The TPP and National Sovereignty
By Eric Teller
After years of haranguing between high-level representatives of twelve nations, vigorous debate in congress, and impassioned resistance from advocates in the labor and environmental movements, the negotiations to establish the Trans-Pacific Partnership have come to a close. All that remains is for each member state’s government to ratify the agreement. The U.S. Congress has 90 days to review the TPP, after which it will be obliged to hold an up-or-down vote on the legislation as presented, with no amendments. Unless the text of the final agreement has changed significantly from its earlier iterations, Congress ought to reject the TPP because it prioritizes elite interests over the needs of the American people.
Supporters of the deal allege that it will benefit the U.S. economy, but a significant quantity of research has called this argument into question. An analysis by the Center for Economic and Policy Research finds that increased GDP growth from the agreement will be statistically insignificant (even according to statistics by pro-TPP researchers), and will be more than offset by the decrease in wages that will result from the agreement. This means that the TPP will have a negligible effect on the size of the overall economy, but will accelerate the widening of the gap between the rich and poor. In a detailed rundown of the TPP, The Economic Policy Institute explains that GDP-centric arguments about the economics of free trade are deceptive because they hide the fact that the majority of Americans stand to suffer losses, regardless of what happens to GDP. Instead of relying on these faulty metrics, policymakers must ask a simple question: “Will the TPP help the majority of Americans?” Claims to the affirmative rest on faulty assumptions, and the answer is unclear at best.
Now that the misleading nature of the main pro-TPP argument has been exposed, the hidden pitfalls of the agreement can be brought to light. In particular, there is one pernicious, esoteric element of the deal that should single-handedly disqualify the TPP from becoming U.S. law – Investor-State Dispute Settlement (ISDS). ISDS undermines national sovereignty by making the U.S. and other TPP parties beholden to the whims of foreign investors. Under ISDS, an international tribunal will be created in which foreign investors can sue a national government for enacting policies which reduce the investors’ profits. If the government loses the case, it cannot challenge the ruling, and will be ordered to pay out millions in taxpayer money to the company. In response to an explosion in the number of these cases, even the strongly pro-trade Cato Institute has called ISDS an “unreasonable” provision that should be “purged” from trade policy. ISDS tribunals were originally conceived as a way for companies to ensure that their investments in emerging markets would be protected, but since only one TPP member (Vietnam) is a low-income country, that justification is irrelevant. Besides, there are market-based methods that resolve this problem without jeopardizing the sovereign right of countries to legislate in the public interest. ISDS is an economically unjustifiable, politically senseless feature of the TPP that calls into question the ethical foundations of the agreement.
The events that have occurred in ISDS tribunals should disturb anyone concerned about human rights, environmental protection, or the rule of law. By bypassing constitutionally-authorized courts, ISDS has enabled multinational corporations to pursue cases that would be unthinkable in a civilized legal system. For example, a French utility company has sued Egypt for its minimum wage. A Canadian fracking company used an American subsidiary to sue a province of its own country for restrictions on natural gas drilling. One of the most deplorable uses of ISDS occurred when it was used to overturn a preexisting legal decision made by a sovereign court. In 2011, Ecuador ordered Chevron to pay US $19 billion in damages to indigenous people who had been poisoned by the environmental effects of malpractice in oil drilling. Chevron used ISDS tribunals to have the decision overturned, and is now refusing to pay damages for knowingly violating the law. By creating a new system of extrajudicial tribunals that will envelop 40% of the global economy in the jurisdiction of ISDS, the TPP threatens economic reform, corporate accountability, and democratic decision-making across the world.
Critics may argue that the United States has historically been successful at defending itself in ISDS tribunals, but we still spend millions of dollars defending ourselves in courts that have no basis for existing. The above examples demonstrate that any country, from the OECD to the Third World, can face a legal challenge. The most powerful argument against ISDS is not economic but political and ethical: no country should ever be punished for attempting to protect its citizens. Elected governments enter into a sacred contract with their constituents; they should be beholden to nobody but the citizens of their country.
It is understandable to see why the TPP is so appealing to multinational corporations, their lawyers, and their lobbyists. It is equally clear why so many grassroots organizations are united in opposition to it. This deal was not made in the best interests of the global economy. It was made in the best interests of a club of elites who are now attempting to use their influence to further weaken the political institutions which threaten to hold them accountable.
Eric Teller is a sophomore studying International Affairs with a concentration in Environmental Studies. He is a member of the GW Model UN Team and an organizer with Fossil Free GW
By Rebecca Galanti
On October 5, after days of prolonged talks, leaders representing the twelve nations of the Trans-Pacific Partnership (TPP) announced the finalization of the monumental trade deal, which has been in the works since 2008. Further economic integration with the eleven other TPP countries––which account for 44% of total U.S. goods exports––is part of the Obama administration’s “pivot to Asia” strategy, and successful completion of the deal is considered a backbone of the foreign policy legacy the President wishes to leave. Disagreement over whether this deal will help or hurt our economy is rampant, especially in the midst of a contentious election year. However, this ongoing debate should not take away from the underlying fact that TPP gives the United States an opportunity to influence the world’s fastest growing region by implementing rules of trade that fit our own values and commercial interests.
A common argument made against TPP is that it does not do enough to combat unfair labor treatment and harmful environmental practices in some of TPP’s developing countries. Though the United States has been required to include environmental and labor standards in its trade negotiations since 2007, the provisions set out in TPP are the first to actually enforce those commitments from other countries by introducing potential trade penalties if they are not met. It will require member countries to introduce minimum wages and adhere to standards set forth by the International Labor Organization. Vietnam, for example, will now have to allow for the formation of independent labor unions for the first time in its history. TPP also addresses environmental issues such as overfishing and illegal logging, and includes provisions that allow for the imposition of trade sanctions on member countries that do not do enough to combat wildlife trafficking.
Others cite the potential damage to American jobs as reason to oppose TPP. What they fail to understand is that the eleven other TPP countries already face extremely low trade barriers for exports to the United States. Six of the countries already benefit from free trade agreements (FTAs) with the United States, while the tariffs encountered by the other five nations are negligible. There is thus little reason to fear that the provisions in TPP that bring the marginal tariffs to zero would have a large effect on the import competition that U.S. manufacturers already experience. The fault in this argument lies in the failure to differentiate between the effects of trade versus the effects of trade pacts. Yes, international trade leads to job loss in some sectors, especially those at the very bottom of the socioeconomic spectrum. But the culprit is not tariff-lowering trade agreements––it is globalization and the increased trade that naturally comes with it. For instance, many often point to the numerous American jobs lost to expanding Chinese industry as an argument against trade agreements; they do not realize that such an argument makes little sense when one considers that we do not even have an FTA with China. Trade deals, if anything, serve to help participating countries influence existing commerce to their industries’ benefit. Defeating TPP will not bring back jobs already lost to trade, and it will not solve the United States’ economic inequality problem.
TPP is as much about geopolitics as it is trade. Fitting in with the Obama administration’s rebalancing of its foreign policy priorities, the deal stands to increase American influence and engagement in Asia. With TPP, the United States will become a considerable counterweight to China’s dominant role in the region. We frequently hear President Obama say in this debate that we can’t let China “write the rules of the global economy,” and––though the sound bite seems hackneyed––he is right. China has supported a rival regional trade agreement, called the Regional Comprehensive Economic Partnership (RCEP), which brings together sixteen Asia-Pacific countries (seven of which are also in TPP) but excludes the United States. This poses the question of whether the region’s development will be led by China or guided by American initiatives and principles. Asia-Pacific leaders have also expressed desire for further American integration within the region to counterbalance Chinese economic influence. Additionally, in raising the standards for many of China’s biggest trading partners, TPP puts pressure on China and other dominant regional players to adopt similar standards. Part of the enormity of TPP is that it is an open agreement; any Asia-Pacific country willing to open their markets and commit to TPP’s rules can join the deal. Countries such as South Korea and the Philippines have already shown interest, and there is talk that one day China might even want to join in order to get better terms of trade with countries it already trades heavily with.
TPP could be the harbinger of a new era of trade. With the fourteen-year Doha round of global trade talks stalled, agreements such as TPP shift the focus to larger regional agreements for trading partners with similar interests. The completion of this deal also puts pressure on the European Union to conclude its negotiations with the United States for the Transatlantic Trade and Investment Partnership. But despite the deal’s overall benefits to American industry and potential to spur our economic growth, it faces months of scrutiny in Congress. As congressmen debate the perceived downfalls or merits of TPP, it is important to consider that it was a compromise. We cannot bring global rules of trade entirely up to speed with the United States’ standards, but we can wield our commercial and political influence to raise them while they are still being shaped. I am confident that members of Congress will see past the political rhetoric plaguing the debate and sign off on this deal that will expand American commercial development, elevate international standards of trade, and advance the United States’ global leadership.
“U.S. in position to write rules on trade,” Financial Times
“The Future of U.S. Trade Policy,” Council on Foreign Relations
Rebecca Galanti is a junior from Atlanta, Georgia, double majoring in History and International Affairs with a concentration in International Politics. This past summer, she interned in the Office of the United States Trade Representative, and on campus she is a member of the Delta Phi Epsilon Professional Foreign Service Sorority.