Promoting democracy through free trade agreements

1 Jun 2005

A commitment to openness would affirm democratic values and principles, write Rebecca LaForgia and Bryan Mercurio

AUSTRALIA and China began the first round of historic free trade agreement (FTA) talks earlier this week. Trade between the two nations has quadrupled in the past decade and it has been estimated that an agreement between the two could generate US$82 billion in economic benefits over 10 years.

The merits of the agreement can and will be debated. But one thing is certain, Australia should use the talks, as well as its FTA negotiations with ASEAN, Malaysia and the United Arab Emirates, to promote democracy and transparency by advocating for an ‘open’ model of state to state dispute settlement.

State-to-state dispute settlement mechanisms are included in all FTAs. Most are very closely modelled on the World Trade Organization’s method of dispute settlement, which expressly provides that consultations and panel proceedings shall be confidential, that opinions expressed by panelists shall be anonymous, and that parties shall respect the confidentiality of any document marked as such. Moreover, individuals who are not parties or third parties to a dispute are not permitted to attend panel proceedings and transcripts of proceedings are not publicly available. As a result, much of the process remains out of view and insulated from public scrutiny. In this sense, the WTO model of dispute settlement is a ‘closed’ model.

By contrast, some countries, such as the United States, insist upon an ‘open’ model of dispute settlement that promotes openness, transparency and non-governmental involvement in all of its FTAs. Australia has yet to formulate a policy on this important issue. It endorses the closed model in its FTA with Singapore while endorsing the open model in its FTA with the United States.

The FTA negotiations with China, ASEAN, Malaysia and the United Arab Emirates provide an opportunity to settle this policy issue. It is not merely an academic question but an important principle with goes to the heart of an open democratic system. Australia should, as a matter of policy, negotiate for an open model of dispute settlement in its future FTAs that allows public access to hearings, documentation and the opportunity to submit views, rather than a closed model that denies these rights.

In its 2004 White Paper on Terrorism, the federal government frankly states that we ‘advance our values through an active foreign policy. We energetically support democracy’ It must therefore be presumed that a democratic option which promotes openness, public access and other democratic values should be the preferred foreign policy choice.

The open state-to-state dispute settlement mechanism is a practical method of ensuring principles of democracy, which are sometimes vague and difficult to promote internationally, are endorsed through bilateral relations with our burgeoning neighboring states.

Not only would an open dispute settlement mechanism provide a practical right of access and involvement from members of the public within, for example, China or ASEAN countries such as Burma, but it would also allow Australians to view proceedings and documentation on important trade issues which now impact upon our everyday lives. In other words, endorsing a closed system of dispute settlement will not simply have external ramifications, it will also have an internal effect: Australian citizens will be shut out of trade dispute proceedings.

If Australia does not endorse open dispute settlement mechanisms in its FTAs, then the government should explain why it is accepting a closed system of dispute settlement. How can such a decision be reconciled with our foreign policy commitment to openness and transparency? How can such a decision be reconciled with our own system of open democracy?

The dispute settlement mechanism included in FTAs is there as a last resort. But even if the mechanism is only rarely used, it is both in Australia’s policy interests and a positive affirmation of our democratic values and principles to promote, if only symbolically, a commitment to democratic and open dispute settlement systems in all of its FTAs. •

Rebecca LaForgia is a lecturer in international law at Finders University and Bryan Mercurio is an international trade lecturer at the University of New South Wales.


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