“The words “free trade agreement” should bring to mind the response attributed to Gandhi when he was asked what he thought about western civilization: “it might be a good idea.” Same with “free trade agreements.” Maybe they would be a good idea, maybe not, but the question scarcely arises in the real world. What are called “free trade agreements” have only a limited relation to free trade, or even trade at all, and are certainly not agreements, at least if the people of a country are regarded as its citizens."
-Noam Chomsky
Free trade really is an interesting concept that tends to get people hot and bothered one way or the other. Oxford dictionary describes it as "international trade left to its natural course without tariffs, quotas, or other restrictions."
It's fairly easy to see the appeal of free trade. It's quite excellent being able to freely move goods across borders so that consumers are able to choose to purchase at the lowest price. This should breed efficiency in production everywhere since domestic industries are not protected by government subsidies, tariff walls, or quotas limiting the amount of imports coming into the country. And if, for whatever reason, another country is simply too capable of undercutting your profits in one industry, the idea is that you would switch your emphasis to something you are more capable of being the most efficient at.
This concept of specializing to produce efficiency was first noted by my namesake's predecessor, the economist Adam Smith, in his 1776 work, The Wealth of Nations. He notes that: "It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.... If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage."
The economist David Ricardo, born in the late 18th century, would go further with this idea and develop it into the theory of comparative advantage in his 1817 work, On the Principles of Political Economy and Taxation. Essentially, he used an example where Portugal was able to produce both wine and cloth more efficiently than England. However, since Portugal was able to produce wine even more efficiently relative to England than it was able to produce cloth, it would benefit both countries for Portugal to focus solely on wine, trading its excess for English cloth. This theory has been hugely influential in world politics although it's worth noting that it has been shown to need certain prerequisites to work at all in real life and will still have problematic implications which I'll discuss later.
Actually enacting free trade has been considerably messier than these theories would imply. During Western Europe's period of mercantilism, roughly the 16th to late-18th century, protectionism was still the norm for the major powers in order to build trade surpluses of precious metals. The use of colonized nations made this much easier since they could be banned from trading with anyone else and be forced to buy your goods while providing resources unavailable at home.
Adam Smith and the classical economists would mark the move of the European powers towards supporting free trade as a global system. Of course, it's important to note that this was the equivalent of kicking out the ladder once you've personally climbed it. The major European powers had taken advantage of protectionist measures to build up their own industries, safe from being crushed early on by competition. After this, they enforced quite successfully and quite aggressively on the world a free-trade regime which meant other countries were not allowed to do the same. South America, Africa, and most of Asia have only relatively recently been able to emerge into the world economy as competitors in their own right and have generally only been able to do so via protectionist measures. The Four Asian Tigers - Hong Kong, Singapore, Taiwan, and South Korea - used protectionist measures to protect their industries and were able to rapidly industrialize from the 60s to the 90s. China has more recently started using this model to great success.
Latin American countries were forced into free-market policies by the International Monetary Fund (IMF) in order to receive additional funds to service their debt during the Latin American debt crisis of the late 70s and 80s. These policies resulted in demonstrating a troubling aspect of David Ricardo's comparative advantage theory; this being that developing an advanced economy capable of producing advanced goods like electronics will necessarily require a 'weak' period where the industry must be protected from more advanced competitors. Thus, following this theory's prescription can only result in further entrenching the status quo of nations. The Asian Tigers refused the free trade argument, chose to place barriers to imports, and were able to develop advanced industries much sooner. Latin America was forced into free trade which resulted in many of the countries there being stuck selling primitive commodities that don't have a lot of value added while needing to import more profitable and technologically-savvy goods. This could be thought of as being stuck in a commodity ghetto as it reinforces itself and is hard to get out of.
Anywho, enough of this boring history lesson. The reason I am talking about free trade is that Canada is currently negotiating two major free-trade deals. These are the Canada-EU Comprehensive Economic and Trade Agreement (CETA) and the Trans-Pacific Partnership (TPP), both major undertakings involving quite a few countries. It's important to note that free trade has changed a bit since its original conception. It doesn't just apply to creating barriers for imports or subsidizing your own exports. It also applies to flows of capital in the form of investment as well as corporations setting up branches or purchasing existing companies within foreign countries.
Few countries allow total free trade in this sense since giving up key or strategic industries to foreign control can be problematic. Canada has an Investment Canada Act which has a "net benefit to Canada" test included. The test is kinda poorly defined but it allows cover for refusing sales to foreign businesses that are politically indigestible. This was used in 2010 to prevent Australia's BHP Billiton Ltd. from a $38.6 billion hostile bid for Potash Corp. of Saskatchewan as it was considered strategically important.
The problem is that free-trade agreements are often undemocratic and tend to chip away at an elected government's ability to regulate business or enact legislation the people favor. They also tend to last quite a long time before any of the countries are allowed to unilaterally opt out of them meaning that a government can ram one though and leave the people stuck with it for quite a while. To get a sense of why this is a problem, it's useful to look back at the North American Free Trade Agreement (NAFTA), enacted in 1993 by the US, Canada, and Mexico.
NAFTA created laws that entrenched the relationship between businesses from any of the three countries and the government of the other country they are operating in. These laws supersede the domestic laws of the nations meaning that if a US company operating in Canada felt that the Canadian government didn't honor its obligations under NAFTA, they could request a review by the NAFTA Tribunal. The concerning part is that the Tribunal meets in secret, is not required to name its members for a case, and doesn't even have to fully disclose the decisions they reach or why. This extreme lack of transparency is rarely good for democracies where information is required for voters to make informed decisions. The point of NAFTA was to ensure that foreign companies and investors get treated as well by the foreign government as it would treat its own people. This confidentiality is the norm when companies are going to court but it is a huge problem when a company is going to court against a country's government and the result will have a huge impact on public policy.
There have been some quite troubling decisions made by the Tribunal and we never get the full story of how the decision was made. For instance, the Canadian government was forced to lift restrictions on the production and importation of a hazardous ethanol-based gasoline additive, MMT, because a US company said the ban hurt their business. Canada's right to disallow the poisonous substance within its boarders was overruled by a US company's right to profit. Another time Mexico had to pay a US company $16.7 million because local environmental laws that disallowed a toxic-waste-processing plant that they were constructing were seen as expropriating.
A very concerning situation was when United Parcel Service of America (UPS) tried to sue the Canadian government for $160 million. This was because they argued that Canada Post was being unfairly subsidized since its services draw on public infrastructure that UPS needs to provide on its own. This was essentially an attempt to force Canada out of providing a government service which the private-sector company wanted to provide. Fortunately the lawsuit failed but this would have set a terrible precedent. Could our public healthcare system become a liability that could result in Canada being sued since it's providing a service that US businesses could do?
These laws are problematic since they essentially limit what our elected governments can do. Trying to set environmental laws will get us sued. Trying to have our government provide public services can get us sued. You can bet that these lawsuits will hugely alter what legislation we try to pass as a country. Currently, US pharmaceutical giant Eli Lilly is suing Canada for $500 million for voiding two of its patents early because they failed to fulfill the promises given as reason for the patents. Essentially, Eli Lilly only ran a 22 patient study to prove the efficacy of its ADHD drug, Strattera, and Canada is saying that this tiny sample is totally insufficient to prove it is 'useful,' the requirement needed in Canada to hold a patent. In the US, an invention only needs to demonstrate a "scintilla" of usefulness, ie, a friggin' tiny amount. Canada, however, is allowed to define 'useful' however it wants and the limited data presented is not capable of showing that the drug is. Thus, Eli Lilly is trying to use Chapter 11 of NAFTA, the investor-protection part, to force Canada to change its laws. If it successfully sues us, we will certainly be open to a slew of lawsuits from other drug companies.
And just for good effect, let's do a quick analysis of how NAFTA played out because free-trade agreements tend to have winners and losers. Mexico was expecting a lot of new jobs due to their low wages. Mexico certainly received a lot of foreign direct investment which had increased 70% by 1994 and was up 435% by 2004. That's a lot of money coming in. A lot of it wound up in maquiladoras, US-owned Mexican factories along the US boarder there to take advantage of cheap labor. This was supposed to give rise to a decent Mexican middle-class but it failed to do so since productivity was not high enough even for these low wages. Much of the jobs would go to cheaper China eventually. The surge of workers to these labor-towns would also problematically result in slums with high-living costs while pulling men away from their families in the rest of Mexico. Roughly 2.3 million traditional Mexican farmers were also displaced and rendered unable to compete by the flood of mass-produced, subsidized US food when their own tariffs were removed.
Canada did much better overall. We sold more beef, oil, agriculture, and wood to the US while receiving increased investment in our own automotive factories. The US did less well. A lot of manufacturing jobs went to Mexico which meant higher profits for business and their executives and much lower wages for US workers. The larger, multinational companies did the best by far since they were the most capable of taking advantage of the cheap foreign labor. An estimated 820,280 US jobs were lost to Canada and Mexico, mostly well-paying manufacturing ones. NAFTA really hurt their middle-class and the US trade deficit would rocket up 281% between 1993 and 2002. That's a jump from $30 billion to $85 billion per year added onto the national debt.
Anyway, enough about NAFTA. Even with the scary, secretive, undemocratic aspects of the NAFTA Tribunal arrangement, I'm willing to accept that it has likely been good for Canada. The Canada-EU free-trade agreement negotiations underway are also interesting but since it is being discussed with the European Union, not exactly a bastion of cheap, job-taking labor, let's ignore if for the time being. For now, let's focus on the Trans-Pacific Partnership.
The TPP is a trade agreement that has grown to involve Brunei, Chili, New Zealand, Singapore, Australia, Malaysia, Mexico, Peru, Vietnam, Japan, Canada, and the US. It is also open for any other Pacific nation to join later. For the US, the goal of the TTP is two-fold. First, it will update the World Trade Organization's rules that haven't changed since 1994. Second, it will entrench US interests in an area of the world increasingly dominated by China's influence. The result is supposed to be an agreement that deepens trade, protects investors, addresses intellectual property protection, and deals with the conduct of state-owned businesses.
That all sounds fine but there are some legitimate complaints with the deal. Only 5 out of 29 of the chapters being discussed actually involve traditional trade. The rest cover a wide array of issues with far-reaching consequences. It is essentially an agreement on corporate rights that set out what governments are allowed to do to regulate business, what Crown corporations can do, patent and copyright terms, how the internet should be governed, when to compensate businesses for lost profits, and banking and taxation rules. Like NAFTA, these agreements will supersede our own laws and open us up to lawsuits should we hurt profits of foreign corporations.
There always tends to be a lot of protest regarding free-trade agreements. However, a lot of this one has been driven by its extremely secretive nature. It probably doesn't help that the Conservatives have been actually hiding the current drafts from the Official Opposition here in Canada. Conservative Trade Minister Ed Fast had a TPP meeting in Vancouver which he didn't disclose until the Peruvian media leaked it. Fast had also said that no corporate group got special access but then documents turned up showing his ministry had created a consultation group that included the Canadian Steel Producers Association and Bombardier, both of whom signed confidentiality agreements.
The desire to hide it likely comes from some of its troubling contents. Judging by a leaked draft of the TPP and the negotiations secretive nature, internet freedom advocates at the Electronic Frontier Foundation say that:
"The TPP is likely to export some of the worst features of U.S. copyright law to Pacific Rim countries: a broad ban on breaking digital locks on devices and creative works (even for legal purposes), a minimum copyright term of the lifetime of the creator plus seventy years (the current international norm is the lifetime plus fifty years), privatization of enforcement for copyright infringement, ruinous statutory damages with no proof of actual harm, and government seizures of computers and equipment involved in alleged infringement. Moreover, the TPP is worse than U.S. copyright rules: it does not export the many balances and exceptions that favor the public interest and act as safety valves in limiting rightsholders’ protection."
Also concerning is that the US has been pushing for more stringent intellectual property rights protection for drugs. This would result in higher profits for an already exceedingly profitable industry and in longer wait times before a drug becomes generic and affordable to the poor of the world who do die waiting and trying to save up for treatment.
Fortunately, at least for the time being, it sounds like the differing countries will get to keep their food standard regimes and will not be forced to adopt international standards. However, the US has been pushing for simpler regulations which means in future talks, countries will likely be pressured to accept the international standard even if it means ingesting more pesticides and poisons in their dinner than they would like.
I gotta say, I'm fairly torn on all of this. NAFTA came out decently for Canada despite weakening our democracy's ability to make its own choices. It did result in a race to the bottom for wages between the US and Mexico though which is always a danger of free trade. It seems that if capital can flow freely where ever it wants without worrying about consequences then people should be able to as well. The ability to simply move to a different country that has lower wages or to just threaten to so your people accept less money is a common and problematic factor of globalization. In many cases, people and their cities spend their social and economic resources developing businesses from the ground-up only to have that business leave for cheaper-labored pastures once a brandname is established. This seems unfair and basically puts the rights of capital above the rights of humans.
Really, it sounds like the TPP is barely about trade and more about developing a corporate bill of rights that supersedes our own laws and forces us to accept a legal framework that our own governments could never successfully push through our Parliaments. Of course, there is a lot of hype on the subject online and I'm having trouble discerning what is credible or not. However, the extremely secretive nature that is being used to construct the agreement seems to be intentionally this way and our Conservatives in Canada are not helping by hiding it from the NDP who should be allowed to see, judge, and report their opinion to Canadians, even if they can't go into specifics.
Free trade should ultimately be a goal of humanity since in its perfected form, it means more freedom and increased efficiency. However, if it simply concentrates wealth and crushes the masses in a race to the bottom, it is doing quite the opposite of that. Like all trade agreements, this one will be profitable for multinational corporations who can go to the cheapest labour and will be given greater protection from the public of countries that join in the agreements. Which isn't necessarily a bad thing because as people point out, a lot of hard working people have their pensions and funds invested in these businesses so corporate profits don't only benefit the wealthy elite.
However, it's worth remembering that a lot of people simply do not have pensions. Only about 6 million Canadians do with more than half of those being in the public sector. The Canadian Pension Plan covers all workers but will provide for a pretty impoverished retirement on its own if contributions are not substantially expanded. What it is able to pay out will not cover the large numbers who simply will not be able to save up enough outside of it to retire.
In the US, only about half of private-sector workers have pensions. In both our countries, it is generally the people without pensions who live cheque to cheque and are unable to invest in the stock market. This means these corporate gains will not trickle down in dividends but the increased freedom for the businesses to move will reduce wages further. The same is happening all over Europe as western countries run massive deficits making our social security nets less able to support the increasing number of poor. In the US, between 2009 and 2010, the first year of the recovery, 93% of the gains were captured by the richest 1% of the population. Despite the fact that the number on the S.N.A.P food stamps program has jumped from 26 million in 2007 to 48 million now, the House of Representatives is voting to slash the program by $40 billion over the next decade while increasing subsidies to the agricultural industry which is already doing fine. I promise you that these 48 million who require stamps to eat don't have cash to be investing in booming stock-market corporations.
Capitalism requires buying power for the masses. If corporate profits don't turn into this buying power then it is not working and doing more to increase them won't help. Freedom for goods and capital cannot be considered more important than the freedom of people to live a decent life.
If this free-trade deal will be as good for everyone as its creators want us to believe, let's get it out in the open where it can be judged.
Democracy despises secrets.
AS
-Noam Chomsky
Free trade really is an interesting concept that tends to get people hot and bothered one way or the other. Oxford dictionary describes it as "international trade left to its natural course without tariffs, quotas, or other restrictions."
It's fairly easy to see the appeal of free trade. It's quite excellent being able to freely move goods across borders so that consumers are able to choose to purchase at the lowest price. This should breed efficiency in production everywhere since domestic industries are not protected by government subsidies, tariff walls, or quotas limiting the amount of imports coming into the country. And if, for whatever reason, another country is simply too capable of undercutting your profits in one industry, the idea is that you would switch your emphasis to something you are more capable of being the most efficient at.
This concept of specializing to produce efficiency was first noted by my namesake's predecessor, the economist Adam Smith, in his 1776 work, The Wealth of Nations. He notes that: "It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.... If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage."
The economist David Ricardo, born in the late 18th century, would go further with this idea and develop it into the theory of comparative advantage in his 1817 work, On the Principles of Political Economy and Taxation. Essentially, he used an example where Portugal was able to produce both wine and cloth more efficiently than England. However, since Portugal was able to produce wine even more efficiently relative to England than it was able to produce cloth, it would benefit both countries for Portugal to focus solely on wine, trading its excess for English cloth. This theory has been hugely influential in world politics although it's worth noting that it has been shown to need certain prerequisites to work at all in real life and will still have problematic implications which I'll discuss later.
Actually enacting free trade has been considerably messier than these theories would imply. During Western Europe's period of mercantilism, roughly the 16th to late-18th century, protectionism was still the norm for the major powers in order to build trade surpluses of precious metals. The use of colonized nations made this much easier since they could be banned from trading with anyone else and be forced to buy your goods while providing resources unavailable at home.
Adam Smith and the classical economists would mark the move of the European powers towards supporting free trade as a global system. Of course, it's important to note that this was the equivalent of kicking out the ladder once you've personally climbed it. The major European powers had taken advantage of protectionist measures to build up their own industries, safe from being crushed early on by competition. After this, they enforced quite successfully and quite aggressively on the world a free-trade regime which meant other countries were not allowed to do the same. South America, Africa, and most of Asia have only relatively recently been able to emerge into the world economy as competitors in their own right and have generally only been able to do so via protectionist measures. The Four Asian Tigers - Hong Kong, Singapore, Taiwan, and South Korea - used protectionist measures to protect their industries and were able to rapidly industrialize from the 60s to the 90s. China has more recently started using this model to great success.
Latin American countries were forced into free-market policies by the International Monetary Fund (IMF) in order to receive additional funds to service their debt during the Latin American debt crisis of the late 70s and 80s. These policies resulted in demonstrating a troubling aspect of David Ricardo's comparative advantage theory; this being that developing an advanced economy capable of producing advanced goods like electronics will necessarily require a 'weak' period where the industry must be protected from more advanced competitors. Thus, following this theory's prescription can only result in further entrenching the status quo of nations. The Asian Tigers refused the free trade argument, chose to place barriers to imports, and were able to develop advanced industries much sooner. Latin America was forced into free trade which resulted in many of the countries there being stuck selling primitive commodities that don't have a lot of value added while needing to import more profitable and technologically-savvy goods. This could be thought of as being stuck in a commodity ghetto as it reinforces itself and is hard to get out of.
Anywho, enough of this boring history lesson. The reason I am talking about free trade is that Canada is currently negotiating two major free-trade deals. These are the Canada-EU Comprehensive Economic and Trade Agreement (CETA) and the Trans-Pacific Partnership (TPP), both major undertakings involving quite a few countries. It's important to note that free trade has changed a bit since its original conception. It doesn't just apply to creating barriers for imports or subsidizing your own exports. It also applies to flows of capital in the form of investment as well as corporations setting up branches or purchasing existing companies within foreign countries.
Few countries allow total free trade in this sense since giving up key or strategic industries to foreign control can be problematic. Canada has an Investment Canada Act which has a "net benefit to Canada" test included. The test is kinda poorly defined but it allows cover for refusing sales to foreign businesses that are politically indigestible. This was used in 2010 to prevent Australia's BHP Billiton Ltd. from a $38.6 billion hostile bid for Potash Corp. of Saskatchewan as it was considered strategically important.
The problem is that free-trade agreements are often undemocratic and tend to chip away at an elected government's ability to regulate business or enact legislation the people favor. They also tend to last quite a long time before any of the countries are allowed to unilaterally opt out of them meaning that a government can ram one though and leave the people stuck with it for quite a while. To get a sense of why this is a problem, it's useful to look back at the North American Free Trade Agreement (NAFTA), enacted in 1993 by the US, Canada, and Mexico.
NAFTA created laws that entrenched the relationship between businesses from any of the three countries and the government of the other country they are operating in. These laws supersede the domestic laws of the nations meaning that if a US company operating in Canada felt that the Canadian government didn't honor its obligations under NAFTA, they could request a review by the NAFTA Tribunal. The concerning part is that the Tribunal meets in secret, is not required to name its members for a case, and doesn't even have to fully disclose the decisions they reach or why. This extreme lack of transparency is rarely good for democracies where information is required for voters to make informed decisions. The point of NAFTA was to ensure that foreign companies and investors get treated as well by the foreign government as it would treat its own people. This confidentiality is the norm when companies are going to court but it is a huge problem when a company is going to court against a country's government and the result will have a huge impact on public policy.
There have been some quite troubling decisions made by the Tribunal and we never get the full story of how the decision was made. For instance, the Canadian government was forced to lift restrictions on the production and importation of a hazardous ethanol-based gasoline additive, MMT, because a US company said the ban hurt their business. Canada's right to disallow the poisonous substance within its boarders was overruled by a US company's right to profit. Another time Mexico had to pay a US company $16.7 million because local environmental laws that disallowed a toxic-waste-processing plant that they were constructing were seen as expropriating.
A very concerning situation was when United Parcel Service of America (UPS) tried to sue the Canadian government for $160 million. This was because they argued that Canada Post was being unfairly subsidized since its services draw on public infrastructure that UPS needs to provide on its own. This was essentially an attempt to force Canada out of providing a government service which the private-sector company wanted to provide. Fortunately the lawsuit failed but this would have set a terrible precedent. Could our public healthcare system become a liability that could result in Canada being sued since it's providing a service that US businesses could do?
These laws are problematic since they essentially limit what our elected governments can do. Trying to set environmental laws will get us sued. Trying to have our government provide public services can get us sued. You can bet that these lawsuits will hugely alter what legislation we try to pass as a country. Currently, US pharmaceutical giant Eli Lilly is suing Canada for $500 million for voiding two of its patents early because they failed to fulfill the promises given as reason for the patents. Essentially, Eli Lilly only ran a 22 patient study to prove the efficacy of its ADHD drug, Strattera, and Canada is saying that this tiny sample is totally insufficient to prove it is 'useful,' the requirement needed in Canada to hold a patent. In the US, an invention only needs to demonstrate a "scintilla" of usefulness, ie, a friggin' tiny amount. Canada, however, is allowed to define 'useful' however it wants and the limited data presented is not capable of showing that the drug is. Thus, Eli Lilly is trying to use Chapter 11 of NAFTA, the investor-protection part, to force Canada to change its laws. If it successfully sues us, we will certainly be open to a slew of lawsuits from other drug companies.
And just for good effect, let's do a quick analysis of how NAFTA played out because free-trade agreements tend to have winners and losers. Mexico was expecting a lot of new jobs due to their low wages. Mexico certainly received a lot of foreign direct investment which had increased 70% by 1994 and was up 435% by 2004. That's a lot of money coming in. A lot of it wound up in maquiladoras, US-owned Mexican factories along the US boarder there to take advantage of cheap labor. This was supposed to give rise to a decent Mexican middle-class but it failed to do so since productivity was not high enough even for these low wages. Much of the jobs would go to cheaper China eventually. The surge of workers to these labor-towns would also problematically result in slums with high-living costs while pulling men away from their families in the rest of Mexico. Roughly 2.3 million traditional Mexican farmers were also displaced and rendered unable to compete by the flood of mass-produced, subsidized US food when their own tariffs were removed.
Canada did much better overall. We sold more beef, oil, agriculture, and wood to the US while receiving increased investment in our own automotive factories. The US did less well. A lot of manufacturing jobs went to Mexico which meant higher profits for business and their executives and much lower wages for US workers. The larger, multinational companies did the best by far since they were the most capable of taking advantage of the cheap foreign labor. An estimated 820,280 US jobs were lost to Canada and Mexico, mostly well-paying manufacturing ones. NAFTA really hurt their middle-class and the US trade deficit would rocket up 281% between 1993 and 2002. That's a jump from $30 billion to $85 billion per year added onto the national debt.
Anyway, enough about NAFTA. Even with the scary, secretive, undemocratic aspects of the NAFTA Tribunal arrangement, I'm willing to accept that it has likely been good for Canada. The Canada-EU free-trade agreement negotiations underway are also interesting but since it is being discussed with the European Union, not exactly a bastion of cheap, job-taking labor, let's ignore if for the time being. For now, let's focus on the Trans-Pacific Partnership.
The TPP is a trade agreement that has grown to involve Brunei, Chili, New Zealand, Singapore, Australia, Malaysia, Mexico, Peru, Vietnam, Japan, Canada, and the US. It is also open for any other Pacific nation to join later. For the US, the goal of the TTP is two-fold. First, it will update the World Trade Organization's rules that haven't changed since 1994. Second, it will entrench US interests in an area of the world increasingly dominated by China's influence. The result is supposed to be an agreement that deepens trade, protects investors, addresses intellectual property protection, and deals with the conduct of state-owned businesses.
That all sounds fine but there are some legitimate complaints with the deal. Only 5 out of 29 of the chapters being discussed actually involve traditional trade. The rest cover a wide array of issues with far-reaching consequences. It is essentially an agreement on corporate rights that set out what governments are allowed to do to regulate business, what Crown corporations can do, patent and copyright terms, how the internet should be governed, when to compensate businesses for lost profits, and banking and taxation rules. Like NAFTA, these agreements will supersede our own laws and open us up to lawsuits should we hurt profits of foreign corporations.
There always tends to be a lot of protest regarding free-trade agreements. However, a lot of this one has been driven by its extremely secretive nature. It probably doesn't help that the Conservatives have been actually hiding the current drafts from the Official Opposition here in Canada. Conservative Trade Minister Ed Fast had a TPP meeting in Vancouver which he didn't disclose until the Peruvian media leaked it. Fast had also said that no corporate group got special access but then documents turned up showing his ministry had created a consultation group that included the Canadian Steel Producers Association and Bombardier, both of whom signed confidentiality agreements.
The desire to hide it likely comes from some of its troubling contents. Judging by a leaked draft of the TPP and the negotiations secretive nature, internet freedom advocates at the Electronic Frontier Foundation say that:
"The TPP is likely to export some of the worst features of U.S. copyright law to Pacific Rim countries: a broad ban on breaking digital locks on devices and creative works (even for legal purposes), a minimum copyright term of the lifetime of the creator plus seventy years (the current international norm is the lifetime plus fifty years), privatization of enforcement for copyright infringement, ruinous statutory damages with no proof of actual harm, and government seizures of computers and equipment involved in alleged infringement. Moreover, the TPP is worse than U.S. copyright rules: it does not export the many balances and exceptions that favor the public interest and act as safety valves in limiting rightsholders’ protection."
Also concerning is that the US has been pushing for more stringent intellectual property rights protection for drugs. This would result in higher profits for an already exceedingly profitable industry and in longer wait times before a drug becomes generic and affordable to the poor of the world who do die waiting and trying to save up for treatment.
Fortunately, at least for the time being, it sounds like the differing countries will get to keep their food standard regimes and will not be forced to adopt international standards. However, the US has been pushing for simpler regulations which means in future talks, countries will likely be pressured to accept the international standard even if it means ingesting more pesticides and poisons in their dinner than they would like.
I gotta say, I'm fairly torn on all of this. NAFTA came out decently for Canada despite weakening our democracy's ability to make its own choices. It did result in a race to the bottom for wages between the US and Mexico though which is always a danger of free trade. It seems that if capital can flow freely where ever it wants without worrying about consequences then people should be able to as well. The ability to simply move to a different country that has lower wages or to just threaten to so your people accept less money is a common and problematic factor of globalization. In many cases, people and their cities spend their social and economic resources developing businesses from the ground-up only to have that business leave for cheaper-labored pastures once a brandname is established. This seems unfair and basically puts the rights of capital above the rights of humans.
Really, it sounds like the TPP is barely about trade and more about developing a corporate bill of rights that supersedes our own laws and forces us to accept a legal framework that our own governments could never successfully push through our Parliaments. Of course, there is a lot of hype on the subject online and I'm having trouble discerning what is credible or not. However, the extremely secretive nature that is being used to construct the agreement seems to be intentionally this way and our Conservatives in Canada are not helping by hiding it from the NDP who should be allowed to see, judge, and report their opinion to Canadians, even if they can't go into specifics.
Free trade should ultimately be a goal of humanity since in its perfected form, it means more freedom and increased efficiency. However, if it simply concentrates wealth and crushes the masses in a race to the bottom, it is doing quite the opposite of that. Like all trade agreements, this one will be profitable for multinational corporations who can go to the cheapest labour and will be given greater protection from the public of countries that join in the agreements. Which isn't necessarily a bad thing because as people point out, a lot of hard working people have their pensions and funds invested in these businesses so corporate profits don't only benefit the wealthy elite.
However, it's worth remembering that a lot of people simply do not have pensions. Only about 6 million Canadians do with more than half of those being in the public sector. The Canadian Pension Plan covers all workers but will provide for a pretty impoverished retirement on its own if contributions are not substantially expanded. What it is able to pay out will not cover the large numbers who simply will not be able to save up enough outside of it to retire.
In the US, only about half of private-sector workers have pensions. In both our countries, it is generally the people without pensions who live cheque to cheque and are unable to invest in the stock market. This means these corporate gains will not trickle down in dividends but the increased freedom for the businesses to move will reduce wages further. The same is happening all over Europe as western countries run massive deficits making our social security nets less able to support the increasing number of poor. In the US, between 2009 and 2010, the first year of the recovery, 93% of the gains were captured by the richest 1% of the population. Despite the fact that the number on the S.N.A.P food stamps program has jumped from 26 million in 2007 to 48 million now, the House of Representatives is voting to slash the program by $40 billion over the next decade while increasing subsidies to the agricultural industry which is already doing fine. I promise you that these 48 million who require stamps to eat don't have cash to be investing in booming stock-market corporations.
Capitalism requires buying power for the masses. If corporate profits don't turn into this buying power then it is not working and doing more to increase them won't help. Freedom for goods and capital cannot be considered more important than the freedom of people to live a decent life.
If this free-trade deal will be as good for everyone as its creators want us to believe, let's get it out in the open where it can be judged.
Democracy despises secrets.
AS
Love the Chomsky... read through most of your entries. Good stuff man.
ReplyDeleteI think you could be a little harder on neoliberalism though. Not because your argument about moderation/ balance isn't valid in North America... but because the cost of neoliberalism isn't really felt in North America... psychologically, no doubt. But, the cost comes from the places where the real resources are.
All I know is Latin America... and neoliberalism has enslaved the majority of people into poverty- with say Canadian mining companies extracting the mineral wealth of Northern Guatemala.. when money is the rule of law, only a few benefit. Not, in Canada/ U.S. - where a huge middle-class benefits.. but globally, it is not even close. The MAJORITY of people in Cuba are living much better than they were under a fascist Batista.. I would argue crippling sanctions and a trade embargo has resulted in Cuba's apparent "failure," not the redistribution of wealth.
Keep it up bro! Cheers,
Scottie Silver