to include history and geography and the thoughts of Latin America’s heroes. Historical sites are restored and a collective identity and history is reconstructed. A new ethic also requires accountability. An ethic of accountability is also instilled through greater citizen participation and power in electing and recalling elected officials as well as through bodies such as social comptrollers that ensure that public funds are used effectively and efficiently.

Venezuela Post-Chavez
In March 5 2013, Chavez passed away dealing a heavy blow to the Bolivarian Revolution. In April 14, Nicolas Maduro was elected president. A unionist and an avowed Chavista, he promised to continue the revolutionary path that Chavez had laid out. The right wing opposition along with the United States and Spain begin attempts to destabilize the revolution through hoarding of basic goods, violence, and sabotage tactics meant to sow discontent and uncertainty against Nicolas Maduro. Yet, not only did Nicolas Maduro win the presidential elections, his power was further consolidated when his party (the PSUV) and its allies won the majority of positions in the December 8 regional and municipal elections. As Maduro and PSUV’s strength became further consolidated, the right wing – unable to win in a democratic manner – is now resorting to desperate acts by fomenting violent protests and encouraging foreign intervention through distorted global media coverage.

These violent actions instigated and led by the ruling class can be seen as an indication that a revolution taking wealth and power from the rulers and giving it to the masses of people is indeed taking place. As the first viable alternative to a capitalism that is starving, oppressing humanity while destroying the planet, it is up to the rest of us around the world to make sure that 21st Century Socialism be realized not only for Venezuelans’ sake, but for that of humanity

Why Capitalism Can’t Fix Global Warming

A hundred thousand bats fell from the sky when a heat wave struck Australia. In the opposite hemisphere, a polar vortex drove temperatures across the United States to record lows. Last year, a few days before the COP 19 negotiations, a supercharged Typhoon Haiyan killed 6,000 people in the Philippines with thousands still missing. Even as greenhouse gas (GHG) levels near a point of no return where climate disasters will become more frequent and reach even more catastrophic levels, the countries that are responsible do nothing and refuse to take responsibility. Around the world, corporations market green capitalism as the solution. Many in the environmental movement reluctantly agree with methods to reduce GHG through use of the market. Yet, capitalism cannot fix global warming because global warming is not a policy problem; rather, it is a direct consequence of capitalism’s fundamental driving forces.

Climate colonialism
Ever since industrialization in the 19th century, people have been producing more greenhouse gases then can be absorbed. Thus, GHG has been accumulating in the atmosphere. Climate scientists have set 2 degree Celsius as the maximum temperature increase that would allow human civilization to exist. For the poorest countries to also survive would require a maximum 1 degree Celsius increase. We are at 0.8 degree Celsius. To achieve a no more than 1 degree Celsius increase requires that we stabilize the atmosphere at 350 ppm. What this means is that the world’s carbon budget for how much GHG can be emitted into the atmosphere annually is very limited. It is from this scientific premise that we get the notion of climate colonialism. Imperial powers have developed by consuming not only the carbon budget allotted to them but also that of the rest of the world. In effect, they have “colonized” the portion of the atmosphere that belonged to the rest of the world. Thus, developed countries not only have a responsibility for making the largest cuts in GHG emissions, but they also have the responsibility of transfering a portion of their wealth in the form of technology and financial transfers as a form of reparations to developing countries for colonizing the atmosphere.

Technology won’t solve the problem
From government policy to corporate boardrooms to the mainstream media, technology is touted as the magic bullet that will defeat global warming. Yet, technology alone can’t solve the problem. This is because more important than technological innovation is its application. John Bellamy Foster, in his book “Ecological Revolution,” explains the Jevons Paradox: greater energy efficiency in the 1800s in England didn’t result in the conservation of coal; paradoxically, it resulted in its accelerated consumption: Greater efficiency had made coal cheaper thus driving up overall consumption. Likewise, greater energy efficiency alone does not necessarily lead to less consumption of energy. Greater car mileage means that driving a given distance has become cheaper. Within the market’s cost-benefit analysis, the cheaper cost of driving may mean people drive rather than take public transportation. Unless structural changes are implemented such as low cost public transportation alongside greater energy efficiency, greater efficiency does not to lead to less consumption. Secondly, the effectiveness of green technology is limited by accessibility. In the current global economic order with ever strengthening patent rights through free trade agreements (such as the Korea-US FTA), the World Trade organization, and regional trading blocs such as the Trans-Pacific Partnership Agreement, green technology is being further pulled out of the reach of poor countries forcing them to either take the same polluting path of industrialization or to remain in poverty. For technology to be effective in fixing global warming, technology needs to be embedded in a system that meets the needs of society as a whole, not one where they are held hostage for the greed and profit of a few.

Carbon markets can’t solve the problem
Carbon markets are touted as a flexible solution that avoids the rigidities of direct regulation. In theory, it rewards those that decrease their greenhouse gas emissions and allows flexibility for polluters. The two most basic components of carbon trading are cap and trade. First, the level of GHG a country can produce is capped at a maximum. In order to reach this goal each country parcels out this budget of pollution to its producers in the form of permits. Let’s say there are two producers A and B. They are both given permits to pollute 100 tons of GHG a year. Producer A through the adoption of greater energy efficiency only pollutes 80 tons of a GHG a year; producer B pollutes the same as before at 120 tons of GHG a year. Then under carbon trading, producer A would be able to trade its permits of 20 tons of GHG a year to producer B in exchange for money. The problem with this premise is that even if it worked, nothing stops the polluting behavior from still negatively affecting surrounding communities. In the documentary “The Carbon Connection,” pollution from oil companies is killing a community in Scotland. Yet, these companies are able to do so because they have purchased carbon credits from the planting of eucalyptus trees in Brazil. In Brazil, rural communities are being displaced from their lands to make room for these eucalyptus tree plantations. Rather than fixing the problem and reducing emissions, the carbon markets allow companies to shift responsibility to another part of the world. Ultimately, the polluters and its cottage industry benefit, while the masses of people suffer.

Yet, carbon markets in even this twisted scenario do not lead to actual decrease of greenhouse gas emissions. First, carbon markets place the regulation of GHG into the same financial markets fraught with speculation, greed, and corruption that have created mass suffering through its economic and food crises. One of the greatest proponents, and likely beneficiaries, of carbon trading is Goldman Sachs who had not only created fake securities, but had also defrauded their own customers during the subprime mortgage bubble. These would be the people in charge of brokering these carbon trade deals. Only this time they are not only gonna crash the market, they are gonna crash the planet.

Besides placing the fate of our planet in the hands of greedy, corrupt, lying speculators who seek to maximize profits at whatever cost, the carbon market itself is fundamentally flawed. This is because it ties regulation to the price of carbon credits. When carbon credits are cheap, polluting is cheap; conservation from an economic point of view is pointless. The world experienced this when the Kyoto Protocol was approved for its second round with a weak cap (i.e. feeble emissions reductions targets) and the price of carbon credits in Europe collapsed making it cheap to pollute and pointless to conserve. The way to fix global warming is simple: reducing pollution through regulation and more effective use of resources to meet people’s needs.

Profit driven production is the fundamental problem
Under our current system, production only happens when profits can be made. As Richard Smith in “Beyond Growth or Beyond Capitalism?” makes clear, under capitalism employment is linked to production and production is linked to profits. If a profit can’t be made, then production will cease, and jobs will be lost. If a profit can be made – regardless of whether the product aggravates global warming or not – then production will expand and jobs will be created. Thus, in an economy based in the market system the well-being of the majority of people is held in the hands of a few capitalists. If we extrapolate, this means that the well being of society is tied to GDP growth (i.e. the sum aggregate of profits within a country). Yet, infinite growth within a finite planet is not possible. What then is the solution? The solution is to make production more effective and efficient and center it not on profits but on people’s needs. This would mean that we would only use up our natural resources – including our limited atmosphere – on products that meet people’s needs and are built in a durable and efficient manner. Disposable products would be eliminated, public transportation infrastructure would be greatly expanded and individual car usage limited. Food production and consumption would be localized decreasing food miles and increasing food quality. Workers from sectors that are shut down by the government would be rechanneled and retrained to fix appliances or to upgrade technology products. In this type of sustainable society, production would not be able to be in the hands of a few to increase their profits; production would need to belong to the people, and it would need to be used to meet their needs through planning and participatory democracy.

Ecological Revolution!
Capitalism and imperialism aren’t just destroying our planet; they are also starving, oppressing, and killing most of its inhabitants. Let’s snap out of it! Capitalism is killing us. Now is the time to stand up, fight back, and dismantle it, for the sake of our planet, our children, and our humanity.

Trans-Pacific Partnership Agreement: Singapore Ministerial Outcome and Background

Current state of the Trans Pacific Partnership Agreement negotiationsThe four-day ministerial summit in Singapore from December 7 to the 11th, failed to secure the final Trans Pacific Partnership Agreement by the proposed 2013 deadline. As the meetings are held in complete secrecy except for hundreds of corporate representatives, it is difficult for the public or even for legislators to know what is happening. However, leaked documents have revealed that there is still wide disagreement mostly between the United States on one side (with some developed countries on some issues) and the developing countries on the other. TPPA expert Professor Jane Kelsey from the University of Auckland predicts that TPPA negotiators are likely to meet early this year and attempt to finalize by the April APEC trade ministers’ meeting.

The biggest barrier concluding a TPPA deal was related to the US Trade Promotion Authority (TPA). Previously called the Fast Track Authority, the Trade Promotion Authority grants the head of the executive, the president, the authority to negotiate an agreement and force the legislative to either pass or reject the agreement with limited time for discussion, without the ability to make any modifications, and solely based on the merits of the agreement. The TPA was first introduced under the Nixon Administration with the coming into force of the Trade Act of 1974 with a time limit of five years. It was subsequently extended six times (1979, 1984, 1988, 1993, 2002) before it expired in 2007. Through the use of TPA authority, multilateral agreements (such as the Tokyo and Uruguay rounds of the General Agreement on Tariffs and Trade) and bilateral agreements (such as the KORUS FTA) were successfully concluded. Now with the TPPA negotiations reaching their final stages, the Obama Administration is strongly demanding the re-establishment of the TPA. Given the majority Democratic House of Representatives voicing their opposition to re-establishing the TPA, it appears that resurrecting the TPA faces difficulties. However, it has been reported that Senator Max Baucus (chairman of the finance committee) and Orrin Hatch (an influential Republican within the committee), and Representative David Camp (chair of the House Ways and Means Committee) have reached agreement on introducing the TPA and are expected to introduce it as the first bill of 2014.

History of the TPPAThe Trans-Pacific Partnership Agreement (TPP) was signed in 2005 and implemented in 2006 between Singapore, New Zealand, Chile, and Brunei. These four countries are referred to as the P4. When the P4 restarted negotiations to deepen their agreement, the United States joined in 2008. Negotiations are happening in two ways: creating a single set of rules on services, investment, government procurement, quarantine, sanitary and phytosanitary measures, technical barriers to trade, and intellectual property; and bilateral and multilateral approachesto market access to goods.

Geo-political significance of the TPPAThe TPP is much more than a treaty to liberalize trade. It is a vehicle for the US to strengthen its influence in Asia through economic means. This strategy is important because in blocking China’s ascent and the West to East shift of the world’s economy. This strategy – referred to as the Asia Pivot – is built upon six pillars: strengthening bilateral security alliances; deepening working relationships with emerging powers, including China; engaging with regional multilateral institutions; expanding trade and investment; forging a broad-based military presence; and advancing “democracy and human rights.”

The US strategy for the TPPA is to create a multi-national agreement with Asian and Pacific countries modeled after its own strategic interests. This economic architecture would force China to remain isolated or to conform to a pro-US economic agreement if it wants to join. In short, the TPPA is a way of forcing China to play by rules that the US sets down.

Controversial provisions within the TPPA While the TPPA has become a way for the US to entice Asian and Pacific countries into its sphere of influence, many of the provisions under negotiation are highly detrimental to development and democracy for the participating countries and their peoples. The provisions have often been referred to as “toxic” given their detrimental impact on democratic governance and a state’s sovereignty. Some provisions currently under consideration and negotiation are:

  1. Deregulation and corporate protections at the expense of national sovereignty: Under “regulatory coherence,” TPP countries have to change their regulations and bureaucratic structure to be more compatible with each other. Ostensibly this would facilitate trade between countries by eliminating non-tariff barriers. However, the need for regulatory and bureaucratic coherence across multiple countries would limit a country’s ability to write regulations or run government in accordance with the democratic desires of its people. In addition, opening up regulations and the government would allow stronger nations to influence the regulations and governments of the weaker ones. Coupled with other pro-corporate investor provisions, regulatory coherence can only mean coherence towards a weaker regulatory pro-corporate profit structure influenced by the stronger nations at the expense of both democratic control and society’s well-being.
  2. Creation of a pro-investor extrajudicial body to challenge domestic regulations and policy: Leaked documents revealed the presence of an investor-state dispute settlement (ISDS) system in the TPPA. In short, the ISDS is a special court system outside the law [made up of a tribunal of three arbitrators (legal professionals that negotiate on your behalf)] where investors can sue host governments, but governments cannot sue investors. The ISDS allows an investor to sue a host government through an arbitration tribunal (the special court system outside the law) for actions or policies that hurt the investor’s present or future profits. This means that if a policy changed the business environment such that it resulted in decreased expected profits than the investor can sue the government for compensation. Worse, the tribunal that decides the outcome is not only outside the domestic and international legal system, it is also biased towards investors, and possesses great discretionary powers. When coupled with TPP transparency provisions (where governments have to notify corporations before writing a new regulation or law), the ISDS gives foreign corporations (and domestic ones with foreign shareholders) the space and the tool to intervene in government regulations. Even threatening an ISDS claim can result in “regulatory chill” where the government avoids implementing legitimate laws and regulations for fear of ISDS claims leveled against it.
  3. Strengthening of intellectual property rights at the expense of public health: The TPP would strengthen intellectual property rights to exceed even those of the WTO’s TRIPS. One particularly toxic set of proposals pushed by the US regarding medicine makes it easier to extend patents by: allowing re-patenting of a drug for a different use (e.g. headaches instead of high blood pressure) or a different method of using it (e.g. a change in doses); prevents the use of clinical trial data for generic drugs until five years after marketing approval of the original drug (even if the chemical formula for the generic drug is exactly the same as the original one, the generic drug producer would either have to wait 5 years or they would have to do all of the tests again); forces a host government to notify a patent holder if there is a drug similar to it which allows the patent holder an opportunity to file frivolous lawsuits and prevent the entry of the other drug during litigation (in addition, it burdens developing countries with the creation of such specialty and infrastructure). As a result, affordable generic medicines are kept out of the market; money is snatched from the public and fed into the coffers of billion dollar pharmaceutical companies without any real innovation offered in return.
  4. Attack on state-owned enterprises: TPP would neutralize any advantage that a government gives to domestic state-owned enterprises over the private sector. State owned-enterprises, due to their public nature, have the potential to fulfill larger societal goals such as universal access, affordable prices for goods and services, the creation of good paying jobs, and implementation of a state’s industrial development. Even if a state owned enterprise were less economically competitive than a private one driven just by profit considerations, preferential treatment and government subsidies could be justified due to these greater social benefits. “Competitive neutrality” would neutralize subsidies and preferential treatment given to state-owned companies, so that foreign companies would not be at a competitive disadvantage.
  5. No performance requirements on investments: This prevents the government from placing conditions on investments to ensure benefits to the country. For example performance requirements such as technology transfers, local management of enterprises, and local hiring which facilitate the transfer of technical knowledge and support for the local economy are barred. The lack of such performance requirements strips foreign investment of all these beneficial elements and calls into question the economic rationale of foreign investment as a vehicle for development.
  6. Attack on government procurement: Government contracts for products and services would be opened to foreign companies. In other words, contracts above a certain monetary value would be open for bidding by foreign companies. As Martin Khor from the Third World Network states a large part of a developing country’s income is made up of the spending of its federal government. Therefore, government procurement is important as a policy tool in fighting recessions through government spending in local production and services. Preventing a government from giving preferential treatment to domestic companies would create a “leakage” in the implementation of policies to boost an economy, since some portion of this increased spending would “leak” out of the domestic economy through contracts to foreign companies. Let’s say a government wanted to pump money into the economy by spending a thousand dollars. If it spent 600 dollars on local production and spent 400 dollars on a foreign company (due to limitations in government procurement), and the foreign company transferred 200 dollars of its profits abroad rather than re-investing it (it is allowed this because of the free flow of capital and the lack of performance requirements), then that 200 dollars would be leaked out rather than re-inserted into the economy.
  7. Removal of restrictions on capital flows: The leaked investment document on the TPP contains provisions that prevent restrictions on the flow of capital in and out of a country. Even during a balance of payments emergency, such as the 1997 IMF crisis, a government would be helpless to prevent the flight of capital. Coupled with the lack of “performance requirements” on investments, governments would not be able to block the entry of speculative capital that with its quick entry and exit disrupts the economy and contributes little to economic development. In addition, the free mobility of capital allows investors greater leverage against a government’s policy it deems unfavorable by threatening capital flight.
  8. Entry of toxic financial “innovations” such as the ones “at the centre of the global financial crisis”: Financial “innovations” such as the subprime mortgage loan derivatives and “credit default swaps” that created the speculative bubbles that destabilized the global financial system and created the current economic crisis would be allowed.
  9. Sensitive products might be re-opened and re-negotiated as part of a larger multilateral tariff schedule: As has been mentioned above, the TPPA is taking a hybrid approach to tariff schedules on goods. There is the possibility that if the TPPA took the multilateral approach by re-opening the current negotiated tariff schedules and if new countries joined the TPPA that sensitive products may be re-opened. For example, US rice producers may want to revisit the Korea FTA if South Korea were to join the TPPA talks.
  10. The elimination of protective tariffs, like with all free trade agreements, will drive small farmers and peasants off their land, while destroying biodiversity and the environment: The immediate result of a decrease in the price of farm products due to the elimination of tariffs from the TPP, will be driving off poor debt ridden peasants from their lands. Furthermore, as the amount of profit attainable per hectare of land decreases, the minimum amount of land required to financially support a family will increase. As a result of both these dynamics, land ownership will accumulate into fewer larger farmers. Ultimately, the propensity of these larger farms to mechanize and to plant monocultures will have devastating effects on rural communities, biodiversity, and the environment.
  11. Global re-organization of food production and consumption will lead to greater Multinational Corporation’s control over food production: When local production and consumption is replaced with mass production for export, it is inevitable that biodiversity will be replaced with monoculture: Walmart and MacDonald’s don’t want 50 varieties of potatoes; they just want one uniform variety set to their specifications.
  12. Harmonization of sanitary and phytosanitary (SPS) measures erodes national sovereignty: The current P4 agreement between New Zealand, Chile, Brunei, and Singapore allows a lot of flexibility for each country to determine its own SPS measures and give it the freedom to change it in the future. The forced harmonization of SPS measures towards “US techniques and standards” would violate the sovereign right of people to determine their food preferences and the acceptable levels of risk in their food. One controversial point has been the labeling of genetically modified organism (GMO), which the US considers a non-tariff technical barrier and wants to eliminate. The elimination of such labeling would not only have great potential impacts on health, but it would also violate the rights of consumers to choose what product they buy.

    Transatlantic Trade and Investment Partnership Many of the toxic provisions (greater intellectual property rights, elimination of all tariffs and the reduction of tariff barriers, greater regulatory coherence, and restriction of subsidies to state-owned enterprises) under discussion in the TPPA negotiations are also included in the Transatlantic Trade and Investment Partnership negotiations between the United States and the European Union. On December 16th, on the occasion of talks between the US and European trade representative in D.C., more than 100 civil society groups issued an open letter to the trade representatives outlining their concerns with the TTIP. In particular, NGOs, social movements, consumer groups, labor unions, environmental groups, and civil society organizations voiced their opposition to the Investor State Dispute component of the TTIP.

Analysis of COP 19 Meeting at Warsaw

Background
Over the past two hundred years increased greenhouse gas (GHG) emissions from industrialization have resulted in global warming and climate change. To address the growing concern over global warming, countries gathered in 1992 in Rio de Janeiro, Brazil for the first World Earth Summit. The result was an international treaty for addressing climate change [the United Nations Framework Convention on Climate Change (UNFCCC)] that introduced many important concepts such as “common but differentiated responsibilities.” When countries realized that the UNFCCC was not rigorous enough, a new legally binding agreement (the Kyoto Protocol) was signed in 1997 and implemented in 2005. At the core of the Kyoto Protocol are legally binding GHG emission reduction targets for developed countries (Annex I). The first round of the Kyoto Protocol ended in December 2012. Within the Kyoto Protocol was the promise of a second round. However, now with the first round of the Kyoto Protocol over and the beginning of the second round, the world’s major polluters that had been a part of the first Kyoto Protocol – Japan, Canada, Russia – decided to not participate. In addition, the United States, which didn’t even participate in the first round, is also not participating in its second one. A major participant of the second round will be the European Union. Yet, its pledge of reducing GHG emissions by 20% is not nearly enough. It is also unclear if the second round of the Kyoto Protocol will end in 2017 or in 2020. If it ends in 2017, it would leave a three year gap where no action takes place before the next international treaty – the Durban Platform which was agreed at the COP 17th – is implemented in 2020. This new international treaty would be different from the Kyoto Protocol because it would include financing for developing countries and it would also force all countries – whether they are developed or developing – to adopt measures that would be legally binding.

COP 19 Outcomes
The COP 19 meeting was supposed to establish “the table of contents” for the Durban Platform, so that the agreement could be signed by 2015 and then implemented in 2020. Two concrete results can be seen to have come out of COP 19: adoption of REDD+ and the introduction of “loss and damage.”

REDD+ is a program which seeks to reduce GHG emissions due to deforestation and forest degradation. Deforestation means deforesting a whole area by cutting down its trees; forest degradation includes such activities as lessening the density of trees. REDD+ is based on the understanding that deforestation and forest degradation lead not only to the release of carbon when trees are burned or when they rot, but also the loss of carbon sinks when these trees that absorb carbon dioxide are cut. While the preservation of forests is crucial, the manner in which REDD+ seeks to do this is problematic. At the root of the problem is placing forest preservation under the markets rather than under government regulation. Given the dearth of funding and the stinginess of developed countries to provide such funding, these programs will likely be funded with private financing. However, depending on private financing is ineffective at best, and at worst it will be destructive for the forests – and then the planet – as well as the forest people that have stewarded and lived in it for millennia.

Private financing for REDD+ would likely be based on the sale of the carbon credits that anti-deforestation and anti-forest degradation projects would produce. However, since there is no real cap in carbon emissions (as mentioned before the current ceiling amount of allowable pollution is not low enough to force people to buy carbon credits), there would be no demand for these carbon credits. Hence, there would be no funding for forest preservation. At its worst, it will lead to the blocking of access and eviction of indigenous forest people to and from forests, while placing the fate of the forests (and the earth) in the hands of financial speculators that would set the value of forest preservation. High carbon credit prices would mean an acceleration of these projects. Low carbon credit prices (such as when the second round of the Kyoto Protocol was effectively gutted) would mean increased carbon emissions since companies could continue polluting by buying these cheap carbon credits; and little funds to developing countries that have set-up these carbon credit producing projects. There are also problems in implementation as implementing a system of measuring and verifying carbon emissions reductions is very costly. Ultimately, mitigating climate change needs to be achieved by forcing developed countries that have the greatest historical responsibility for global warming (GHG emissions are cumulative) to reduce their polluting and stopping deforestation and forest degradation through regulation and through the guarantee of collective rights for indigenous forest people.

The second outcome from COP 19 was the introduction of “loss and damage” under adaptation. To understand loss and damage, it’s important to understand its relation to mitigation and adaptation. Reducing greenhouse gas emissions is still the overriding goal of the UNFCCC, but even if the world enacted very strict reductions in greenhouse gas emissions, there is still an overabundance of greenhouse gasses from past pollution. It would take time for these excess greenhouse gases to be reabsorbed. During that time the earth would still feel the climate change impacts of global warming. “Adaptation” refers to the preventative measures (e.g. higher sea walls) to absorb or deflect the impacts of such climate change. However, even these adaptation measures are sometimes not enough to shield from the “loss and damage” brought upon by climate change. Hurricane Haiyan demonstrated the limits of adaptation in fully absorbing and/or deflecting climate change related natural disasters. Loss and damage was introduced in COP 19 for these instances when adaptation is not enough. An agreement was reached despite controversy between the developing and developed countries: the developing countries argued that loss and damage should be separate from adaptation since it is conceptually (not preparatory measures but restorative measures post-destruction) and methodologically different (the immediacy of rescue and reconstruction efforts immediately after a natural disaster like Hurricane Haiyan are different from preparatory measures such as higher sea walls); developed countries argued it should be included under adaptation. The agreement included loss and damage under adaptation with the note that its needs might sometimes exceed adaptation. A promise of review two years after its implementation was also included.

Unresolved Issues
Two issues that remained unresolved at COP 19 were whether or not there would be a distinction between developed and developing countries regarding emissions reductions targets and how the 100 billion dollars/year promised by the developed countries would be funded. Developing countries claimed that since the Durban Platform is under the UNFCCC, the distinction between the responsibilities of developed (i.e. Annex I countries) and developing (i.e. non-Annex I countries) countries remained; developed countries claimed that the establishment of the Durban Platform effectively eliminated such distinction. Secondly, developing and developed countries disagreed on how to achieve the 100 billion dollars/year starting 2020 promised by the developed countries. Developing countries wanted the funding to come solely from the government – due to their belief that private funding would come with conditions. On the other hand, the US wanted the government funds to go to lesser developed countries and for the mid/high income developing countries to receive private financing. In addition, developing countries demanded a roadmap to this 2020 goal for funding, proposing that 70 billion dollars/year be raised by 2016. Developed countries rejected the proposal. Discussions concluded with no roadmap or pledges for funding just promises of more discussions and reports.
What is next after COP 19? COP 20 in Peru will flesh out the details of the Durban Platform. A work plan for loss and damage will be completed and its effectiveness will be evaluated (two years later) at COP 22. COP 21 in Paris will sign the Durban Platform with its implementation take place starting 2020.