Obama’s Trade Agreements are a Gift to Corporations

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Obama’s Trade Agreements are a Gift to Corporations

"These agreements are conceived and drafted by corporations, and sponsored by both political parties."

People dressed in pig costumes take part in a demonstration against the Transatlantic Trade and Investment Partnership (TTIP), a proposed free trade agreement between the European Union and the United States, in Munich, Germany on Saturday,  April 18, 2015. REUTERS/Michael Dalder

On Thursday, legislation moved forward that would give President Obama authority to negotiate two contentious trade deals: the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). But for the most part, these aren’t trade agreements at all. They’re a gift to corporations, here and in partner countries, that claim to be restrained by domestic regulations.

If these deals pass, the pharmaceutical industry could get new leverage to undermine regulations requiring the use of generic drugs. The tobacco industry has used similar “trade” provisions to attack cigarette package warnings.

A provision in both deals, known as Investor State Dispute Settlement, would allow corporations to do end runs around national governments by taking their claims to special tribunals, with none of the due process of normal law. This provision has attracted the most opposition. It’s such a stinker that one of the proposed member nations, Australia, got an exemption for its health and environmental policies.

To get so-called fast-track treatment for these deals, the administration needs special trade promotion authority from Congress. But Obama faces serious opposition in his own party, and he will need lots of Republican votes. He has to hope that Republicans are more eager to help their corporate allies than to embarrass this president by voting down one of his top priorities.

But the real intriguing question is why Obama invests so much political capital in promoting agreements like these. They do little for the American economy, and even less for its workers.

The trade authority vote had been bottled up while the Senate Finance Committee Chair, Orrin Hatch of Utah, and his Democratic counterpart, Ron Wyden of Oregon, worked out compromise language in the hope of winning over skeptical Democrats. The measure announced Thursday includes vague language on protections for labor and environmental standards, human rights, and Internet freedoms. Congress would get slightly longer to review the text, but it would still have to be voted on as a package that could not be amended.

Wyden trumpeted these provisions as breakthroughs, but they were scorned by leading labor and environmental critics as window dressing. Lori Wallach, of Public Citizen’s Global Trade Watch, points out that the language is almost identical to that of a 2014 bill that had to be withdrawn for lack of support. Only about a dozen House Democrats are said to support the measure — and many Republicans won’t back it unless more Democrats do.

But why would they, at a time when Hillary Clinton sounds more populist and momentum is increasing for campaigns to raise the minimum wage? Speaking last week at the Brookings Institution, Jason Furman, chair of Obama’s Council of Economic Advisors, proclaimed that, according to an elaborate economic model, by 2025 the Pacific deal would increase US incomes by 0.4 percent, or about $77 billion.

That’s pretty small beer. And as Furman admitted, the projection is only as good as its economic assumptions. One such heroic assumption is full employment, but this deal might well reduce US employment by increasing our trade deficit.

The TPP was rolled out with great fanfare in 2012 as part of Obama’s “pivot to Asia.” The subtext was that a Pacific trade deal would help contain China’s influence in its own backyard.

Since then, Beijing has unveiled a development bank that rivals the US-dominated World Bank, and our closest allies — Britain, France, Germany, Italy — are lined up to join. It’s not at all clear how the TPP, whose only large Asian member would be Japan, helps contain China, whose economic influence continues to grow.

Basically, ever since the North American Free Trade Agreement of 1993 (NAFTA), trade policy has been on autopilot. Tariffs are now quite low, and these deals are mainly about dismantling health, safety, consumer, labor, environment, and corporate regulations.

These agreements are conceived and drafted by corporations, and sponsored by both political parties. For the Obama administration, the key official negotiating these deals is US Trade Ambassador Michael Froman, a protégé of former Citigroup and Goldman Sachs executive Robert Rubin, who was a big promoter of NAFTA while serving as Bill Clinton’s top economic official.

Mainly, these deals help cement a corporate alliance with the presidential wing of the Democratic Party and divert attention from the much tougher challenge of enacting policies that would actually raise living standards. In the closing days of the Obama era, this is what passes for bipartisanship.

Robert Kuttner

Robert Kuttner is co-founder and co-editor of The American Prospect magazine, as well as a Distinguished Senior Fellow of the think tank Demos. He was a longtime columnist for Business Week, and continues to write columns in the Boston Globe and Huffington Post. He is the author of A Presidency in Peril: The Inside Story of Obama's Promise, Wall Street's Power, and the Struggle to Control our Economic Future, Obama's Challenge, and other books.

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