The Good, Bad and Political in TPP

Down with TPP?

After calling it “the gold standard” of trade agreements, Hillary Clinton said she waited to read it before making a judgment, and then finally, under campaign pressure, she declared her opposition to the Trans-Pacific Partnership (TPP). The waffling made her seem weak. She has a lot invested in trade agreements, and she can claim some successes on their behalf. So it’s worth looking at what the problems are, and why she might express two minds on the matter.

The TPP and earlier such agreements, especially the North American Free Trade Agreement, or NAFTA, which was executed by Clinton’s husband in 1992, have come under fire from both the political left and right, both of which have blamed them for job losses.

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To be fair to the Clintons, the trade agreements probably have not caused an avalanche of job losses. To be fair to the critics, the agreements have other, genuinely problematic features that bear examination and rightfully earn opposition. But let’s not allow the debate to be boiled down to a simplistic, 19th-century, free-trade-versus-tariffs battle. We live in the complicated era of globalization, and it is incumbent on us as voters to recognize some truths of the contemporary world.

First, international trade is a good thing, in the abstract.

Second, more trade with the developing world is not only good for prices here and rising standards of living overseas, but an inevitable consequence of changes both political and technological.

Third, fair trade is important, but what is fair depends on one’s perspective.

And finally, the stakes in an honest and informed debate about trade agreements have less to do with American jobs than with the nature of those jobs and the hegemony of corporate executives in a globalized world of neoliberal capitalism.

Trade is good. But when is it fair?

Let’s take these one at a time, from the top: trade is good. Here is a remarkably short piece brilliantly explaining why that is, as well as some of the ways in which trade can go badly wrong: “The Good (and Bad) News About Global Trade” from The New Yorker. A world in which some countries suffer at the expense of others is a dangerous world. Trade, properly conducted, addresses this fact as nothing else can. On the other hand, trade, even while leveling the playing field across borders, may tilt the field wildly for business and against workers. That kind of imbalance is dangerous, too, and it is the crux of legitimate opposition to the recent trade agreements.

As to the second proposition, here’s a fascinating piece of academic work: “Estimating the effects of the container revolution on world trade.” It argues that even without the major trade agreements, including NAFTA and even the General Agreement on Tariffs and Trade (GATT), the prosaic and obscure development called containerized cargo would have revolutionized and greatly expanded global trade. In other words, globalization is a function of technology more than politics. That’s a sensible position. The Communist Chinese state’s participation in a global capitalist system is an economic necessity, greatly enabled by technological developments. This is more tenable than the argument that China’s (or any other country’s, including our own) position on trade with the rest of the world rests on purely political motives or decisions.

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Now let’s discuss what is fair. If you’re a progressive, you might shop at Ten Thousand Villages, buy a trinket costing three times what you’d pay at TJ Maxx, and feel good about supporting “fair trade.” If you’re a Libertarian-leaning capitalist, you’ll feel fine about TJ Maxx and its prices, bless the chain for helping people in Malaysia find some kind of work, and enjoy your new vase. If you’re a former factory worker now restocking paint cans at a Home Depot, you may blame globalization in general, and trade deals in particular, for lowering your living standards. The point is that it is possible to evaluate these deals only by their aggregate effects, and even when we do, it is hardly likely that we can agree on what worked out well and what didn’t.

There is little doubt that the trade deals already in effect, including NAFTA, have exerted some positive influences on the world. In the case of the TPP and the TTIP, or Trans-Atlantic Trade and Investment Partnership, they form the core of President Obama’s “pivot to Asia,” largely a push-back against China’s growing economic power and threatening hegemony.

tradeThe agreements also have boosted trade and raised average incomes in some of the poorest areas of the planet — although the latter effect is often overstated. On the other hand, the deals have had some negative consequences, as well. Joseph Stiglitz points out that monetary and fiscal policy have much more to do with job creation and retention than does trade policy, but it beggars belief that these deals have not cost jobs in America and driven people from high-wage jobs to positions with lower pay. So Ross Perot and Bernie Sanders overstated the case against the trade deals on that ground.

What neither Perot, 24 years ago, nor Sanders this year spent a lot of time on is a much more salient set of problems with NAFTA, TPP and other recent trade deals. These agreements are negotiated in secret, with corporate representatives at the table. It is not sufficient to argue that environmental groups, labor unions and others are consulted. They are not at the table, whereas being there as a corporate representative makes corporate interests themselves effective parties to the agreements.

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This strange arrangement echoes the historical era of mercantilism. It results in some bizarre creatures of international law, such as “investor-to-state dispute settlement,” or ISDS. This curious construct allows corporations to take complaints to boards of “arbitrators” — corporate lawyers — who have the power to effectively overturn local, regional and national law. They are empowered to order governments, for example, to pay huge sums to corporations whose profits were damaged by environmental regulations in countries where they operate — even if they understood the regulations and simply chose to ignore them.

Seven years of secret negotiations are followed by a demand for “fast-track” authority to approve the deals without significant debate because time is short and enacting the instrument is now an emergency? It sounds like Hillary Clinton’s health-care plan of 1994, except that the TPP will probably pass.

Container cargo helped lead to globalization.

These trade agreements are not the cause of globalization. Fifty years of container cargo is much more the cause, and trade agreements the symptom. They do have something powerful to do, though, with changes in the international balance of power. They bestow on certain large corporations, who consider that they owe allegiance to stockholders and not the state, the effective legal status of nation-states, themselves.

It is simplistic to argue, as populists have and do, that the trade agreements are the cause of massive American job losses. It is simplistic to the point of inaccuracy to reduce the argument, as proponents of the agreements do, to a dispute between free trade and no trade. Donald Trump has taken the populist route. Clinton is waffling. She would do herself, and the country, a great favor to explain what the real benefits as well as the real problems are, and try to take the legal pins out from under corporate dominance of international trade.