It aint your grandpa’s trade agreement. Though the proposed Trans-Pacific Partnership is attended by the usual chorus, featuring competing refrains of “International Trade Took My Job” versus “International Trade Got me a Better Job, plus some Sweet Deals at Walmart,” the controversial aspect of TPP isnt the opening of borders through the elimination of tariffs. It’s about strengthening the power of corporations over national governments, and limiting governments – democratic or otherwise – in their ability to regulate industry.

A relatively minor story just out of Congress serves as a good illustration. The House Agriculture Committee voted to repeal a US labeling law that requires meat to specify its country-of-origin. What’s interesting is why the committee moved to eliminate the law: not because they thought country-of-origin information was superfluous or irrelevant to consumers; but rather because the World Trade Organization decided that the labeling law discriminated against Canadian and Mexican firms. If the US fails to repeal the law, Mexico and Canada will be permitted to retaliate, and that will be costly.

Ignoring whether these labeling laws are actually good or bad for US consumers – we focus instead on the process. An international tribunal made a decision, and Congress is now likely to respond by changing US laws – not for the interests of their electorate (as if!), but without regard to their interests.

TPP goes even further. It would create new supra-national tribunals, in which firms could sue governments for their failure to respect TPP’s provisions. Prevailing firms could effectively collect their “lost profits” from taxpayers. And the tribunals would not be staffed by independent judges with lifetime appointments – but rather by corporate representatives on a rotating basis. Today you’re a plaintiff, tomorrow you’re a judge, and next week you’re a plaintiff again. Nice work if you can find it….

Tariffs have already been all-but eliminated across international borders by existing trade agreements. Modern-day trade agreements like TPP are much more concerned with dispute resolution processes and harmonization of national laws, to smooth things out for multinational corporations. That in itself isnt a bad thing. In past decades, the US pushed to make commercial laws uniform across the fifty states. The resulting Uniform Commercial Code has helped to facilitate interstate commerce.

But TPP would go even further, and may too much restrict the latitude of governments. For example, TPP takes aim at banking regulations. While we could all probably get on not knowing whether our pork chop hails from Texas or Manitoba, we should not be thrilled to see US banking reforms – passed in the wake of the 2008 financial crisis – undone.

Free trade is good – and freer is usually better. That the parties to a transaction may be based in different towns, states or countries isnt terribly important to the analysis. If everyone acts according to their individual interests, the net result is usually that everyone is better off. While things usually are that simple, circumstances arise when people, through their governments, should restrict trade to further a greater good.* And the problem with TPP is that it promises to run roughshod over democratic processes, by which individual nations tailor their laws according to their own values and their perception of the national interest.

 

Refs:

http://en.wikipedia.org/wiki/Trans-Pacific_Partnership

http://www.thenation.com/article/168627/nafta-steroids#

http://krugman.blogs.nytimes.com/2015/05/19/the-mis-selling-of-tpp/?module=BlogPost-Title&version=Blog%20Main&contentCollection=Opinion&action=Click&pgtype=Blogs&region=Body

http://www.washingtonpost.com/blogs/plum-line/wp/2015/04/30/battle-rages-over-key-obama-trade-policy/

http://www.bloomberg.com/politics/articles/2015-05-15/warren-claim-that-trade-bill-could-undermine-dodd-frank-is-right

http://news.yahoo.com/house-consider-repeal-meat-labeling-law-071204979–finance.html

http://www.azlyrics.com/lyrics/naughtybynature/opp.html

 

* For example, it doesnt much matter whether a factory releases carbon dioxide in Canton, Ohio or in Guangdong, China – the impact on global warming is the same. While people in one country might reasonably accept a dirtier local environment as a cost of having more local industrial jobs, their decision to not regulate carbon impacts people in all countries. And so it’s quite reasonable for other countries to limit trade with the polluting country, as a means of protecting their own environment.

Another example: Left to themselves, laborers tend to organize and demand better pay and working conditions. Therefore there is little pressing need for western countries to impose their own labor standards on the developing world. However some third world governments systematically harass and suppress labor movements in an effort to artificially maintain a competitive advantage. It is reasonable to respond with trade restrictions if only to ensure a level playing field, if not to promote human rights.

 

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