What’s more, those regulations were often put
in place by governments responding to the democratic demands of their
citizens. Trade agreements’ new boosters euphemistically claim that they
are simply after regulatory harmonization, a clean-sounding phrase that
implies an innocent plan to promote efficiency. One could, of course,
get regulatory harmonization by strengthening regulations to the highest
standards everywhere. But when corporations call for harmonization,
what they really mean is a race to the bottom.
When agreements like the TPP govern
international trade — when every country has agreed to similarly minimal
regulations — multinational corporations can return to the practices
that were common before the Clean Air and Clean Water Acts became law
(in 1970 and 1972, respectively) and before the latest financial crisis
hit. Corporations everywhere may well agree that getting rid of
regulations would be good for corporate profits. Trade negotiators might
be persuaded that these trade agreements would be good for trade and
corporate profits. But there would be some big losers — namely, the rest
of us.
These high stakes are why it is especially
risky to let trade negotiations proceed in secret. All over the world,
trade ministries are captured by corporate and financial interests. And
when negotiations are secret, there is no way that the democratic
process can exert the checks and balances required to put limits on the
negative effects of these agreements.
The secrecy might be enough to cause
significant controversy for the TPP. What we know of its particulars
only makes it more unpalatable. One of the worst is that it allows
corporations to seek restitution in an international tribunal, not only
for unjust expropriation, but also for alleged diminution of their
potential profits as a result of regulation. This is not a theoretical
problem. Philip Morris has already tried this tactic against Uruguay,
claiming that its antismoking regulations, which have won accolades from
the World Health Organization, unfairly hurt profits, violating a
bilateral trade treaty between Switzerland and Uruguay. In this sense,
recent trade agreements are reminiscent of the Opium Wars, in which
Western powers successfully demanded that China keep itself open to
opium because they saw it as vital in correcting what otherwise would be
a large trade imbalance.
Provisions already incorporated in other
trade agreements are being used elsewhere to undermine environmental and
other regulations. Developing countries pay a high price for signing on
to these provisions, but the evidence that they get more investment in
return is scant and controversial. And though these countries are the
most obvious victims, the same issue could become a problem for the
United States, as well. American corporations could conceivably create a
subsidiary in some Pacific Rim country, invest in the United States
through that subsidiary, and then take action against the United States
government — getting rights as a “foreign” company that they would not
have had as an American company. Again, this is not just a theoretical
possibility: There is already some evidence that companies are choosing
how to funnel their money into different countries on the basis of where
their legal position in relation to the government is strongest.
There are other noxious provisions. America
has been fighting to lower the cost of health care. But the TPP would
make the introduction of generic drugs more difficult, and thus raise
the price of medicines. In the poorest countries, this is not just about
moving money into corporate coffers: thousands would die unnecessarily.
Of course, those who do research have to be compensated. That’s why we
have a patent system. But the patent system is supposed to carefully
balance the benefits of intellectual protection with another worthy
goal: making access to knowledge more available.
I’ve written
before about how the system has been abused by those seeking patents
for the genes that predispose women to breast cancer. The Supreme Court
ended up rejecting those patents, but not before many women suffered
unnecessarily. Trade agreements provide even
more opportunities for patent abuse.
The worries mount. One way of reading the
leaked negotiation documents suggests that the TPP would make it easier
for American banks to sell risky derivatives around the world, perhaps
setting us up for the same kind of crisis that led to the Great
Recession.
In spite of all this, there are those who
passionately support the TPP and agreements like it, including many
economists. What makes this support possible is bogus, debunked economic
theory, which has remained in circulation mostly because it serves the
interests of the wealthiest.
Free trade was a central tenet of economics
in the discipline’s early years. Yes, there are winners and losers, the
theory went, but the winners can always compensate the losers, so that
free trade (or even freer trade) is a win-win. This conclusion,
unfortunately, is based on numerous assumptions, many of which are
simply wrong.
The older theories, for instance, simply
ignored risk, and assumed that workers could move seamlessly between
jobs. It was assumed that the economy was at full employment, so that
workers displaced by globalization would quickly move from
low-productivity sectors (which had thrived simply because foreign
competition was kept at bay through tariffs and other trade
restrictions) to high-productivity sectors. But when there is a high
level of unemployment, and especially when a large percentage of the
unemployed have been out of work long-term (as is the case now), there
can’t be such complacency.
Today, there are 20 million Americans who
would like a full-time job but can’t get one. Millions have stopped
looking. So there is a real risk that individuals moved from low
productivity-employment in a protected sector will end up
zero-productivity members of the vast ranks of the unemployed. This
hurts even those who keep their jobs, as higher unemployment puts
downward pressure on wages.
We can argue over why our economy isn’t
performing the way it’s supposed to — whether it’s because of a lack of
aggregate demand, or because our banks, more interested in speculation
and market manipulation than lending, are not providing adequate funds
to small and medium-size enterprises. But whatever the reasons, the
reality is that these trade agreements do risk increasing unemployment.
One of the reasons that we are in such bad
shape is that we have mismanaged globalization. Our economic policies
encourage the outsourcing of jobs: Goods produced abroad with cheap
labor can be cheaply brought back into the United States. So American
workers understand that they have to compete with those abroad, and
their bargaining power is weakened. This is one of the reasons that the
real median income of full-time male workers is
lower than it was 40 years ago.
American politics today compounds these
problems. Even in the best of circumstances, the old free trade theory
said only that the winners could compensate the losers, not that they
would. And they haven’t — quite the opposite. Advocates of trade
agreements often say that for America to be competitive, not only will
wages have to be cut, but so will taxes and expenditures, especially on
programs that are of benefit to ordinary citizens. We should accept the
short-term pain, they say, because in the long run, all will benefit.
But as John Maynard Keynes famously said in another context, “in the
long run we are all dead.” In this case, there is little evidence that
the trade agreements will lead to faster or more profound growth.
Critics of the TPP are so numerous because
both the process and the theory that undergird it are bankrupt.
Opposition has blossomed not just in the United States, but also in
Asia, where the talks have stalled.
