Business/Finance

TTP: fast-track disaster ahead

The Trans-Pacific Partnership is the opposite of free trade

Like many, I have my share of disappointments with Obama. On balance, he’s infinitely preferable to any of the plausible Republican alternatives—can you imagine what Mitt Romney or John McCain and a Republican Congress would be getting up to these days? Still, there are areas—global warming in particular—where I wish he had been more aggressive. I fully concede the limits of what may have been possible throughout his term, given the implacable opposition he has been facing. But still, it would have been good to see a more deliberate attempt to change the trajectory of things.

The ongoing corporatization of nearly everything would have been another place to start. I suppose the failure to pursue the banks aggressively should have been a tip-off that the Clinton financial people were still running the show. Plus the Obama administration’s unwillingness to try to put Elizabeth Warren as head of her brainchild, the new (and pretty efficient, I gather) Consumer Financial Protection Bureau (although she has had her payback.) When people start telling me that there’s no real difference between the two parties, in the finance area I tend to agree, with some notable exceptions like Warren.

A case in point are the two trade deals that the Obama administration is seeking fast-track approval from Congress so that we can get on with the important business of turning the rest of the world over to multinational corporations. It would be mainly American multinationals, of course, although no doubt some European and Asian ones would manage to sneak in there. What’s the problem with Fast Track? It allows no debate, no amendments, no anything. It only gives representatives—in this case, Senators—the ability to vote yes or no on some particular piece of legislation. In this case, they’re treaties, which means they need to be approved by the relevant governments, just like any other treaty—in the US, this is the Senate. Just like NAFTA, which has worked out so well for the American middle class.

What are these deals? Well, there’s TTIP (the Transatlantic Trade and Investment Partnership), with Europe, the largest potential trade deal ever, and then there’s TPP (the Trans Pacific Partnership), with 11 Asian nations. But they both have the same problems. What do these deals do? In the name of “free trade,” a shibboleth if there ever was one, the treaties will legally require the elimination of a wide range of trade “barriers.” These vary widely be industrial sector—those pertaining to agriculture are somewhat different from those pertaining to manufactured goods, for example, and no one is quite certain yet what the implications for intellectual property will be. In addition, they basically serve to protect, and extend, the range of intellectual property rights that have accrued to large multinational firms—again, agriculture is a relevant case in point. TTIP, incidentally, is in its eighth round of talks.

The real problem is not so much the concept of the deals themselves—I can think of some good economic reasons for loosening various trade barriers– for example, in sugar and some other agricultural commodities. On the other hand, I can think of some things where international trade should not even exist—tiger skins and elephant tusks, say. The broader issue is how the programs would be implemented. What these deals would create is a large infrastructure designed to subvert the ability of national governments to set policies in a number of areas. In particular, these will likely restrict the abilities of governments to tighten environmental or public health regulations if those regulations can be shown to affect the profitability of foreign companies. This is because TTIP, for example, does not seek simply to reduce trade barriers—it seeks to harmonize regulations. This alone should be a huge red flag. Who gets to determine this? Well, not governments. Instead, we’ll have some special purpose courts set up to pass muster on only aspects of these trade deals. This is laughingly, in good Orwellian fashion, referred to as the Investor-State Dispute Settlement mechanism, or ISDS. And these will be conducted in secret, just like the negotiations for the treaties themselves.

As Glyn Moody over at Common Dreams has pointed out:

ISDS not a new idea: it has been included in bilateral trade agreements for decades. But those were generally between Western nations looking to invest in developing countries that were keen to attract foreign companies. The ISDS mechanism was there to protect investments in regions where legal systems were often weak and governments capricious.

TTIP by contrast would see the ISDS mechanism between two blocs with highly-developed legal systems. ISDS would introduce external tribunals that allowed companies to bypass national laws. It would open up the EU (and US) to the risk of ISDS claims on an unprecedented scale. If TTIP includes ISDS, there are 14,400 US-based corporations owning more than 50,800 subsidiaries in the EU, all of which could use the mechanism to sue the EU and its Member States. Even without TTIP, European nations are already facing claims of at least €30 billion because of ISDS chapters in existing agreements – we don’t know exactly, since many cases are still secret. With TTIP, it’s easy to imagine that figure multiplied by ten or even more. Moreover, this is money that must be paid by the public, making a mockery of any claims that TTIP will bring benefits to ordinary people.

In this regard, the redoubtable Institute for Agriculture and Trade Policy (IATP) has been yeoman work on both these deals. Here, for example, is a summary of their concerns about TPP—which could just as easily be raised about TTIP:

It undermines local control of food: Only five of the 29 chapters of the “trade” agreement deal with conventional trade issues like tariffs or quotas. The real focus of the deal is “regulatory coherence.” The idea here is that the current diversity of national and sub-national-level laws and regulations complicate trade, and that some regulations constitute “barriers” rather than legitimate safeguards for public health or the environment. The TPP fix is to “eliminate unnecessary barriers [and] reduce regional divergence” in standards. This means that if the TPP is adopted by the countries involved, regulations written by negotiators will supersede local laws and policies. While regulations in the trade deal would be legally binding, there are also built-in enforcement mechanisms, including an Investor-State Dispute Settlement (ISDS) process, in which corporations can sue countries over rules they feel are infringing on their expected profits. ISDS, enshrined in other trade deals like the US.-Central America Free Trade Agreement (CAFTA), has been a powerful lever for corporations to challenge national and local laws. CAFTA has allowed mining companies to sue Latin American countries, notably El Salvador, for refusing them the “right to mine”—likewise, corporations like Monsanto have power to sue small countries that don’t want their products, and will see that power increased in the TPP. Under regulatory deals, secret panels of trade boosters tell sovereign countries how to legislate.

It’s done in deep secrecy: While the regulatory focus of TPP means that the deal could have tremendous impacts on domestic policy, absolutely everything the public—and most of Congress—knows about the actual content of the TPP comes from leaks rather than public debate or published texts; negotiating texts are kept top-secret. Members of Congress only have limited, hard-fought access to negotiating texts. Those who go through the rigmarole of seeing the text are not allowed to take any notes on it, publicize what they’ve learned, or share specific information with anyone. In 2012, then-U.S. Trade Representative Ron Kirk intimated that secrecy is needed precisely because Congress and the people they represent may disagree with the issues USTR and the other negotiators are pushing. Under the terms of the negotiations, even after the deal is completed and made public, those past negotiating texts will stay secret for four years after it takes hold. In 2012, after battling for months to see the agreement’s text, Rep. Alan Grayson (D-FL) called it ironic that “the government thinks it’s alright to have a record of every single call that an American makes, but not alright for an American citizen to know what sovereign powers the government is negotiating away.” More recently, 130 Congressional opponents of TPP’s secrecy sent a letter to the White House pointing out that previous trade deals set a much higher bar for transparency.

It’s a corporate brainchild: So, with TPP negotiations safely insulated from our democracy, how does USTR make decisions? Six hundred corporate advisors are allowed direct input to the negotiation texts, even as our elected officials are offered no meaningful access. The “goals” of the USTR value free markets over any and all other concerns, like those of workers or farmers, public health or the environment. In this frame, countries’ protective measures like tariffs and quotas, technical regulations like consumer labeling laws for food, and food safety standards like the restrictions many countries have put on beef after the breakout of Mad Cow disease in the early 2000s, become problems to be solved rather than legitimate exercises of policy. The corporate bias in these trade deals is especially apparent in agriculture: USTR’s Agricultural Policy Advisory Committee is loaded with prominent members of huge agribusiness concerns like the National Cattlemen’s Beef Association and Cargill. When corporations run the negotiations, policy judgments are made on the basis of how much they “distort” trade rather than how much they support the public good.

It’s dependent on Fast Track: Whatever USTR and the other negotiators decide must be approved by the U.S. Congress. But proponents don’t want TPP subject to the same processes as other legislation. USTR and its allies are fighting for Fast Track, or “Trade Promotion” Authority (TPA). TPA is a measure originally designed by the Nixon administration. It mandates both houses of Congress to hold a yes or no vote on the completed text of the deal within 90 days, with no ability to amend or revise the deal; this is a privilege no other piece of legislation ever gets. Congress has yet to consider Fast Track and this will be a major hurdle for the TPP.

And this is just agriculture. So, for example, consider the current bullying the US government is attempting in Europe to have Europe tone down—i.e., weaken—its pesticide regulations proposals. Or the US’s attempts to force the EU to allow imports of US beef laden with hormones, which the EU have persistently blocked for decades. Could Monsanto or Syngenta or anyone, really, take European governments to this special court and argue that not allowing beef hormones could affect Monsanto’s profitability, and should therefore be ruled illegal under TTIP? Who knows? Since we don’t know the details of any of this, we can’t know. In the case of the TPP, global agribusiness comanies—many of them US companies—are already pushing hard for policies that would weaken the ability of governments to protect local farmers, and that would further the large-scale development of factory farms, but in this case purely for export. Anyone ever live downwind, or downstream, from a factory farm? Wendell Berry would decidedly not approve.

The good thing is that people have started to notice. The new government in Greece, now headed by the ”leftist” Syriza party, has indicated it would not ratify the treaty in its present form. Politicians in Germany have expressed a similar viewpoint. The European Commission has, in fact, published eight chapters of the EC’s negotiationg texts of TTIP—which is how we know what they are. The EC is committed to publishing 16 more chapters. And just recently the Environmental Audit Committee of Parliament issued a report that warned the UK and European environmental and public health regulations could be weakened by the treaty. They also call out the dispute settlement element as something that could prevent future environmental regulations. And good old Elizabeth Warren is on the case on the ISDS in the TPP, which suggests she won’t like it in TTIP either.

None of this is new. Various NGOs have been making noises about these same issues for some time. So why does the Obama administration think that these are really good deals to pursue? Do they really not have anyone on staff who pays attention? Are these all free trade believers, who are really no better than the crazy libertarians we lie to laugh at regularly because they are so disconnected from the way the world actually works? Maybe they’re all just people who expect to continue the revolving door policies of DC, and hope they’ll end up working for some bunch of lawyer pushing future trade deals. Who don’t we have one with yet? Oh, wait, the entire Southern Hemisphere.

How did the world get hornswoggled by the concept of “free trade?” It isn’t David Ricardo’s world anymore, and hasn’t been for some time. Yes, I know Ricardo’s arguments, as does anyone who has ever studied economics, or for the CFA exam, anywhere. But that was a different world, where the mobility of capital wasn’t the pervasive problem it is today. And yet we still have a raft of politicians, especially in the US, for whom “free trade” is an article of faith—in spite of its manifest failure to actually exist.

There is just no way that anyone, even in the Obama administration, should be allowed to Fast Track any of this. Why do the Obama people want this—so that no one actually know what’s in the treaties? This is the sort of stunt I would expect from Romney, or any Bush. It deserves the light of day, and, just perhaps, may be getting it.

The postage stamp above, from 1950 China, shows Joseph Stalin and Mao Zedong celebrating some long-forgotten trade deal.

9 replies »

  1. Good piece.

    For a while, I was a world expert on international trade in wheat, meat, and sugar. Suffice to say, you’re right–free trade is a unicorn. And the U.S. and EU are the very worst abusers of all. Anything that doesn’t address invisible subsidies (e.g., Canada’s support of rail to get wheat to market at sub-market prices or the US Farm Loan program) is nonsense. (One of my favorite anecdotes is standing in the office of a senior bureaucrat at the mammoth USDA building and having him take me to the window and ask my what I say out there. I stared for a moment and then said, “Washington.” He shook his head. “Well I see twelve million farmers and they all vote.”

    To apply it to these agreements, if these treaties did get rid of trade barriers, new and more insidious ones would emerge to replace them, and good luck getting the US to agree to any ruling that goes against us. We’ve have the sovereignity flag flying before you can say “UN.”

    • Yeah, we’ll have a fit over the imaginary threats of Agenda 21, but remain blithely unconcerned about corporations taking over our lives. What an interesting way to live.

  2. Great stuff! In the beginning, I was such an Obama supporter. He did criticize NAFTA as a candidate. I just don’t understand his positions at all anymore.

  3. wuf, I learned more about free trade agreements from reading this than anything else. Thanks for investing the time it took to research and write this.

    I agree with Sam. All politicians, eventually, are reduced to that lowest common denominator: Do what the billionaires say.

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