Leak Cracks Open Trans-Pacific Partnership Scandal

Obama was warned, frankly, about the Trans-Pacific Partnership. Given his status as a center-left president, the public’s burgeoning disapproval of free-trade agreements, and the fact that he criticized such agreements when President Bush made them, he really should have known that such treaties were not for him.

And yet he chose to plow ahead. As I noted last year, the omens were not good. After the failed promises of NAFTA, a job-destroying trade deficit that has grown despite a long series of free-trade agreements, and ever-more-aggressive foreign mercantilism, it really should have been obvious that America needed a new trade strategy.

Now, thanks to a leak, we get to see that the Trans-Pacific Partnership really is as bad as feared. The text of the treaty had been kept from the public during two years of closed-door negotiations, and now we know why: It does not reflect any of the changes that Obama promised as a candidate. It’s more Bush-era same-old, same-old.

The proposed agreement would embrace Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam to start. Eventually, its advocates hope, it will include every nation on the Pacific rim, including Indonesia, the Philippines, Japan, Mexico, Russia, and China.

Yes, you read that right. China. (Recently, U.S. Trade Representative Ron Kirk said that he “would love nothing more” than to have China join TPP.)

The TPP probably would not have survived serious scrutiny by the press, the public, or even the larger community of policymakers. That’s why Kirk was on TV last month explaining that all the secrecy was necessary because public disclosure purportedly killed another major regional trade pact, the Free Trade Area of the Americas.

You can read the text of the leaked document here.

The initial appalled reaction of the indefatigable Lori Wallach of Global Trade Watch was this:

The outrageous stuff in this leaked text may well be why U.S. trade officials have been so extremely secretive about these past two years of TPP negotiations. Via closed-door negotiations, U.S. officials are rewriting swaths of U.S. law that have nothing to do with trade and in a move that will infuriate left and right alike have agreed to submit the U.S. government to the jurisdiction of foreign tribunals that can order unlimited payments of our tax dollars to foreign corporations that don’t want to comply with the same laws our domestic firms do.

(The rest of Global Trade Watch’s analysis can be found here.)

Secrecy in trade agreements has, of course, been standard procedure for a long time. When George H.W. Bush announced finalization of the NAFTA text in 1992, he trumpeted the “achievement,” but was so afraid of public reaction to the details that he would not release the text until after he had left office.

American trade negotiators have even been known to withhold details of these treaties from other U.S. government departments whose laws they would overturn, and from our legislators. In May, Sen. Ron Wyden (D-Ore.), chairman of the Subcommittee on International Trade, Customs and Global Competitiveness — the committee that supposedly has jurisdiction over the TPP — filed legislation to obtain information for himself and his staff. This is the stuff of comedy.

Despite the Trans-Pacific Partnership being nominally a “trade” agreement, it contains provisions that interfere with areas well beyond the bounds of trade. To wit, it would (again, Lori Wallach):

• Limit how U.S. federal and state officials could regulate foreign firms operating within U.S. boundaries, with requirements to provide them greater rights than domestic firms.

• Extend the incentives for U.S. firms to offshore investment and jobs to lower-wage countries.

• Establish a two-track legal system that gives foreign firms new rights to skirt U.S. courts and laws, directly sue the U.S. government before foreign tribunals and

• Demand compensation for financial, health, environmental, land use and other laws they claim undermine their TPP privileges.

• Allow foreign firms to demand compensation for the costs of complying with U.S. financial or environmental regulations that apply equally to domestic and foreign firms.

Taken to its logical conclusion, this all ultimately amounts to the idea that the profitability of investments must be the supreme priority of state policy — overriding health, safety, human rights, labor law, fiscal policy, macroeconomic stability, industrial policy, national security, cultural autonomy, the environment, and everything else.

While there is no justification for going to the opposite extreme and allowing governments to ride roughshod over legitimate property rights, these agreements thus rigidly mandate market-based, property-first solutions to questions where societies must strike a reasonable balance between public and private interests.

We are signing away not just our democratic right to make our own laws, but also the integrity of our judicial system and its ability to function according to our Constitution and legal norms.

What would a reasonable “21st-century” trade agreement, the kind Obama promised us as a candidate, look like? Well, it would probably embody the following principles:

1. Balanced Trade: Trade agreements must contribute to a national goal of achieving a manageable balance of trade over time.

2. National Trade, Economic and Security Strategy: Trade agreements must strive to optimize value added supply chains within the U.S. — from raw material to finished product — pursuant to a national trade and economic strategy that creates jobs, wealth and sustained growth. The agreements must also ensure national security by recapturing production necessary to rebuild America’s defense industrial base.

3. Reciprocity: Trade agreements must ensure that foreign country policies and practices as well as their tariff and non-tariff barriers provide fully reciprocal access for U.S. goods and services. The agreements must provide that no new barriers or subsidies outside the scope of the agreement nullify or impair the concessions bargained

4. State Owned Commercial Enterprises: Trade agreements must encourage the transformation of state-owned and state-controlled commercial enterprises (SOEs) to private sector enterprises. In the interim, trade agreements must ensure that SOEs do not distort the free and fair flow of trade — throughout supply chains — and investment between the countries.

5. Currency: Trade agreements must classify prolonged currency undervaluation as a per se violation of the agreement without the need to show injury or intent.

6. Rules of origin: Trade agreements must include rules of origin to maximize benefits for U.S. based supply chains and minimize free ridership by third parties. Further, all products must be labeled or marked as to country(s) of origin as a condition of entry.

7. Enforcement: Trade agreements must provide effective and timely enforcement mechanisms, including expedited adjudication and provisional remedies. Such provisional remedies must be permitted where the country deems that a clear breach has occurred which causes or threatens injury, and should be subject to review under the agreements’ established dispute settlement mechanisms.

8. Border Adjustable Taxes: Trade agreements must neutralize the subsidy and tariff impact of the border adjustment of foreign consumption taxes.

9. Perishable and Cyclical Products: Trade agreements must include special safeguard mechanisms to address import surges in perishable and seasonal agricultural product markets, including livestock markets.

10. Food and Product Safety and Quality: Trade agreements must ensure import compliance with existing U.S. food and product safety and quality standards and must not inhibit changes to or improvements in U.S. standards. The standards must be effectively enforced at U.S. ports.

11. Domestic Procurement: Trade agreements must preserve the ability of federal, state and local governments to favor domestic producers in government, or government funded, procurement.

12. Temporary vs. Permanent Agreements: Trade agreements must be sunsetted, subject to renegotiation and renewal. Renewal must not occur if the balance of benefits cannot be restored.

13. Labor: Trade agreements must include enforceable labor provisions to ensure that lax labor standards and enforcement by contracting countries do not result in hidden subsidies to the detriment of U.S.-based workers and producers.

You can sign the Coalition for a Prosperous America’s petition on behalf of the above principles here.