TPP will let banks write their own regulations and stick taxpayers with the bill

One of the most controversial aspects of the secretly negotiated Trans Pacific Partnership is its inclusion of investor-state dispute settlements (ISDS) — a procedure that allows a corporation to sue governments to get rid of laws that undermine its profitability. ISDSs epitomize everything that's messed up in "trade" agreements, have resulted in corporations being given billions of dollars in tax-payer money in "compensation" for environmental, safety and labor laws; and, most notoriously, were used by Philip Morris to attack countries that passed laws aimed at reducing smoking.

TPP's proponents (including lead US negotiator, a former Citibank exec named Michael Froman) claim that its ISDS procedures are different, but as David Dayen points out, they're virtually word-identical to widely abused ISDSs in trade agreements like CAFTA, the Central American Free Trade Agreement.

But TPP's ISDS system is much worse than its predecessors in one way: it includes finance as one of the industries that can attack government regulation through the courts. Under TPP's ISDS system, the big banks would be able to block attempts to separate out investment and retail banking (the merger of these two types of banking led directly to the financial crisis of 2008) or even to make them account and pay for the systemic risk they impose on the whole world's financial system through risky, mass-scale, leveraged gambling.

Excessive awards for violations would be likely to lead governments to repeal laws and regulations, as the U.S. is in the midst of doing with country-of-origin labeling for meat and poultry. In that case, the World Trade Organization ruled that the U.S. would face $2 billion in retaliatory tariffs unless it repeals the law. While the tariffs aren't the same as the direct compensation to corporations under ISDS, the resulting financial pressure would similarly lead lawmakers to move to repeal.

Extending minimum standard of treatment in this fashion protects all of Wall Street, not just foreign firms, as domestic mega-banks would benefit from any repeal as much as their foreign colleagues.

The big takeaway is this: Former Citigroup executive Michael Froman, the U.S. trade representative, negotiated an agreement that will give Citi and all other banks a shot to undermine every future financial reform enacted.

"Expanding the financial chapter is an enormous expansion of the scope of the investor-state dispute system," Lori Wallach concluded. "It opens up a Pandora's box for financial services regulation."

TPP Trade Pact Would Give Wall Street a Trump Card to Block Regulations [David Dayen/The Intercept]