Trade Deals and Fair Trade

Debate between Geraint Davies and Stewart Hosie

Wednesday 11th March 2020 Westminster Hall

[Stewart Hosie]

Nor am I, but I am surprised and slightly disappointed that the UK Government’s stated intention is to exclude certain important matters from dispute resolution or arbitration. But—and this is a big but—not all arbitration and dispute resolution mechanisms are the same. Although the SNP will continue to support the inclusion of all the aspects of modern trade deals that I have mentioned, we would be deeply concerned if other future trade deals implemented the one-sided ISDS-type mechanisms that the hon. Member for Swansea West mentioned.

[Geraint Davies]

I am following the hon. Gentleman’s speech closely, and I agree with what he is saying. Does he agree that it is imperative that the UK stands up for dispute resolution mechanisms that include social and environmental matters and other areas beyond investment, as a precedent for when the EU—and indeed the UK, which is in a much weaker position—talks to the US or China? The EU will be the future of fair trade globally.

[Stewart Hosie]

Of course I agree with that. It is important that the wide range of issues that form the basis of modern trade deals—not simply tariffs and quotas—are included. As I have said, however, not all arbitration mechanisms are the same, and I would not want one that operated on the basis of the secret ISDS-type schemes that we have seen.

That is primarily because of the potential restrictions that such mechanisms could place on Governments, including the UK Government, in legislating even on public health, for example. To demonstrate, I will give two brief examples of how ISDS-type arrangements are unfair and limit the Government’s ability to act in the interests of citizens. The examples are not new and the information has been around for some time.

In the first case, between 1995 and 1997, the Canadian Government banned the export of toxic polychlorinated biphenyl waste to comply with their obligations under the Basel convention, to which the United States was not a party. Waste treatment company SDMyers sued the Canadian Government for $20 million in damages under chapter 11 of the North American free trade agreement, which included an ISDS-type arbitration scheme. The claim was upheld by a NAFTA tribunal even though Canada had acted to comply with an international treaty—that is quite extraordinary.

In the second case, in April 1997, the Canadian Parliament banned the import and transportation of the petrol additive methylcyclopentadienyl manganese tricarbonyl, because of concerns that it posed a significant public health risk. Ethyl Corporation, the additive’s manufacturer, sued the Canadian Government—again under NAFTA chapter 11—for $251 million, to cover losses resulting from the “expropriation” both of its plant and its “good reputation”. The claim was upheld by the Canadian dispute settlement panel, and the Canadian Government repealed the ban and paid Ethyl Corporation $15 million in compensation.

Those cases involved toxic PCB waste and a petrol additive that was deemed to have an impact on public health. In my view, it is quite wrong and unfair for large corporations to be able to sue Governments simply for taking steps to protect the wellbeing of their citizens, or for enacting public health measures that they believe to be right and fair, and for which they may well have an electoral mandate.

Although we welcome new trade deals, they need to be fair. As has been said, the process of agreeing them needs to be transparent and inclusive. For example, it must formally involve, at all stages, the Scottish Government and other devolved Administrations; and approval must be sought from and granted by Members of Parliament. That mirrors the point about democracy that the hon. Member for Swansea West made.

A clear understanding is required that although genuine dispute resolution mechanisms are vital for delivering fairness, free-trade agreements that include secret ISDS-type courts that limit, or appear to limit, the ability of Governments at any level to act in the best interests of their citizens are wrong, unfair and profoundly unacceptable.