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The Trade Agreement Pinatas

Monday, 22 December 2014 09:33 By Dean Baker, Truthout | Op-Ed
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In recent weeks many labor, environmental, and consumer groups have stepped up their criticisms of the Obama administration’s plans for pushing fast-track trade negotiating authority. The purpose of fast-track is to allow the administration to negotiate to complete the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Pact (TTIP) and then hand both deals to Congress on a take it or leave it basis.

Under the fast-track rules there would be no opportunity for amendments or delays. The deal must be voted up or down in a narrow time-frame. The idea is that with the bulk of the business community promising large campaign contributions to supporters and threatening to punish opponents, most members of Congress would find it difficult to vote no.

Furthermore, the elite media can be counted on to do its part. It will use both the news and opinion sections to denounce opponents of whatever deal is produced as Neanderthal protectionists. As Thomas Friedman once famously said in reference to his support of CAFTA, “I didn’t even know what was in it. I just knew two words: free trade.” Others in the media may be too sophisticated to express themselves so bluntly, but undoubtedly most share Friedman’s view. Under such circumstances, there will be few politicians prepared to stand up for principle or their constituents and vote against the pacts regardless of what it is in them.

Since many traditional Democratic constituencies strongly oppose these deals it is reasonable to ask why the Obama administration is so intent on pushing them. The answer is simple: money.

There is a well-known argument for free trade familiar to anyone who sat through an intro econ class. Free trade allows countries to specialize in the goods and services in which they are best at producing. They can then trade for other items. This makes the world richer.

While not everyone gains in the textbook story, the winners are supposed to gain enough that they compensate the losers and still be better off themselves. This could then mean that everyone is better off.

The real world trade story is considerably more complicated, in part because the winners never actually compensate the losers, but that is really aside the point here. In TPP and TTIP we are not talking about the textbook trade story. The actual trade barriers between the United States and the countries in these deals, with few exceptions, are already quite low. This means that there is little to be gained by lowering them still further.

TPP and TTIP are about getting special deals for businesses that they would have difficulty getting through the normal political process. For example, oil and gas companies that think they should be able to drill everywhere may be able to get rules that prevent national or state governments from restricting their activities. This could mean, for example, that New York State would have to compensate potential frackers for the ban that Governor Cuomo imposed last week.

Similarly, the financial industry will be looking to roll back the sort of regulations put in place through Dodd-Frank and similar legislation in other countries. Again, if governments want to ensure that their financial system is safe, they may have to pay the banks for the privilege.

The pharmaceutical industry and entertainment industries will get longer and stronger patent and copyright protection. And the food and pesticide industries will be able to able to limit the ability of governments to impose safety and environmental regulations.

Best of all, these trade deals will set up a new legal structure that goes outside existing system in the United States and elsewhere. All the businesses that didn’t think German or British courts could be trusted to give them a fair deal can turn to the investor-state dispute settlement tribunals established as part of these trade pacts. These tribunals will effectively make their own law. The trade deals allow no appeal back to U.S. courts or the courts of any other country that is included.

In short, these trade deals are a real bonanza for business. And it is a bonanza that the Obama administration is betting that they will be happy to pay for big time when it comes to the 2016 elections.

It takes lots of money to run a campaign. If the Democrats can show business that it can come through for it pushing massive trade deals like TPP and TTIP, then they expect that the businesses that benefit will reward them at campaign contribution time.

That’s the basic story behind these trade deals which would otherwise look like both bad politics and bad policy for the Democrats. President Obama and other party leaders are prepared to ignore whatever harm the deals will do to the country and the world, with the hope that they amply rewarded in campaign contributions.

Copyright, Truthout. May not be reprinted without permission.

Dean Baker

Dean Baker is a macroeconomist and codirector of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He is a regular Truthout columnist and a member of Truthout's Board of Advisers.


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The Trade Agreement Pinatas

Monday, 22 December 2014 09:33 By Dean Baker, Truthout | Op-Ed
  • font size decrease font size decrease font size increase font size increase font size
  • Print

Uncle Sam pinata(Image: Uncle Sam pinata via Shutterstock)Show your support for independent news and help Truthout survive. Click here to fund more stories like this one!

In recent weeks many labor, environmental, and consumer groups have stepped up their criticisms of the Obama administration’s plans for pushing fast-track trade negotiating authority. The purpose of fast-track is to allow the administration to negotiate to complete the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Pact (TTIP) and then hand both deals to Congress on a take it or leave it basis.

Under the fast-track rules there would be no opportunity for amendments or delays. The deal must be voted up or down in a narrow time-frame. The idea is that with the bulk of the business community promising large campaign contributions to supporters and threatening to punish opponents, most members of Congress would find it difficult to vote no.

Furthermore, the elite media can be counted on to do its part. It will use both the news and opinion sections to denounce opponents of whatever deal is produced as Neanderthal protectionists. As Thomas Friedman once famously said in reference to his support of CAFTA, “I didn’t even know what was in it. I just knew two words: free trade.” Others in the media may be too sophisticated to express themselves so bluntly, but undoubtedly most share Friedman’s view. Under such circumstances, there will be few politicians prepared to stand up for principle or their constituents and vote against the pacts regardless of what it is in them.

Since many traditional Democratic constituencies strongly oppose these deals it is reasonable to ask why the Obama administration is so intent on pushing them. The answer is simple: money.

There is a well-known argument for free trade familiar to anyone who sat through an intro econ class. Free trade allows countries to specialize in the goods and services in which they are best at producing. They can then trade for other items. This makes the world richer.

While not everyone gains in the textbook story, the winners are supposed to gain enough that they compensate the losers and still be better off themselves. This could then mean that everyone is better off.

The real world trade story is considerably more complicated, in part because the winners never actually compensate the losers, but that is really aside the point here. In TPP and TTIP we are not talking about the textbook trade story. The actual trade barriers between the United States and the countries in these deals, with few exceptions, are already quite low. This means that there is little to be gained by lowering them still further.

TPP and TTIP are about getting special deals for businesses that they would have difficulty getting through the normal political process. For example, oil and gas companies that think they should be able to drill everywhere may be able to get rules that prevent national or state governments from restricting their activities. This could mean, for example, that New York State would have to compensate potential frackers for the ban that Governor Cuomo imposed last week.

Similarly, the financial industry will be looking to roll back the sort of regulations put in place through Dodd-Frank and similar legislation in other countries. Again, if governments want to ensure that their financial system is safe, they may have to pay the banks for the privilege.

The pharmaceutical industry and entertainment industries will get longer and stronger patent and copyright protection. And the food and pesticide industries will be able to able to limit the ability of governments to impose safety and environmental regulations.

Best of all, these trade deals will set up a new legal structure that goes outside existing system in the United States and elsewhere. All the businesses that didn’t think German or British courts could be trusted to give them a fair deal can turn to the investor-state dispute settlement tribunals established as part of these trade pacts. These tribunals will effectively make their own law. The trade deals allow no appeal back to U.S. courts or the courts of any other country that is included.

In short, these trade deals are a real bonanza for business. And it is a bonanza that the Obama administration is betting that they will be happy to pay for big time when it comes to the 2016 elections.

It takes lots of money to run a campaign. If the Democrats can show business that it can come through for it pushing massive trade deals like TPP and TTIP, then they expect that the businesses that benefit will reward them at campaign contribution time.

That’s the basic story behind these trade deals which would otherwise look like both bad politics and bad policy for the Democrats. President Obama and other party leaders are prepared to ignore whatever harm the deals will do to the country and the world, with the hope that they amply rewarded in campaign contributions.

Copyright, Truthout. May not be reprinted without permission.

Dean Baker

Dean Baker is a macroeconomist and codirector of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He is a regular Truthout columnist and a member of Truthout's Board of Advisers.


Hide Comments

blog comments powered by Disqus