Everything you need to know about trade deals but were too bored to ask.
President Barack Obama has been riding high these last few weeks, cementing his legacy with landmark victories on healthcare, gay marriage, and opening a first US Embassy in Cuba for the first time since the Cold War. Between the rainbow flag waving and soaring eulogy-writing, though, it was easy to miss what may have been the president's most significant—and controversial—victory: the signing of a Trade Promotion Authority bill that gives Obama filibuster-proof superpowers when it comes to negotiating trade deals.
The legislation, formally known as the Trade Promotion Authority, passed the Senate at the end of last month, clearing a major hurdle for Obama's trade agenda after months of heated debate that divided the Democratic Party. Basically, it means that Congress will only be able to vote thumbs-up or thumbs-down on trade deals, specifically the massive Trans Pacific Partnership deal that Obama is currently trying to lock down.
The new law, and its connection to an eventual trade partnership, are understandably unclear to the average person in the US, or any of the countries that could be affected. It doesn't help that the law and the trade deal have similar acronyms: TPP for the Trans-Pacific Partnership, a massive deal involving a bunch of countries; TPA for Trade Promotion Authority, which the White House believes is critical to the trade agreement, because it gives Obama wiggle-room to negotiate without having to worry about wishy-washy recalcitrance from Congress.
It's confusing as hell, so here's everything you need to know to be able to talk about this topic intelligently.
Here are some basics.
On the face of it, the TPP—which, to be absolutely clear did not suddenly go into effect just because Congress granted Obama this new authority—is a measure meant to bring about more trade between 12 countries around the Pacific Ocean, whose leaders all shook hands on a basic version of the agreement in March of this year. The biggest players in the deal are the US and Japan, but the deal also includes Canada, Mexico, Australia, New Zealand, Peru, Chile, Malaysia, Singapore, Vietnam, and Brunei.
Trade Promotion Authority is a controversial issue, because until this "fast track" TPA process came about, the TPP had been a very slow burn. Some form of the partnership has been in talks since 2003, and the current version has been the subject of rigorous negotiations for the past five years.
Why it matters to Obama
If the TPP deal goes through, it will unite 40 percent of the global economy in mysterious ways, and mark the crowning achievement for his administration's " Pivot to Asia," a term the president and his team have coined for the Asia-centric foreign policy strategy that they've been trying to implement for much of his second term.
Popular wisdom held that America's drawn-out 2016 election would have dominated all political discussion and kept the TPP off the table until a new president is in office. After all, the Trade Promotion Authority bill involved the unholy union of Obama with Senate Republicans, who normally get along like cats and velociraptors. Democrats in the House have fought Obama hard on this deal, despite being in his own party, and Senate Democrats at best grudgingly capitulated.
Here are some basics on trade deals in general.
The Trans Pacific Partnership is in that category of trade deals that tend to spark episodes of unrest, like the explosive 1999 protests in Seattle during a World Trade Organization meeting. It's safe to say globalization is something that benefits major corporations, and the poor, well, aren't typically consulted about these deals.
The standard reasoning for a trade deal is typically: "It's so we can have free trade," although historically the corporations and governments that want that freedom have been terrible at explaining why. Labor unions and other worker's rights groups tend to see any move toward globalization as a "race to the bottom," granting jobs to the lowest bidder, wherever in the world they may be.
Obama acknowledged those concerns in his optimistic remarks Monday, claiming that "this legislation will help turn global trade—which can often be a race to the bottom—into a race to the top." To that end, he also put his autograph on something called the Trade Adjustment Assistance Act, which purports to help out those who lose their jobs because of deals like the TPP.
Lots of people like trade deals.
The buzzword that shows up again and again in defenses of the TPP is " comparative advantage." Comparative advantage is one of those Economics 101 concepts that economists can only describe using elaborate metaphors as illustrations. Suffice it to say, comparative advantage explains why a country might want to import goods it can easily produce, or produce goods it can easily import, even when that seems counterintuitive. In order to facilitate this cleverness at every turn, trade barriers have to be torn down and replaced with ever more freedom, glorious freedom.
To create that nominal freedom, trade deals must paradoxically include a list of rules. The World Trade Organization's rules provide a basic foundation, but with each new treaty, in order to get to the other side of the free trade velvet rope again, countries set a stringent set of criteria, which often include enacting domestic reforms.
Reform can sound great. The US Department of Commerce provides a list of practices that get in the way of international trade, and some of them are no-brainers that should clearly be done away with. For instance, if you're a developing country, and you want to play in the big leagues, you should probably do something about customs rules that are vague, or are enforced sporadically. You might have some kind of inane certification program or a test that people have to pass if they want to trade with you. Your ports might be rife with bribery and corruption, and your private sector might practice brazen influence peddling.
Theoretically, clearing those barriers can be worth it for the smaller fish. In places like economically depressed Peru, for example, open access to larger markets for their exports can be a big deal.
But some people hate almost all trade deals.
Labor activists are having flashbacks to the the North American Free Trade Agreement, or NAFTA, a deal between the US, Canada, and Mexico, which went into effect back in 1994. The AFL-CIO says the US lost 700,000 jobs after NAFTA went into effect.
Trade deals are traditionally negotiated behind closed doors. While that conjures an image of world leaders gathering in smoke-filled rooms plotting ways to screw over their respective populaces—and that could definitely be the case—there are also perfectly valid reasons to negotiate in total secrecy. It keeps lobbyists and other crony capitalists from sniffing around, which is nice for everyone. There are also complicated, game-theory type reasons for what's called "noncooperative bargaining."
But there's also the fact that, although the TPP negotiations haven't been public, 500 people are allowed to participate. That means they, unlike the rest of us, get to know what's in the deal, and to meet with officials involved in the negotiations. This cabal includes higher-ups at the US Chamber of Commerce, Chevron, Johnson & Johnson, and a guy named Robert Roche, who chairs a marketing firm in China. There are also some activists and labor leaders in the group, and interestingly, representatives of the IASC, which stands for the International Association of Skateboard Companies.
So at least there's that.
The Obama White House is being really secretive about this trade deal.
The White House has taken unusual measures to keep the details not just secret, but extra, super secret. Legal researcher Margot Kaminski wrote in the New York Times that since 2013, the US Trade Representative has been giving the relevant documents classified status, as if the agreement is a new stealth bomber.
Senators who wanted to read the TPP deal while the TPA was being negotiated this spring, had to do so in a soundproof chamber below the US Capitol building. To get in, they had to surrender their phones, and instead of being allowed to consult their own staff or counsel about the confusing language of the deal, they were only able to ask a member of the US Trade Representative—which is to say: They could only ask a White House official.
We do know a little bit about what might be in the TPP, thanks to a couple of leaks. In 2013 and 2014 Wikileaks published a draft of a section on intellectual property rights, and then a section on the environment. Earlier this week, Politico obtained and analyzed another leak, which shows that the TPP could give US pharmaceutical companies lots of protection against competition from cheaper drugs.
Possible intellectual property crackdowns are making the internet lose its shit.
Intellectual property concerns might be what caused some of the more over-the-top reactions online.
If you're looking for information about the TPP on Reddit, for instance, you might check the "TTP" subreddit, where you'll find the following somewhat incomplete description of the agreement:
The Trans-Pacific Partnership (TPP) is a secretive, multinational trade agreement that threatens to extend restrictive intellectual property (IP) laws across the globe and rewrite international rules on its enforcement.
This might be tunnel vision on the part of internet activists, but intellectual property is still a big part of the agreement. The Electronic Frontier Foundation fact sheet on the TPP points out measures included in the leaked draft would force countries like New Zealand to jump through annoying hoops to conform to American copyright standards.
There's also vague language in there about possible regulations that could result in legal action against whistleblowers for revealing trade secrets; and provisions that might make it harder to use copyrighted material under a fair use rationale. And it looks like there might be harsher penalties for copyright infringers who weren't even motivated by commercial gain.
According to Politico, it looks like the TPP also helps Big Pharma fight competition from generic drugs in markets outside the US, which could make it harder for poorer consumers to obtain treatment, and jack up the cost of Medicare and Medicaid. Rohat Malpini, a representative of Doctors Without Borders told Politico that, "There's very little distance between what Pharma wants and what the US is demanding."
Environmentalists are also losing their shit.
According to the Sierra Club's analysis of the leaked draft, the deal doesn't so much guarantee new pollution as it does possibly roll back previously negotiated environmental preservation measures, although the Sierra Club does make an argument for a possible increase in fracking.
The scarier part for environmentalists is a section on " investor-state dispute settlements" that gives corporations, such as oil companies, the right to sue signatory countries for enacting restrictions that hurt their businesses.
A little more about that whole "investor-state dispute settlements" bit.
This part could have a much bigger effect than just boosting oil companies' ability to fend off regulations. Investor-state dispute settlements are in that category of terms like "net neutrality" and "campaign finance reform" that activists scream in the streets trying to get the public to give a shit, but are just too boring for anyone to care.
However, investor-state dispute settlements might allow foreign companies to challenge US laws.
In her January op-ed in the Washington Post, Democratic Senator Elizabeth Warren—one of the most vocal opponents of the TPP—detailed a worst-case scenario:
Imagine that the United States bans a toxic chemical that is often added to gasoline because of its health and environmental consequences. If a foreign company that makes the toxic chemical opposes the law, it would normally have to challenge it in a U.S. court. But with ISDS, the company could skip the U.S. courts and go before an international panel of arbitrators. If the company won, the ruling couldn't be challenged in U.S. courts, and the arbitration panel could require American taxpayers to cough up millions—and even billions—of dollars in damages.
Back in April, Obama said Warren was "wrong," adding, "I would not be doing this trade deal if I did not think it was good for the middle class." However, his argument comes down to "trust Uncle Barry," because remember: what's actually going to be in the final version of the deal is a secret, and even what's been leaked might all be erased in the final version.
Again, Obama is really into this.
To make their case that the TPP is great, without tipping their hand about what's in it, the White House published what it called the "outlines" of a 2011 version of the TPP. Much of that document is written in public relations lingo (the administration wants to "effectively implement" and "strengthen" a lot of things), but the document paints a pleasant picture of a Pacific trade region where efficiency is increased thanks to coherent and consistent regulations, and even the smallest businesses in developing countries will be able to benefit from international trade.
But the president's support stands at odds with other Democrats like Warren, who say that TPP and other trade will hurt American workers while benefiting their corporate overlords. So why does Obama support a trade deal that other Democrats like Warren and 2016 Democratic presidential candidate Bernie Sanders hate? In a word: China.
"China wants to write the rules for the world's fastest-growing region," Obama declared in his 2015 State of the Union Address. "That would put our workers and our businesses at a disadvantage. Why would we let that happen? We should write those rules. We should level the playing field."
It's not clear what's going to happen though.
During the Trade Promotion Authority debate, the opinion pages of newspapers featured dozens of predictions for the future.
For instance, according to a team of economists who wrote a pro-TPP op-ed in the Washington Post on March 12, while NAFTA may have burned US manufacturing, much to the benefit of countries like Mexico, the TPP might actually turn things around. So even though China's not in on this deal, and probably won't be, some of the signatory countries are among its key trading partners. Their participation will supposedly force the juggernaut that is China to play the trade game according to American rules, which the authors argue would benefit trade.
Paul Krugman's agnostic take on the TPP offers a clearer picture than most. Krugman won the Nobel Memorial Prize in Economics for his discoveries in how geography shapes economies, so he approached the TPP differently than all the other pundits. Krugman compared the Pacific region to Europe, which benefits more easily from such trade pacts by being clustered together. He forecasts that by contrast, the TPP may not be a job-devouring nightmare, but that the gains will be minuscule compared to the uglier aspects, like the intellectual property advantages for Big Pharma:
If pharma gets to charge more for drugs in developing countries, do the benefits flow back to US workers? Probably not so much. Which brings me to my last point: Why, exactly, should the Obama administration spend any political capital—alienating labor, disillusioning progressive activists—over such a deal?
You'll be hearing a lot about this during the election next year.
Most Republicans are pretty friendly toward the TPP, according to a rundown by The Washington Examiner's David Drucker. Notable exceptions include Kentucky Senator Rand Paul who voted against the TPA bill, and Texas Senator Ted Cruz, who also voted against TPA, despite otherwise supporting free trade. In any case, frontrunners for the GOP nomination most likely won't make the TPP an issue in 2016.
But Democrats are a different story. After being rebuked by labor groups like the AFL-CIO during the TPA debates, Obama went to Wisconsin last week to tout a new trade proposal that labor likes. This is, according to Jim Kuhnhenn of the Associated Press, an attempt to repair the rift. The Democrats are, after all, going to need the unions on their side during the 2016 election.
The non-Hillary candidates—particularly Sanders—are vehemently opposed to the TPP deal. The Vermont senator wrote a piece about it for the Huffington Post saying it will "undermine democracy." Former Maryland Governor Martin O'Malley said recently the deal will "hollow out our middle class and middle class wages," although he has been somewhat supportive of the TPP in the past.
Meanwhile, Hillary Clinton is in a tough spot over the TPP. When she was Secretary of State, she called it "the gold standard in trade agreements." And let's not forget that her husband signed NAFTA into law.
But Candidate Clinton has been vague about the TPP. She criticized investor-state dispute settlements in her book, Hard Choices, and has said that any trade deal has to increase prosperity and create jobs. But the closest she's gotten to a clear opinion was in June when she said "the President should listen to and work with his allies in Congress," to come to some kind of agreement, and that "if we don't get it, there should be no deal."
Here's when the deal might potentially be finalized.
According to The Japan Times, trade talks between the two heaviest hitters in the deal might resume on July 9, and another meeting between all 12 countries is expected to be scheduled for July 23.
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NOTE: A previous version of this post attributed a claim that NAFTA had directly caused jobs to be lost to Mexico to the AFL-CIO. That statement, and the evidence we cited in support of it, have been revised. We regret the error.