The Free-Trade Consensus Is Dead

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Like most modern trade deals, TTIP has less to do with tariffs than with so-called “non-tariff trade barriers,” a euphemism for ordinary health, safety, environmental, and financial regulations that corporations want to weaken both at home and abroad. In democratic societies, the people usually decide the balance between protecting the public and satisfying commerce. But TTIP’s goal is to eliminate trade barriers, even if the public prefers them, to facilitate the smooth movement of corporate capital. This prevents future governments from operating in the public interest if it harms business in any fashion.

[David Dayen| May 5, 2016 |The New Republic]

Speaking on Monday at the Milken Institute Global Conference in Los Angeles, U.S. Trade Representative Michael Froman made a familiar argument. The Obama administration has used trade agreements to reshape globalization in the best way, he said. We’ve put labor and environmental standards at the core of the deals, he claimed, and we’ve created a level playing field for U.S. workers. 

Froman’s timing was unfortunate. The same day, documents leaked by Greenpeace Netherlands revealed that U.S. negotiators working on a trade deal with the European Union have actually been pressuring their trading partners to lower those same standards.

This distance between Froman’s words and the contradictory reality is at the heart of the disintegration of the global trade consensus. The 2016 presidential election has focused heavily on trade agreements, and the leading basher of them is now the Republican nominee for president. We’re seeing something similar on the Democratic side: You can argue that Hillary Clinton has not moved on any major issue as much as she has moved on trade agreements, publicly opposing a Trans-Pacific Partnership (TPP) agreement she enthusiastically promoted as secretary of state.

In short, the center of gravity holding together a policy framework that prioritizes corporate dominance over democratic governance has collapsed. And this week’s leak is another nail in the free-trade coffin.

The leaked documents show current negotiating positions for the Transatlantic Trade and Investment Partnership (TTIP), a deal between the U.S. and the EU, the world’s largest common market. The two sides have been locked in negotiations since 2013; the thirteenth round of talks ended last week in New York.

Like most modern trade deals, TTIP has less to do with tariffs than with so-called “non-tariff trade barriers,” a euphemism for ordinary health, safety, environmental, and financial regulations that corporations want to weaken both at home and abroad. In democratic societies, the people usually decide the balance between protecting the public and satisfying commerce. But TTIP’s goal is to eliminate trade barriers, even if the public prefers them, to facilitate the smooth movement of corporate capital. This prevents future governments from operating in the public interest if it harms business in any fashion.

The EU routinely makes its TTIP negotiating positions public; until this leak, the U.S. positions were a secret. That this leak is so up-to-date suggests someone on the inside, unhappy with the state of the talks, decided to go public. And it’s easy to understand why: In virtually every instance in the negotiations, the U.S. has preferred less-stringent constraints on corporations to the EU’s tougher stances.

The U.S. negotiators complained about the European ban on animal testing in cosmetics, calling it an “irreconcilable” difference that would cripple market access. They proposed pre-empting restrictions Europe maintains on genetically modified organisms, euphemistically referring to them as “products of modern agricultural technology.” They sought a dispute-mechanism process for food safety and pesticides that would outsource decision-making to a UN organization, where corporate executives often sit on the national delegations and where rulings have typically been more lax than those from the EU.

The documents also show that the U.S. wants to change the entire EU rulemaking process. In a chapter entitled “Regulatory Cooperation,” U.S. negotiators proposed that the EU inform American companies of planned regulations in advance, giving them an opportunity to influence the rules. They want the EU to limit regulations to those least burdensome to business, and seek out “alternatives to achieve the appropriate level of protection” without a new rule. They would require the EU to take into account the trade effects of regulations; that means that if regulations banning a hazardous chemical would stop a corporation from selling a product containing it in the EU, the European Parliament would have to give those market considerations as much weight as safeguarding public health before approving the rule.

The regulatory proposal would also add layers of bureaucracy and detailed “impact assessments”—the kinds of cost-benefit analysis Washington habitually uses to stop regulations cold. In fact, just a few weeks ago the Obama administration argued against including a cost-benefit analysis in determining whether financial institutions posed a systemic risk to the economy—because it’s too subjective, burdensome, and biased in favor of corporations. Now its trade negotiators want to mandate the same analysis for Europe.

A “science and risk” provision is even more explicit: No prohibitions on products should be implemented, the U.S. demands, without scientific proof that the products are harmful, rather than as a precautionary measure. This is a higher regulatory burden than current EU practice, and would result in overturning several of its laws.

Finally, in this agreement to remove barriers to trade, the U.S. is also threatening protectionist measures to achieve its goals. In one section, negotiators commit to authorizing exports of liquefied natural gas to the EU, a major user of that energy source. However, the Sierra Club points out that, in a separate note, the U.S. holds back on that promise unless it can obtain further concessions. Washington is running the same gambit on permitting imports of European cars, seeking higher quotas for its agricultural exports.

The TTIP leak provides more fuel for a growing movement against global trade agreements, particularly in Europe, where public sentiment was already running heavily against the deal. Just yesterday, even after the EU’s trade minister Cecilia Malmström called the leak insignificant, France’s trade minister determined that the talks were now “likely to stop” altogether.

Froman chose not to address the leak in Los Angeles on Monday. But Assistant Trade Representative Matthew McAlvanah did some damage control, telling The New York Times that TTIP would “preserve, not undermine, our strong consumer, health, and environmental standards.” It’s hard to square that with the leaked texts, which expose how officials seek to bully the EU into capitulation with a corporate-friendly agenda.

But the greater importance of the leak is the way it exposes this mismatch between America’s public and private stances—not just on TTIP, but on all trade deals. In public, for instance, officials claim the Trans-Pacific Partnership (TPP) raises labor standards; in private, the agreement does not force Mexico to commit to such improvements. In public, Froman said Monday that we cannot allow China to write the rules for global trade; in private, the U.S. is actively negotiating a bilateral investment treaty with the Chinese, collaborating with them in writing those rules. And in public, Froman warns about the cost of delay and the geopolitical risk of inaction—but he quietly acknowledged on Monday that “trade plays a relatively small role in our economy.” The meager benefits come at the expense of disallowing countries to operate in the interests of their citizens.

I’ll acknowledge a certain amount of demagoguery about trade, particularly from the Republican nominee, who wants to supplant bullying other countries on behalf of business with bullying them on behalf of Donald Trump. But there’s no question that economic anxieties across the political spectrum have been channeled into trade policy, and even once-supportive economists like Paul Krugman have grown more skeptical that you can compensate the workers who lose out to global competition. Ham-handed defenses of the trade agenda from those who conceal their true aims don’t help the case.

While some free traders don’t believe in the sincerity of Hillary Clinton’s public stance against TPP (perhaps because she’s said nothing about TTIP), and hope her election would signal a return to the status quo, I tend to think the bipartisan shift on trade reflects the popular will. What’s changed is that when defenders claim that trade agreements will increase prosperity for all instead of a few well-connected corporate interests, people no longer believe them. And they have nobody to blame but themselves.

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