Economic theory holds that removing trade barriers among nations should increase global wealth. But the proposed 12-nation Trans-Pacific Partnership that Congress must soon give a straight up-or-down vote threatens our liberties as Americans and is likely to add almost nothing to U.S. economic growth.
I have been a longtime critic of the agreement, especially since WikiLeaks obtained a draft of its intellectual property provisions, showed a clear bias in favor of corporations.
Since Washington made the text public in October I have come to see some very real benefits in the agreement — but not nearly enough to warrant making it the law of the land. What I see now is a pact that would make government subservient to corporations, posing a real threat to freedom and self-governance.
Does little on tariffs
There are two chief reasons to reject the TPP. First, the partnership does little for the U.S. on tariffs. In fact, the TPP was only minimally about U.S. tariffs on imports, which overall are insignificant at 1.5 percent, amounting to only a fraction of a penny of each dollar of federal tax revenue. However, the same is not true for exports: Some U.S.-made goods are subject to tariffs of up to 70 percent. Tariffs on U.S. goods imposed by the 11 other countries fall to zero, encouraging more exports of machinery, automotive parts and other manufactured products. But these issues could be resolved in bilateral negotiations without expanding corporate powers.
"What trade agreements [like this] are really about is expanding corporate power while diminishing state power."
Second, the agreement would allow foreign corporations and governments to challenge federal, state and local laws in every other partnership country. The arbitration panels will likely to be composed of trade lawyers agreed to by each side. Despite some precedents in existing treaties, this raises fundamental questions of sovereignty, especially since corporate agents, not judges in courts of law, would make decisions binding on the body politic. That no case brought against the United States under the North American Free Trade Agreement (NAFTA), for example, has resulted in damages should not blind us to the fact that huge damages could be awarded under the TPP.
The TPP would create a system of arbitration run by insiders, who could be advocates one day, arbiters the next, an arrangement almost guaranteed to produce corrupt backscratching for the benefit of corporations and at the expense of we the people.
Worse, no matter how economically damaging, unfair or just plain wrong the decisions of TPP arbitration panels, the rulings will not be subject to review by any court. This is justice of, by and for corporations, which means it cannot be justice.
You could even pay more taxes to cover damages awarded by these unaccountable arbitration panels. More than $400 million in damages have been paid and $14 billion is sought under trade agreements already in effect.
Supporters of the pact try to divert the public from these issues with promises of big economic gains that imply more jobs. Take the Peterson Institute for International Economics, which is sponsored by Wall Street mogul Peter Peterson. News reports last week cited a Peterson estimate that if the agreement were approved, American exports in 2030 would grow by an extra 9.1 percent, or $357 billion, in 2030.
For people to remain free and governments to remain sovereign, corporations must remain subject to state control, not the other way around.
That sounds terrific. The problem is in a related fact all the news reporters missed because they read the press release, not the actual study. The report predicts that imports will rise by the exact same $357 billion as exports, making the net result a big fat zero, as economist Dean Baker pointed out in his invaluable Beat The Press blog.
Actual results will be not much better than zero, at least for America, the World Bank estimates. It projects the American economy in 2030 will be larger by an extra four-tenths of one percent. That’s roughly equal to the economy of metropolitan Oklahoma City. Australia, Canada, Chile and Mexico would see growth increase by a fraction of one percent to about 2 percent.
On the other hand, the World Bank expects Vietnam’s economy to surge by an extra 10 percent and Malaysia about 8 percent.
Some countries that are not part of the pact, such as Thailand, South Korea and the Philippines, can expect their economies to shrink, the World Bank predicted. That could lead to social upheaval. It also raises questions about China, which is not part of the pact and which has become increasingly bellicose under President Xi Jinping. Would Beijing react to the pact by creating its own economic trading zones, by disrupting the deal, by reviving the communist party’s xenophobia or becoming even more aggressive in the South China Sea?
In the U.S., advocates have failed to make the case that the pact will reduce our huge trade imbalances. Existing trade rules enable people to buy goods cheaply, especially Chinese goods, but at a terrible cost of lost manufacturing jobs and steadily draining American assets.
If past experience is any guide, that will only continue with new agreements. NAFTA and our bilateral deals with China and South Korea have resulted in their exports to America growing much faster than our exports to them — a boon to foreign workers at the expense of American workers, especially in manufacturing. Global capitalists are indifferent to these imbalances because they benefit no matter how individual countries fare.
For each dollar of goods we sent to China last year they sent us more than $4 of goods; the trade imbalance ran close to $1 billion per day. With Seoul the ratio is less, about $1.60 to $1, with an annual trade imbalance of $26 billion.
America has done better in services — accounting, banking, information technology, law — but those represent a minority of total trade.
Expanding corporate power
What trade agreements such as TPP and the proposed Trans-Atlantic Free Trade Agreement are really about is expanding corporate power while diminishing state power. Congress, state legislatures and local boards such as county and city councils have already had some of their decisions voided because corporate trade panels deemed them in violation of NAFTA and similar trade pacts. That should never happen.
A corporation is an artificial person, an entity that owes its existence to government. Artificial persons have no conscience and are inherently amoral, subject to the whims of the executives and directors who run them on behalf of their owners. Significantly, corporations are not subject to control at the ballot box, where the people can vote those we entrust with the power of government.
The value of corporations lies in encouraging risk-taking, managing assets owned by groups of people and in conducting business efficiently. But corporations have no place ruling over people or their governments.
For people to remain free and governments to remain sovereign, corporations must remain subject to state control, not the other way around. If we allow corporate arbitration panels — especially panels drawn from a close-knit world of insiders — to rule over governments, our liberties will diminish.