Fair Trade Trumps Free Trade

Barack Obama’s ambitions to pass sweeping new free trade agreements with Asia and Europe are getting bogged down. It seems Democrats are on a collision course with the White House as the party’s newly emboldened liberal wing digs in its heels over global free trade deals it claims will drag down US wages and working conditions. What we are looking at are two separate agreements, the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). As we view the global economy we must ponder how much of this is about individual governments giving up control and becoming subservient to corporate “efficiency” and the desire of companies to both develop and control future rules. Many people see the global economy as currently being run as an ill-regulated business model tilted to favor big business. The benefit to the public is again the promise it will create new jobs, we should expect that will turn out to be largely a myth.

The more controversial of the two agreements is the TPP which excludes China and sets up a robust trade agreement between North America and some of China's nearest neighbors. A big issue is the exact language and details of the agreement are being kept secret by the Obama administration. Summaries indicate the agreement will affect tariffs, workers' wages, intellectual property, and environmental regulations in the US and 11 Asia-Pacific countries. Some people view the Trans-Pacific Partnership (TPP), currently being pushed by the Obama administration and its corporate allies as a blatant attack on labor, farmers, food safety, public health and even national sovereignty. Part of the problem is the details of the deal have been kept largely secret and other than what’s been leaked we have no access to its contents. Even members of Congress don’t know much with only, “cleared advisers,” mostly corporate lawyers, having full access because the TPP is way too important to its sponsors to allow little details like congressional or public input to get in its way.

Making all this more controversial is the beliefs held by many Americans that bad trade deals with low wage countries have contributed to our current economic woes. When Massachusetts Senator Elizabeth Warren, came out strongly against these agreements Obama said the Massachusetts senator was “absolutely wrong” and accused her of speculating about the contents of the emerging 12-nation trade deal for personal gain. Many people see Obama's criticism of Elizabeth Warren as not only disrespectful but as disingenuous. His statement did little to quell the controversy, instead it seemed to throw fuel on the fire. It should be pointed out that just because the President says someone is wrong on an issue does not make it true. Former Labor Secretary Robert Reich called the TPP “Nafta on steroids”  Senator Warren and those concerned that a trade agreement with low wage nations will not be a great job creator for America have history on their side.

Economist Dean Baker said, “This really is a deal that’s being negotiated by corporations for corporations, and any benefit it provides to the bulk of the population of this country will be purely incidental.” It is difficult to say why Obama sees this as a big plus, but it’s worth noting that in 2008, as a presidential candidate, he said, “I voted against Cafta, never supported Nafta, and will not support Nafta-style trade agreements in the future.” Historically, trade laws are geared to enrich the “mother” country and was often used to build a nation. Following World War II free trade arguably benefited the economies of the countries involved. But the new laws, starting with 1994’s North American Free Trade Agreement (Nafta), recognized that capital is now mobile, it moves about the world and owes allegiance to shareholders rather than loyalty to any one country.

Those supporting the TPP, claim it will be a boon for America when it reduces tariff barriers to vast Asian markets and strengthens protection for intellectual property a strong plus for America.  Moreover, the overall gain is more than just economics. In our competition with China for influence in the region, they reason it would anchor our relations with Pacific Rim nations keeping them out of China's orbit. Even if a Republican controlled Senate gives the administration the authority that it wants to negotiate trade agreements other countries may not fall in line. Some players may not feel they gain by changing the status quo.  Both Japanese and EU trade negotiators have their own issues and are facing their own domestic constraints. Japan has yet to fully embraced TPP and Abe is unlikely to make the politically unpopular decision do so any time soon. European Commission President Jean-Claude Juncker has split negotiating authority between his Trade Commissioner and Commission Vice President in an effort to placate Europeans worried about the proposed investor-state dispute settlement in TTIP.

With the old saying that "all politics are local" in mind politicians remain mixed on these plans. The 12-nation Trans-Pacific Partnership, would have a big effect on Montana which exports most of its grain to Asian Pacific markets. In Montana agriculture is the No. 1 industry. It’s a $5 billion a year industry in Montana and 80 percent of their wheat crop is exported, Montana farmers and ranchers know that 96 percent of the consumers in the world are located outside the United States. The TTIP between the European Union and the United States includes markets to which Montana products are rarely exported, but the TPP is very important. Steve Daines Republican Senator from Montana last month told The Billings Gazette he would have to consult with Montana “stakeholders” before deciding on how to vote on trade promotion authority. Now Daines says “Montana farmers, Montana ranchers, Montana manufacturers want us to get this done to create jobs and opportunities for our future in Montana.”

If trade promotion authority is granted it would be months before Congress actually votes on these agreements, before that happens the document must be made available to the public and Daines said he will vote against the final TPP if it is bad for Montana. Daines said he knows from personal experience the challenges of doing business in the Asian Pacific and believes the Trans-Pacific Partnership will help. Daines oversaw business in Australia and Japan for Bozeman software company Right Now Technologies. Both of those countries are members of the Trans-Pacific Partnership. Having a trade agreement that protects intellectual property is crucial to the tech economy. “Intellectual property is something we are always having to fight for because it’s where we lead the world, especially when we go forward in the high-tech age," he said. "Really, we’re shipping electrons, and that’s why it becomes so important. We must protect intellectual property.” Several manufacturers endorse Daines’ decision to back TPP.

This is a bipartisan effort if ever there was one and last week, a bill was introduced that would give the president “fast-track authority” to negotiate trade agreements. If that passes, Congress will be able to vote only up or down on the final negotiated agreement, they would not be able to amend it. As it is, failure to secure so-called “fast track” negotiating authority from Congress could stop the current trade negotiations dead in its tracks at the same time marking the high-water mark in the decades of steady trade liberalization that has fueled globalization. Many critics exist because these trade deals over the years have been blamed for environmental problems and exacerbating economic inequality within many developed economies as manufacturing jobs have been outsourced to low wage countries. Internet activists also claim the deal would curb freedom of speech, other detractors even charge it would enshrine currency manipulation.

It is only prudent that we question the merit of these agreements. At least NAFTA intended to bring up our neighborhood, it was thought that when Mexico and Canada benefited America would gain some degree of safer borders and a mutual interest would be served. Nafta is the paradigm of what are most accurately called deregulation deals. It promised better jobs in both the United States and Mexico. Instead, as well-paid workers in the United States were losing jobs to low paid workers in Mexico, badly paid Mexican workers were losing jobs to those in China who would work for even less. This in turn put more pressure on workers in the United States. Yes, free trade is often credited for creating more jobs than it does and the TPP in some ways is more objectionable than NAFTA. Obama told the Wall Street Journal "If we don't write the rules, China will write the rules" implying America will be left dangling in the wind with American businesses and American agriculture suffering and a loss of US jobs.

While free trade is important, fair trade is far more so and should trump it as an issue. Developing a long-term sustainable economic system that is balanced would contribute to both global cohesion and the world economy. It is logical that no country can endure a trade deficit year after year. Nationalistic exploitation of trade agreements has occurred throughout history and it is naive to think such schemes will suddenly end. The changes brought about by the development of the global economy have been hard for many. Promises of wide spread prosperity has fallen short and we have seen the benefits flow to only a few. Considering this, it is little wonder trade has become such a heated issue. I see no quick fix nor can I be optimistic the proposed agreements will bring about anything other than a system for long drawn out arbitration that will most likely dish out solutions that will neither thrill or satisfy.