In October, President Obama hailed the proposed Trans-Pacific Partnership (TPP) as “the most progressive trade deal in history.”
But progressive public-interest organizations say that the final text, the fruit of seven years of secretive trade talks between the United States and 11 other Pacific Rim countries, dashed even their low expectations. The deal not only continues most of the troubling features of trade agreements since NAFTA but also breaks worrisome new ground.
Like most recent international economic agreements, the TPP only glancingly resembles a classic trade deal, concerned mainly with tariffs and quotas. Rather, like the WTO agreements or NAFTA, it is an attempt to set the rules of the global economy to favor multinational corporations over everything else, trampling on democracy, national sovereignty and the public good. The more than 600 corporate lobbyists who had access to the draft texts used their insider status to shape the deal, while labor unions, environmentalists and others offered testimony from outside, with little impact.
Like most post-World War II trade deals, the TPP also has a strategic political goal: tying as many countries as possible to the United States as trade partners — often under terms unfavorable to the average American worker — in order to win political support against anyone seen as a rival to the American economic model. When Obama defends the TPP, he often casts it as a challenge to China’s growing role in defining the Asian economy.
In June, with the help of GOP leaders, Obama very narrowly won “fast-track” authority on the deal, restricting Congress to an up-or-down vote, with no amendments. He would no doubt like that vote soon. Repudiating the TPP could become a campaign talking point across party lines. Already, all three Democratic presidential candidates and most of the Republicans have come out in opposition to it.
But Congress has never rejected a trade agreement under fast-track authority, and some TPP opponents suspect that the administration gave a small group of Democrats a pass to vote no on fast track as long as they pledged to vote yes on the final agreement if needed. This is likely to be a close fight.
To inform that fight, we’ve asked experts to explain, in plain English, some of the deal’s most alarming implications.
#1 IT GIVES 9,200 FOREIGN FIRMS THE RIGHT TO CIRCUMVENT OUR COURTS AND ATTACK THE LAWS WE RELY ON FOR A CLEAN ENVIRONMENT, SAFE FOOD AND DECENT JOBS.
Foreign corporations would be empowered to drag the U.S. government in front of investor-state dispute settlement (ISDS) tribunals composed of three private arbitrators. Many ISDS arbitrators are lawyers who rotate between suing governments for corporations and acting as the “judges.”
There is no limit on the amount of our tax dollars the government can be ordered to pay when foreign corporations successfully argue that their TPP rights have been undermined. Compensation orders could include a corporation’s estimate of the future profits it would have earned in the absence of the public policy it is attacking. Even when governments win, under TPP rules they can be ordered to pay for the tribunals’ costs and legal fees, which average $8 million per case.
The TPP’s expansion of the ISDS system would come just as a surge in ISDS cases elevating corporate profits over the public interest has led other countries, such as South Africa and Indonesia, to begin revoking their ISDSenforced treaties. Recent cases include Eli Lilly’s attack on Canada’s cost-saving medicine patent system, Philip Morris’ attack on Australia’s public health policies regulating tobacco, Chevron’s attack on an Ecuadorian court ruling that ordered payment for mass toxic contamination in the Amazon, and Vattenfall’s attack on Germany’s phase-out of nuclear power.
Almost all of the 50 past U.S. ISDS-enforced pacts are with developing nations with few investors here, allowing the United States largely to dodge ISDS tribunals and fines to date. But the TPP would extend ISDS powers to more than 9,200 U.S. subsidiaries of some 1,000 corporations in TPP nations, including the economic powerhouse of Japan.
The tribunals are unaccountable to any electorate. There is no outside appeal on their dictates. In effect, the TPP elevates these foreign firms to equal status with the entire U.S. government.
—Lori Wallach, Director, Public Citizen’s Global Trade Watch
#2 ITS ENVIRONMENTAL PROTECTIONS ARE MOSTLY TOOTHLESS, AND IT WOULD DIRECTLY ENCOURAGE FRACKING.
Our air, water and health are all at stake with the TPP, which is why so many environmental groups have expressed grave concern.
Most noticeable is that the roughly 6,000 pages of TPP text don’t even mention the words “climate change,” much less attempt to address the fact that the TPP would increase climate-disrupting emissions. The deal takes a step back from the environmental protections of all U.S. free-trade agreements since 2007 by failing to require TPP countries to fulfill their obligations in a set of core international environmental treaties.
The TPP’s weak conservation rules won’t do enough to adequately protect marine life and wildlife from harmful practices such as shark finning or illegal logging. But fossil fuel corporations would be empowered to challenge our public health and climate safeguards in unaccountable ISDS tribunals. This corporate power grab has been used in past deals to challenge clean energy initiatives, bans or moratoriums on fracking, and more.
Speaking of fracking, we could see a whole lot more of this dirty and destructive practice in our backyards thanks to the TPP. The pact would require our Department of Energy to automatically approve all exports of liquefied natural gas (LNG) to all TPP countries — including Japan, the world’s largest LNG importer. This means more fracking, air and water pollution, climate emissions and reliance on fossil fuels — when we should keep those fuels in the ground and fully embrace clean energy.
—Ilana Solomon, Director, Sierra Club’s Responsible Trade Program
#3 WE’D LOSE MILLIONS OF MANUFACTURING JOBS.
Between 1997 and 2014, America lost more than 5 million manufacturing jobs. The vast majority, according to the Economic Policy Institute, vanished as a result of growing trade deficits with America’s free-trade and investment-deal partners. Some 850,000 jobs were lost to NAFTA after it took effect in 1994. China’s entry into the WTO in 2001 cost the United States a staggering 3.2 million manufacturing jobs over the next dozen years.
But the numbers on the TPP look even worse. The Wall Street Journal calculates that by 2025, the deal would increase the U.S. trade deficit in manufacturing, car assembly and car parts by $55.8 billion a year. At that rate, based on the U.S. Department of Commerce formula for jobs created by exports, the TPP would cost another 323,000 American manufacturing workers their jobs. That’s almost a million jobs every three years.
And that is a conservative estimate, because the TPP negotiators failed to include enforceable methods to stop foreign labor abuses, including poverty wages and perilous working conditions. This facilitates a race to the bottom. Corporations move factories overseas because they can’t get away with paying Americans the $107 a month that is the wage floor in Vietnam.
Also, disastrously, the TPP would lower the minimum requirement for cars and auto parts to be considered produced by a U.S. trade partner. The proportion would fall from 62.5 percent under NAFTA to 45 percent under the TPP, which means more than half of a vehicle could be manufactured in China while auto companies would still benefit from zero U.S. tariffs.
For decades, regulations for free-trade agreements like the TPP have lined the pockets of the wealthy and emptied those of workers. This must stop.
—Leo Gerard, President, United Steelworkers
#4 IT DOES NOTHING TO FIX OUR ENORMOUS TRADE DEFICIT.
Our current trade deficit is close to $500 billion annually, or 3 percent of our GDP. This money is creating demand and employment in other countries, not the United States, and implies the loss of close to 3 million U.S. jobs a year.
This matters hugely in the context of an economy facing a shortfall in demand, or “secular stagnation.” In more normal times, the demand lost to the trade deficit could be replaced by more investment or consumption spending. But under secular stagnation, neither will fill that loss.
Yet the TPP fails to address the main reason for our large and persistent trade deficit: currency manipulation by other countries. Lowering one’s currency by 10 percent against the dollar has the same effect as imposing a 10 percent tariff on all imports and paying a 10 percent subsidy on exports. Raising the price of exports and lowering the price of imports makes U.S. goods and services less competitive internationally and domestically.
A number of countries, including TPP parties Japan, Malaysia and Vietnam, have engaged in this practice over the last two decades, driving up the U.S. trade deficit.
Ordinarily we would expect the value of a currency of a country running a large trade deficit to decline. That would make its goods and services more competitive internationally, bringing its trade closer to balance. However, the dollar has not fallen in response to the trade deficit because the central banks of China and other countries have purchased huge amounts of dollar-based assets, such as U.S. government bonds. By holding these assets, central banks prop up the value of the dollar, keeping the U.S. trade deficit large.
The Obama administration opted not to make currency management an issue in TPP negotiations. As a result, there is only a side agreement that provides no new authority to combat currency management beyond what exists in current law.
—Dean Baker, Co-director, Center for Economic and Policy Research
#5 IT WOULD MAKE MEDICINES MORE EXPENSIVE, AND COMPROMISE ACCESS FOR MANY PEOPLE IN THE PACIFIC RIM.
In all countries, people and health systems depend on low-cost generic medicines to make treatment affordable. Prices of patented drugs are rising every year. Absent generic competition, there is little reason for drug companies to bring drug prices down. The brand-name pharmaceutical industry business model relies on maximizing profits by selling at very high prices to the few rather than affordable prices to the many. Most countries, including our own, ration care.
The problem is especially grave in developing countries, and the TPP would make it worse. TPP rules would require countries to change their laws in order to expand drug companies’ monopoly powers, leading consumers and healthcare providers to pay higher prices on more drugs for longer — or go without needed treatment. TPP rules are not about providing basic patent protections, as White House messaging sometimes suggests. All TPP countries already have those rules.
Instead, TPP rules are lobbyist-driven bonuses for the industry. The rules include patent term extensions and patents on new uses of old medicines, and procedural requirements to give pharmaceutical companies greater opportunity to influence government drug coverage and reimbursement decisions. There are marketing exclusivity rules, which create pharmaceutical monopolies even when a product is offpatent. There is no compelling evidence that these rules will spur medical innovation or create jobs.
Some brave TPP negotiators fought the pharmaceutical industry and the U.S. Trade Representative for many years. If it were not for their efforts, the TPP would threaten even more lives. Nevertheless, if the deal is approved, the TPP’s final rules will lead to preventable suffering and death.
—Peter Maybarduk, Director, Public Citizen’s Global Access to Medicines Program
#6 IT WOULD COMPROMISE THE SAFETY OF OUR FOOD.
Most immediately, the TPP would open up a flood of seafood, dairy, fruit and vegetable imports to the United States at a time when import inspections are already severely underfunded. The United States currently inspects just 2 percent of food imports, and there is evidence that fish and seafood are already compromised: Consumer Reports found that 60 percent of seafood (91 percent of which is imported) tested was contaminated.
The TPP also gives companies new ways to challenge food safety processes and inspections. It would create a “rapid response mechanism” that would allow foreign companies to challenge food safety decisions and would compel inspectors to make those new assessments quickly, creating new pressures on already hard-pressed inspectors with no new resources or even basic agreement on what food safety should look like.
The deal would also increase corporate control over agriculture. The TPP is modeled on past free-trade deals that have made wildly inaccurate promises about benefits for small farmers. Under NAFTA, when U.S. corn exports to Mexico increased dramatically, more than 2 million Mexican farmers were driven from their lands. But the number of U.S. family farmers fell sharply, too. Exports increased, but revenues for most farmers did not. Along the way, large multinational companies gained more control over production, so farmers have fewer options of where to buy or sell their goods. It shouldn’t surprise us that trickledown economics doesn’t work for farmers any better than it does for factory workers.
The TPP aims above all to give multinational corporations more power over standards and supply chains, which expands a U.S. agricultural system designed to produce crops for export rather than to provide consumers with healthy food.
—Karen Hansen-Kuhn, Director of Trade, Technology and Global Governance, Institute for Agriculture and Trade Policy
#7 IT WOULD DESTABILIZE GLOBAL FINANCE.
During nearly all of the seven years negotiators worked on the TPP, the world was mired in or recovering from the worst economic crisis in 75 years — one triggered by the collapse of a deregulated, overgrown and corrupt financial sector. Negotiators must not have noticed, because the TPP gives the world’s biggest banks and finance companies even more power. They could much more easily challenge and overturn laws and regulations in countries where they invest — plus collect compensation if their profits don’t meet the firm’s “expectations” as a result of public policies. The new terms will make it easy for big finance to file challenges to government regulations or policies in ISDS tribunals and win. The loser? Global financial stability.
The TPP would prohibit capital controls, which permit countries to block destabilizing flights of “hot money” from investors who hope to take momentary advantage of speculative opportunities, then pull out of the country just before the bubble they create collapses. It would also stop enactment of financial transaction taxes, a means of dampening speculation and raising needed public revenue.
The list goes on. TPP “market access” rules would undermine efforts to limit the size of banks or to establish “firewalls” between financial activities, such as restoring U.S. Glass-Steagall Act regulations, which were eliminated in 1999, contributing to the subsequent financial crisis. It would make it impossible for countries to reject financial “innovations” such as derivatives — the foundation of many “bubbles” that burst in 2008 — if they exist in any other TPP nation. Despite evidence swirling around them every day in the form of global financial chaos, negotiators crafted the TPP’s financial rules following a flawed deregulatory model that was an affront to democracy and sound economic policy — just to protect the “expectations” of profits by big multinational banks and financial firms.
—David Moberg, Senior Editor, In These Times
#8 IT WOULD STRENGTHEN ALREADY-FLAWED INTELLECTUAL PROPERTY REGULATIONS IN AWFUL WAYS, PARTICULARLY ON THE INTERNET.
Copyright laws in America have already had a profound effect on Internet users. The Digital Millennium Copyright Act, or DMCA, was intended to update copyright for the digital age. But over the years, the terms of the law have infringed on fair use and free speech. This ranges from YouTube users flagged for copyright violation because they posted videos of their baby dancing to a Prince song, to more troubling instances of investigative journalists being censored based on things like sketchy defamation claims.
Without an opportunity for the public to weigh in, the U.S. Trade Representative — the lead U.S. negotiator on the TPP — and negotiators for other countries were flooded by lobbyists from corporations, Hollywood and music executives, pushing for more stringent protections on their content.
The result? An agreement that forces what’s broken with copyright law in the United States upon other countries. The TPP will lengthen onerous copyright terms from a previous trade agreement — keeping information and art locked away from the public domain for decades and opening the floodgates for further abuse of copyright laws and censorship.
What’s more, Internet service providers will continue to hastily remove content flagged as a copyright violation, with little review. And countries will be required and incentivized to deliver heavy-handed sentences and fines to alleged infringers.
Perhaps most shocking to anyone who owns a website is a requirement that countries publish databases of names and addresses associated with certain domains. This is a paricularly troubling step for activists and journalists who could face threats and intimidation for the issues they champion— deterring many from speaking out at all.
This is not a done deal. The TPP must go to lawmakers in each country for final passage. Before that happens, activists must be swift to ring the alarm bells and ensure that the very architecture of the Internet is not broken.
—Sara Cederberg, Campaign Director, Demand Progress
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David Moberg, a senior editor of In These Times, has been on the staff of the magazine since it began publishing in 1976. Before joining In These Times, he completed his work for a Ph.D. in anthropology at the University of Chicago and worked for Newsweek. He has received fellowships from the John D. and Catherine T. MacArthur Foundation and the Nation Institute for research on the new global economy.