“NAFTA on steroids” marks a milestone in the slow-motion corporate coup

Democratic Rep. Alan Grayson revealed last week that, after pushing the office of the US Trade Representative for six weeks, he’s now the first Congressperson to have seen the current text of the Trans-Pacific Partnership. The biggest so-called free trade agreement to date, the TPP is also the first to be negotiated entirely in secret – by the Obama administration, some 600 corporate lobbyists, and trade ministers from 11 other Pacific Rim countries: Japan, Mexico, Chile, Peru, Brunei, Vietnam, Australia, New Zealand, Singapore, Malaysia, and Canada.

After viewing the draft, Grayson updated his blog, writing that,

The TPP is nicknamed “NAFTA on steroids.” Now that I’ve read it, I can see why. I can’t tell you what’s in the agreement, because the U.S. Trade Representative calls it classified. But I can tell you two things about it.

1)    There is no national security purpose in keeping this text secret.

2)    This agreement hands the sovereignty of our country over to corporate interests.

Why is the Obama administration keeping the negotiations and draft text so secret that even members of Congress are denied access? Grayson’s second point hints at the reason. In May 2012, then-Trade Representative Ron Kirk said as much when he told Reuters that making the draft text public would make the deal impossible to sign. He noted the case of the Free Trade Area of the Americas, which was permanently derailed when the released draft text triggered huge public outcry in Latin America.

The TPP is so radical, so clearly contrary to the values of people across the political spectrum, that a body as corrupt and right-wing as the US Congress might vote it down for fear of their constituents. The little we know about the deal is the result of leaks from the negotiations published by the consumer advocacy group Public Citizen. I want to highlight some crucial aspects of the TPP, and the threat they pose to national self-determination and the possibility of democratic governance anywhere in the world.

The first thing to note is that of the 29 chapters in the leaked text, only five have to do with trade as we usually think of it. The rest, writes physician and activist Margaret Flowers, “are focused on changes that multinational corporations have not been able to pass in Congress such as restrictions on internet privacy, increased patent protections, greater access to litigation and further financial deregulation.” As I’ve discussed previously, neoliberal policies are less about “free trade” than they are about limiting the ability of people and governments to challenge corporate power. For instance, in 2010, Switzerland sued Uruguay on behalf of Marlboro producer Philip Morris for the crime of putting warning labels on cigarettes and banning the sale of “lights”. Faced with a $2 billion lawsuit under the World Trade Organization for violating its “free trade” pact with Switzerland, the small South American nation watered down its legislation.

To take another example, under the WTO’s Trade-Related Intellectual Property Agreement, multinational pharmaceuticals can sue any country that produces generic versions of life-saving medicines and treatments, such as treatments for HIV – even if the corporation refuses to sell the product for a price the people of that country can afford. As economist Dean Baker points out, while tariffs and quotas might make an item 20-30% more expensive, the monopoly patents enforced by “free trade” policies raise prices “2,000 percent or even 20,000 percent above the free market price. Drugs that would sell for a few dollars per prescription in a free market would sell for hundreds or even thousands of dollars”.

So the scam of “free trade” – contrary to the standard neoliberal dogma – is as protectionist as it gets, regulating global capitalism in favor of (mostly US-based) multinationals. There’s nothing “free” about it. That being said, it’s hard to overstate how extreme the TPP is, even compared to previous disasters like NAFTA and CAFTA. Take drug patents: The TPP is the first trade pact to expand patent protections to cover surgical techniques and medical tests and treatments as well as drugs. Through a process called “Evergreening”, pharmaceuticals can extend patents indefinitely just by making a minor change in use or delivery, like producing gels instead of tablets. “Because of the negative impact on public health from patent protections in previous trade agreements,” Flowers notes, “former President Bush rolled some of these practices back. Unfortunately, the TPP will move them forward again.”

Even more disturbing is the TPP’s regime of investor privileges, which takes the existing system of “state-state” litigation (as in the case of Switzerland v. Uruguay) and radicalizes it: Under the TPP, companies can sue countries directly (“investor-state” litigation) in a shadow court where the judges are corporate lawyers, on temporary leave from their jobs and unbound by conflict-of-interest laws. As Public Citizen’s Lori Wallach explains,

The U.S. and the other countries would submit themselves to the jurisdiction of this corporate kangaroo court, and these three random attorneys would have the right to order the U.S. government to pay unlimited amounts of our tax dollars to corporations and investors who, A, claim regulatory costs need to be refunded, or, B, are saying they’re not being treated well enough, regardless if the policies they dislike are the exact same ones that apply to all of us.

Under the TPP, corporations can sue for “expected future profits” lost due to regulation of finance, health care, labor, the environment, and so on. According to Global Trade Watch, $3 billion has already been paid out under US “free trade” pacts to corporations as compensation for domestic laws, and $14 billion in lawsuits are pending. The cases of Uruguay, El Salvador, Canada, Germany, Australia and others add up to a chilling effect. The TPP’s investor rights provision promises to multiply that effect, making it clear to member nations that enacting progressive reforms just isn’t worth the cost.

So, for example, financial regulations (including Obama’s much-touted Dodd-Frank) will either be repealed or punished, making bans on even the riskiest and most toxic financial products all but impossible. As detailed in a letter from 102 economists to the participating trade ministers, the TPP will enforce a regime of total financial deregulation – at a time when capital controls at the national level could prevent the next financial crisis from becoming global. This is what Senator Elizabeth Warren meant when, last month, she warned that Wall Street is using the TPP and TAFTA (the US-EU pact) “to get something done quietly out of sight that they could not accomplish in a public place with the cameras rolling and the lights on.”  

There’s much more in the leaked texts that impacts our lives, from internet freedom to food safety, and I encourage everyone to look into it for themselves. But maybe the most unique aspect of the pact is something called a “docking agreement”, which allows other countries to join the TPP in the future – just as long as they agree to all of its terms. “Larger countries are able to force smaller, more desperate countries to accept terms that are detrimental to them,” Flowers and Kevin Zeese point out in their analysis for Truthout.org. “As more countries sign on, the TPP could become an agreement that defines global trade.”

The logic of “free trade” is less economic than it is political. It’s in this sense that the TPP marks a milestone in capital’s revolt against the welfare state, a coup “made in America” that began with Nixon’s dismantling of the Bretton Woods system and hit its stride under Clinton. Its wild success might be attributed to the fact that it’s unfolded in slow motion, over the course of decades, as the hard-fought gains of the earlier part of the 20th century have been hollowed out from the inside. The TPP, more brazenly and more permanently than its predecessors, undermines the ability of states to shield their citizens from the worst of global capitalism – which is surely yet to come.

But as long as people can mobilize, government secrecy is the key to corporate rule. If we recognize the path we’re on, we can begin to fight back in precisely the way Ron Kirk, Obama, and the transnational capitalist class fear most. Whistleblowing not only enables dissent, it is itself one of the most vital forms of dissent. We in the US are uniquely situated to tear down a machine that will devastate small, powerless nations long before it turns on us. The Edward Snowdens and Bradley Mannings are doing their part to stop it. Now, it’s on the rest of us to do ours: Organize, build connections, take to the streets, make our government think twice before slavishly serving capital – and defend to the death our right to know what’s being done in our name.

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9 thoughts on ““NAFTA on steroids” marks a milestone in the slow-motion corporate coup

  1. Interesting post, as always. Secrecy in trade negotiations—and especially multilateral trade agreements—is a really interesting problem, though admittedly not one I know much about. In [my very limited reading of] the poli sci literature on trade and protectionism, lots of scholars follow what’s called the Grossman-Helpman model, which theorizes that political actors who vote on these trade agreements try to optimally balance (1) the political benefits they can extract from business interests (campaign donations, etc.) in exchange for supporting protectionist measures against (2) the political/electoral penalty they will bear when constituents’ aggregate welfare suffers under those protectionist measures.

    Obviously, constituents’ knowledge/ignorance of trade agreements looms large in the outcome here, so secrecy of negotiations might indeed have an effect on legislators’ positions on ratification and, in turn, the content of legislation. Importantly, however, legislators in this model are forward-looking, so they anticipate the political consequences they will face when constituents experience/discover the effects of trade measures. Thus, legislators’ susceptibility to corporate/concentrated interests should depend (among other things) on (1) how well-informed constituents are (and at least one cross-national analysis has shown that countries’ regard for aggregate welfare in trade agreements is higher where the proportion of “informed voters” is higher), but also (2) how congruent constituent interests and concentrated/business interests are.

    There’s a good paper out there that compares the trade votes of members of the US House and Senate since the early 1970s, which arrives at two conclusions interesting for this case. First, the House is more protectionist than the Senate, which follows in part from (1) the more narrow economic interests of the smaller, more diverse House constituencies—some constituencies will genuinely benefit from protectionism and measures that serve corporate interests, others will suffer. But it also follows from the fact that (2) members of the House face reelection every two years, while Senators only stand for reelection election every six. In fact, the disparity between House and Senate disappears when you only look at Senators in the last two years of their term (with the important exceptions of Senators in safe seats and those who will be retiring, who tend to vote more liberal positions in their final two years). Time horizons matter for the collective ability of elected legislators to pursue long-term national interests.

    Turning then to the TTP, we can say a few things. First, even without seeing the text, it seems probable that “There is no national security purpose in keeping this text secret,” and that the motive is indeed political. It’s possible that the administration wants to keep early drafts secret from Congress because congressional constituencies would be appalled by the special-interest provisions—after all, Congress will face reelection in 2014, the Obama Administration won’t. But I don’t think that’s what’s going on. My guess is that the administration is keeping the early drafts secret because the potential for politically lucrative protectionist provisions would create incredible gridlock in Congress—it’s precisely because Congress is a diverse and even “corrupt” body that legislators would want to insert a battery of amendments. “Making the draft text public would make the deal impossible to sign,” but mostly because that deal would be impossible to ratify in Congress (especially when legislators don’t want to back down from stances they were compelled to take against the draft in its early stages). Constitutionally, Rep. Grayson’s statement doesn’t make sense otherwise—the TTP *will* become public eventually, and then Congress will vote on it.

    Parenthetically, you can see why Congressional discretion over trade agreements might tend to decrease as the number of democracies involved in an agreement increases—and why it might be that “The biggest so-called free trade agreement to date…is also the first to be negotiated entirely in secret.” A pragmatic if perhaps ethically insufficient defense would be that it’s really hard to get 9 democratic parliaments plus Brunei, Vietnam, and Singapore to agree on much. I’d be interested to know whether the other democracies are keeping things secret (I’m assuming yes).

    For its part, the Obama Administration should want to make Congress’s TTP vote as much of an up-or-down vote as possible, such that the alternative faced by every member of Congress is no trade agreement at all. Occasionally this sort of arrangement is approved by Congress itself when legislators face particularly intractable and contentious issues, especially those linked to constituency interests (votes on shutting down domestic military bases are the best-known example. An interesting poli sci hypothetical is whether Congress would *choose* to delegate the oversight of early trade negotiations to the executive given the choice: given the relative salience of support for the military vs. the content of trade agreements at election time, my guess is that Congress eventually would, but then again I don’t study American politics).

    This is not to suggest that the Obama Administration isn’t working behind closed doors in pursuit an agenda Congress would object to under other circumstances. On the contrary, being able to make a take-it-or-leave-it offer to Congress gives the Administration great discretion to do just that (“great discretion” in the context of a 12-country agreement, at least). But, given that it’s a second-term executive calling the shots here, the Grossman-Helpman question would actually be why there are so *many* special interest provisions in the draft—if it isn’t campaigning for reelection, what does the Obama Administration stand to gain by catering to corporate interests?

    Political favors on other legislative fronts, perhaps. Given its power to present Congress a relatively take-it-or-leave-it offer designed to be pass, these may be comparatively cheap favors to give away. For corporate interests, this is a great opportunity as well. Sure, legislators will learn about these special-interest carve-outs eventually, just as Rep. Grayson has, but, facing an up-down sort of vote that includes benefits as well as costs, a majority legislators will at that time have more to gain by ratifying than by objecting—or so the Administration would hope. The logic so far would suggest that the Administration’s secrecy is less about keeping a silent majority ignorant and more about keeping hundreds of loud special interests quiet, at least for now. Nevertheless, shortening the window of political salience certainly helps the Administration avoid probing public scrutiny.

    Another possibility you raise is that constituent- and corporate interests are roughly congruent in the American case. The US—alongside Canada, Australia, New Zealand, and Japan, perhaps—stands to gain a lot from these provisions, you argue. That could explain why the Obama Administration, with its national constituency, still favors these special-interest-friendly provisions. But then why keep US-friendly provisions a secret from the American people, who stand to benefit from them? (It is, of course, possible that Americans’ policy preferences don’t follow from economic self-interest—see: those pesky coastal-elite Democrats—but I doubt this holds for trade policy like it does for domestic social programs).

    Finally, I would as a matter of completeness raise the logical possibility that 600 corporate lobbyists need not indicate a field day for multinationals. In domestic politics I think it’s a simplification to equate corporate lobbying with bribery (as Grossman and Helman’s 1994 article, “Protection for Sale” does). Policymaking legislators often know less about a policy issue than the affected interests—unsurprising given legislators’ broad responsibilities. Frequently, the real currency of lobbying is therefore information and expertise: lobbyists have it, legislators often don’t. That’s a big part of lobbyists’ influence and a *part* of how lobbyists sometimes come to literally write the legislation. It’s a subtler and, probably, a more intractable form of corporate/special-interest influence in democratic politics than is campaign-donation “bribery.”

    Thus, I would briefly note three more things: (1) it follows that the complexity of policy is a big part of why Congress delegates to Congressional committees of legislators with especial expertise in an issue-area (or, sometimes, just strong opinions) or even to executive agencies like trade ministries. That said, (2) I’m therefore not convinced that the lobbying-as-information mode of influence holds in an area as delegated, contentious, and competitive as international trade agreements, and from what you’ve written it certainly sounds like business lobbies are aggressively pursuing advantage. Nevertheless, (3) getting 600 corporate lobbyists to agree on anything is hard too, and as in campaign spending, lots of money from different camps can lead to no advantage—clearly it depends on how diverse the interests of 600 corporate lobbyists are.

  2. Sam, thanks for your response. You bring up a crucial point: A robust public debate could very well lead to a flurry of conflicting and rival amendments in Congress, producing a gridlock that ends up torpedoing the whole deal. I neglected to mention in the post that the Bush and Obama administrations have been trying to get “Fast Track” (now called the Trade Promotion Authority) reinstated since it expired in 2007 due to Democratic opposition (Kirk talks about it here: http://www.reuters.com/article/2012/02/29/us-usa-trade-kirk-idUSTRE81S1FF20120229). As you probably know, Fast Track circumvents Congress’s constitutionally granted authority to negotiate trade agreements by giving the executive branch the power to negotiate and sign trade pacts before Congress can even vote on it. Even at that point, no debate or amendments would be allowed under Fast Track. In addition, the leaked agreement also includes a requirement that the text not be released until four years after the deal has been signed. So with or without Fast Track, the administration is shooting for precisely the opposite order of events to the one you mentioned: First Congress votes on it, then the text is made public. That’s part of why I’m not convinced that this is about limiting the influence of “special interests” who, as we know, are actively involved in shaping the deal.

    I’m also not ready to say the interests of ordinary Americans are roughly congruent with those of corporations, nor is the content of the TPP so ideologically in line with Americans’ political views that it would be a net gain for the administration/Democrats/the US government. There’s more than a little ambivalence towards neoliberal trade policies among non-elite Americans, particularly (often ideologically conservative) working-class Americans who’ve seen their wages decline and their jobs moved overseas in the wake of NAFTA.

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