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Administration Peddling Increasing Blatant Canards on Proposed “Trade” Deals

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We’ve both written and spoken about the wildly mislabeled “trade” deals that the Obama Administration is still trying hard to conclude, despite its abject failure to meet an arbitrary deadline of year end 2013.

The two pending deals, the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership, have perilous little to do with trade. But invoking the magic incantation “free trade” seems to neutralize the reasoning ability of economists and the media. As we wrote last year:

By way of background, the Administration is taking the unusual step of trying to negotiate two major trade deals in the same timeframe. Apparently Obama wants to make sure his corporate masters get as many goodies as possible before he leaves office. The Trans-Pacific Partnership and the US-European Union “Free Trade” Agreement are both inaccurately depicted as being helpful to ordinary Americans by virtue of liberalizing trade. Instead, the have perilous little to do with trade. They are both intended to make the world more lucrative for major corporations by weakening regulations and by strengthening intellectual property laws. The TPP has an additional wrinkle of being an “everybody but China” deal, intended to strengthen ties among nations who will then be presumed allies of America in its efforts to contain China…

Baker describes in scathing terms why these types of deals are bad policy:

…these deals are about securing regulatory gains for major corporate interests. In some cases, such as increased patent and copyright protection, these deals are 180 degrees at odds with free trade. They are about increasing protectionist barriers..
These deals will also lead to more upward redistribution of income. The more money that people in the developing world pay to Pfizer for drugs and Microsoft for software, the less money they will pay for the products that we export, as opposed to “intellectual property rights”….

This is yet another case where the government is working for a tiny elite against the interests of the bulk of the population.

If that isn’t bad enough, there’s another side of these planned pacts that is often simply ignored. These “trade” deals are Trojan horses to erode or eliminate national regulations. Baker anticipates that these deals will include sections that would limit government regulation (including at the state and local level) on fracking and could revive much of the internet surveillance that reared its ugly head in the failed SOPA [notice this was written in the innocent pre-Snowden era].

And this sort of erosion of the right to regulate will most assuredly extend to financial services. Dodd Frank? The Brown-Vitter bill that some see as a great new hope for tougher financial regulation? They are already unworkable under existing trade agreements.

In a sign that the Financial Times is gaining more influence in the US, a piece about these that was on the front page last night looks to be a clear media plant. The pink paper is dutifully falling in with the official line.

One of the tricks of dealmaking and legislating is to try to create the impression that the negotiations/vote herding are going well, even when they aren’t. That tactic was fully on display with the Administration’s failed effort to get Congressional approval for intervention in Syria. The White House kept messaging that it was getting support lined up even when whip counts showed that putting the measure to a vote would result in an overwhelming rejection.

Now while things are not as clear cut on the trade deals, they were already in trouble last year. Foreign news reports indicated that various proposed signatories to the TransPacific Partnership simply weren’t on board with provisions that the Americans regarded as critical. A State Department press conference after talks in Bali was so out of tune and arrogant that the press representatives there were openly skeptical. And that was before the Wikileaks disclosure of the text of one of the draft chapters, on intellectual property. It both showed how extreme the American position is and how much opposition it was getting from the other supposed “partners”. We don’t know as much about where the European deal stands, but there’s reason to believe that those potential signatories have much less reason to make the world safer for US IT companies in the wake of ongoing revelations about NSA snooping.

So what line is the Administration, via the Financial Times, pushing? (Note my surmise is this article comes directly or from sources close to the US Trade Representative’s office; it very mildly complains that Obama hasn’t spoken forcefully enough about trade, as if that’s going to make any difference).

In the article, Obama challenge on selling trade deals to resurgent left, there is astonishingly no mention of the issues the prospective partners have with the deal or how the Wikileaks publication showed that the critics if anything had understated how bad the deal is. And the headline pretty accurately reflects the spin of the article: Obama’s is supposedly those damned pinkos, as opposed to his lame duck status and the increasingly obvious outrageousness of the deal. But to an uninformed reader, it’s easy to sell the prejudice that only Luddite lefties are against the motherhood and apple pie of economists and the business community, “free trade”.

Look at the canards:

From the days of the North American Free Trade Agreement, launched 20 years ago, trade has always been a tough sell politically in the US – and, for a Democratic president, it means taking on allies among labour, environmental and consumer groups who are often staunchly opposed to the agreements.

Their scepticism about trade boils down to a belief that the US too often negotiates trade deals for the benefit of its multinational corporations, rather than ordinary workers, exacerbating wage stagnation and income inequality.

Mr Obama – and his top administration officials – do not see it that way by any stretch…They acknowledge that US trade policy has had problems in the past, but have vowed to do things differently this time, by insisting on tougher standards on workers’ rights, environmental regulations, the role of state-owned enterprises and intellectual property protections.

They say these will help “level the playing field” in the global economy in a way that can be squared with what the president has described as his “north star” of improving the lives of middle-class Americans.

Puhleeze. First, these “allies” that the Administration must manfully contend with are wusses. They make a show of opposition and let Team Dem carry on catering to powerful monied interests as usual.

Second, the notice how opposition to the deals are subtly presented as uninformed, as mere prejudice? The resistance is based on mere “belief”. In fact, NAFTA led to nearly a million lost jobs, and as we recounted in a weekend post, also wrecked much of the agricultural sector in Mexico. Tell me exactly how that helped regular people? And further notice the subtle bias in “ordinary workers”. To an FT reader, those are not part of their cohort, which are those directly connected to capital and the technocratic elite (executives, senior managers, policy wonks).

Third, the resistance extends well beyond the usual toothless leftie suspects. Over 200 Representatives, including some Republicans, have signed letters or otherwise voiced reservations about the trade deals. and another 30 to 40 are believed to be concerned. The opposition goes well beyond the small cohort of “progressives”.

Fourth, the Financial Times, rather than doing actual journalism (as in investigating) runs the blatant lie that the Administration is working to get tougher regulations via these deals. The most fundamental provisions of both pacts involve gutting regulations via strengthening the rights of foreign investors to sue governments at all level for anticipated losses (mind you, they don’t even have to prove they’d occurred) before secret international tribunals. As the group Public Citizen has documented in considerable detail, these panels are corrupt and bend over backwards to issue pro-investor rulings. Consider this description from a July presentation by Public Citizen:

What is different with TAFTA [pending Trans Atlantic Free Trade Agreement] (and TPP) is the extent of “behind the border” agenda

• Typical boilerplate: “Each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements.” …

• These rules are enforced by binding dispute resolution via foreign tribunals with ruling enforced by trade indefinite sanctions; No due process; No outside appeal. Countries must gut laws ruled against. Trade sanctions imposed…U.S. taxpayers must compensate foreign corporations.

• Permanence – no changes w/o consensus of all signatory countries. So, no room for progress, responses to emerging problems

• Starkly different from past of international trade between countries. This is diplomatic legislating of behind the border policies – but with trade negotiators not legislators or those who will live with results making the decisions.

• 3 private sector attorneys, unaccountable to any electorate, many of whom rotate between being “judges” & bringing cases for corps. against govts…Creates inherent conflicts of interest….

• Tribunals operate behind closed doors – lack basic due process

• Absolute tribunal discretion to set damages, compound interest, allocate costs

• No limit to amount of money tribunals can order govts to pay corps/investors
• Compound interest starting date if violation new norm ( compound interest ordered by tribunal doubles Occidental v. Ecuador $1.7B award to $3B plus

• Rulings not bound by precedent. No outside appeal. Annulment for limited errors.

And as we wrote last year:

And it’s even worse than you imagine once you understand how these panels work. Recall how Public Citizen mentioned the role of the panelists who go between working for the companies and serving on the panels? A small and tight-knit group has disproportionate influence (click to enlarge):

Screen shot 2013-11-13 at 6.23.31 AM

Consider the implications of the fact that the 15, and the larger community of panel “regulars,” work both sides of the street. They draw cases that go before the trade panel, as well as hear them. Thus it’s in their interest to issue aggressive rulings in order to facilitate more cases being filed.

Not surprisingly, this self-reinforcing system is, as expected, producing more claims even before its gets its hoped-for turbo-charging through the pending trade deals:

Screen shot 2013-11-13 at 6.27.38 AM

Now let’s go back to the dictation taken by the Financial Times. The last bit of nonsense in the extracted section was:

They say these will help “level the playing field” in the global economy in a way that can be squared with what the president has described as his “north star” of improving the lives of middle-class Americans.

Why does America have any duty to “level the playing field” if it is not concerned about the welfare of multinational? And spare us Obama’s pretenses to care about the middle class. Un and underemployment languishes in the mid-teens. And our Liar in Chief has taken to trying to depict physically demanding, below living wage jobs (for anyone supporting a household, as opposed to one person) in Amazon warehouses as “middle class”.

And the pretext for the piece is not news. The Senate Finance Committee is gearing up to move a Trade Promotion Authority, which is just another term of art for what is also called “fast track”. Fast track give Congress a limited amount of time to respond to a tabled trade deal with a simple up or down vote. This is just the old effort to move the pacts forward.

But this messaging means the Administration is still keen to get these deals done, which means it is also incumbent to keep the pushback going. Please call or e-mail your representative and tell them “Hell no!”

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26 comments

  1. YankeeFrank

    I have a friend whose father used to work for the AAA (American Arbitration Association) arbitrating labor disputes. According to him, arbitration panels are innately biased due to the fact that the only party that regularly hires the arbitrators is the corporation side via their high priced law firms. The labor side, usually an individual or union local, don’t utilize arbitrators nearly as often as the business side does, so whose interests do you think the arbitrators have to respect in order to continue to receive work? According to this former arbitrator, in the old days the goal of the arbitrator was basically to find some kind of balance that left both parties wanting more (barring the egregious cases where one side was a particularly bad actor). Eventually though the corporate side became more and more greedy, and simply stopped selecting arbitrators that didn’t display clear bias for their positions. That’s why he doesn’t work for the AAA anymore: he just couldn’t play the dishonest game they wanted him to play, so he was eventually de-listed.

    These dispute resolution panels in the TPP sound like this system on steroids.

    1. curlydan

      Exactly! And this no doubt happens in areas of arbitration other than labor. The recent Supreme Court stripping of the ability to file class action lawsuits in many areas such as cell phone contracts and billing matters could create the same situation. The Big 4 cell phone companies are providing tons of cases to the arbitrators, so it’s in the arbitrators interest to rule against the individual and for the big dogs. Grrr…

    2. j gibbs

      This is exactly how securities customer arbitration works. The arbitrators rely on volume business. Most are woefully uninformed about securities law, at best split the baby in half. Oh, you were cheated out of $50,000, how does $25,000 sound? And those are the slam dunk cases. If the evidence is equivocal you waste a whole day giving testimony and walk out with nothing. That 1987 Supreme Court Case which opened the door to compulsory arbitration is the among the very worst decisions by a hijacked institution.

  2. Christopher D. Rogers

    Yves,

    Its not just you chaps in the US who should worry about these so called “free trade” deals that team Obama and his global corporate cronies are trying to foist upon Asia Pac and Europe – its the other countries as well involved in these negotiations who are at fault, or in it for themselves at our expense.

    Given your global audience, and scope of both TAFTA and TTP, all concerned citizens of any nation or trade bloc engaged in these egregious power grabs by the elite should complain bitterly to both their governments and elected representatives, not just you chaps in the US.

    The only bit of good news for me is the anti-China slant of TPP and fact that I live in Hong Kong – now part of China luckily for me, is positive, however, I’m also British and reside for a few months of the year in Wales and TAFTA does nothing for me or my fellow countrymen, quite the reverse in fact.

    Lets put nationalism aside and all revolt against this disgusting abuse of corporate power by those mean’t to represent our interests, and not the interests of the global 0.3% who cannot give a toss about the poor, middle class or anyone else or thing for that matter – all they care about is entrenched power and money and are happy to destroy our planet in the process – and they call themselves “leaders” – greedy “fuckers” is more apt and certainly called for on this occasion.

  3. Ulysses

    Just like the Patriot Act took away most of our civil liberties, TPP/TAFTA, if passed, would take away any possibility of citizens pushing back against corporate power to defend workers and the environment. We need to push very hard against this!! This is in some ways more dangerous than the Enabling Act of 1933, which, after all, didn’t immediately put the entire developed world under Hitler’s boot.

  4. NotTimothyGeithner

    Has Paulie Krugman done any more research on the topic of TPP or is the Bearded One avoiding admitting gross ignorance or being a tool?

  5. Katniss Everdeen

    While I’m not a devotee, I have heard Ed Schultz (MSNBC) railing against TPP quite a bit lately. He also has a call-in afternoon radio show for 3 hours each weekday.

    He seems to have given up the Obot role at least where this issue is concerned, and his audience would seem to be different than that of the FT.

    Just a little good news that some of truth about this thing may be leaking out.

  6. D12345

    Hard to say if anything will make a difference on this. The fix may be in.
    Krugman’s silence is appalling.
    I think it would be helpful if his comments section was systematically barraged with
    insistence that he confront the issue.
    He might still find a way to minimize the treaty…but that could stimulate another great round of comments by intelligent readers.
    Thanks, Yves, for the great work on this!

      1. Synopticist

        It’s not only Krugman. NC is the almost only place beyond an article by George Monbiot in the Guardian I’ve even seen it mentioned.
        The comments below that article were illuminating. Most people seemed to think he was making it up, or he’d completely misunderstood something unthreatenning and benign.

        Even the alternative blogger types don;t seem to realise something big is happening.

        1. guabin

          Mark Weisbrot, of CEPR as is Dean Baker, has also weighed in the TPP, as well as, most recently, on NAFTA.
          And, yes, that silence from Krugman, and in an area where he should have been most vocal…

          1. NotTimothyGeithner

            Its not silence from Krugman. He’s already come out for the “trade” part of the deal, and when he was mocked by his readers, he promised to do research on the other parts. Its been almost a month, and the bearded one has not gotten back.

            Perhaps, he’s do a bang up job of research, but in the case of Krugman, its not just silence. He actively tried to dismiss critics with a bs case for TPP.

            1. guabin

              Yes, he did promise a ‘get back’, but remains prolific in other areas. And as wiki leaks has shown, it’s a bit more than ‘trade’, free or otherwise.

  7. Susan the other

    And worse. Japan continues to try to export stuff like tuna and used cars which are radioactive. Russia recently blocked this poison after testing it. As had China with a ban on all seafood caught in the radioactive zones of the Pacific. But the new pacts would make it impossible to do anything about this sort of poisoning. Eat your blue fin tuna or give Japan millions of dollars. China and Russia are lucky to be outside our corrupt circle of overlords. I say make the Senate eat tuna, all day long.

  8. backwardsevolution

    Yves and others – after reading the article and the “Comments” section, I am proud of you all! Yves, absolutely great work. This is one of the most important issues facing us. Man the phones and call your Congressmen. I’m going to call my Member of Parliament. Enough already.

    I am convinced that psychopaths rise to the top: glib, charming, superficial (like politicians, Jamie Dipshit), egocentric and grandiose, lack of remorse or guilt, lack of empathy, deceitful and manipulative, shallow emotions. Power and control is the name of the game.

    These guys (and their entourage of enablers like Krugman) will end this planet if they are not stopped. Fukushima anyone? No inner guide, no conscience, and rules are meant to be broken, no matter who has to suffer.

    If they are not stopped, get ready for a psychopathic choking.

  9. Expat

    The two transocean agreements read like classic cartels. Think OPEC enforced by the firepower of the world’s armies. In other words, in flat defiance of their labels, these are agreements to stifle trade, to erect major barriers to trade — at least trade in the form of small businesses, which will have to compete on equal footing with the General Electrics and Apples of the world — and to eliminate established forms of policing corporations by removing the possibliity of antitrust, investor rights, environmental and labour regulations.

    The agreements, like those of every other cartel, exist simply to facilitate predatory monopolistic behaviour and divvy up the spoils.

    But because these are cartels, the biggest concern is the ongoing cooperation of the parties. The most interesting provisions leaked so far relate to these concerns: the complex and lengthy process of amendment and change.

    Calling this kind of thing free anything, still less free trade, rivals anything Orwell imagined. Every lawyer who participated should be disbarred for aiding a known form of criminal conspiracy. It sickens me that economists — all of whom should be trained to recognize very predictable behaviour of this kind — are silent except for the courageous few.

  10. Paul P

    Obama is expected to introduce fast track as early as Wednesday.
    The fight is in the House, the Senate being a lost cause.
    Contact your Congress members, now, even if you’ve contacted them previously.
    If Obama fails to get fast track authority, the battle at home will complicate and hopefully undermine the negotiations abroad.

  11. cnchal

    Recently, I have had a rethink on what capitalism is, and commodities are. I thought of capitalism as a system where anyone could be a capitalist by providing a product or service that willing customers wished to buy. How honestly naive of me.

    It seems that capitalism has morphed into a system whereby our politicians, technocrats, judiciary, educators, and all the other bu!!sh!t job holders are just another commodity to be bought and sold by plutocrats, no different than a billet of steel or aluminum, to be formed into whatever their owners want.

    The TPP grenade in our proximity revolves around ISDR (Investor-State Dispute Resolution) tribunals, and here is a completely twisted capitalistic development out of it.

    From Public Citizen in the article link , ISDR has birthed an entire industry of specialized lawyers and tribunalists (many serving both roles) and specialized equity funds that finance what is lucrative business of raiding government treasuries.

    For a detailed look at how this works against all of us, consider this link.

    Canadians have been the hapless victim of these tactics, and three of the arbitraitors come from here. I wonder who owns them?

      1. Expat

        Thanks. It’s important to make it personal. I’ve finally watched enough Sherlock Holmes episodes to see the wisdom of keeping a file of known perpetrators — these guys have long careers. This is how to tell the story!

    1. JohnDoe

      Its been like this for ages…however, the combination of technology and the recent depression has both facilitated this corruption and illuminated it to an unheard of degree. Democracy has been long gone, pushed aside by an extreme form of crony capitalism.

      There are these persistent lies that permeate through American culture. One, which ended disastrously, was that every family needs a house. Another is that ‘You have to go to college’ (and pay for it with your life, even if you will never recup the cost) which is going to end with a loud bang at anytime. Another that largely affected my life was that we ‘need more engineers and scientists because we dont have enough’. Dont get me wrong, I think we DO need more engineers. I wouldnt change my engineering degree for anything. However, there are so few well paying jobs in engineering that most of my friends in engineering are now in consulting and getting MBA’s.

      I would love to explain to all HS that if you get an MBA from Harvard, you are exempt from every having to worry that you will lose your job (the gov will bail you out!), if you are reasonably low key about it, you can do some insider trading (the SEC has your back!), you can pull off stunts like open up a ‘green energy’ company, write it off so you never have to pay taxes, then use NAFTA “to undermine [said green company] and demand $746 million in taxpayer compensation.”

      Essentially, my point is that through these lies, the media, corrupt bureaucrats, lawyers, Wall Street has America wrapped around its stubby fingers, and if your not part of Wall Street, or if you dont speak Wall Street, your nobody.

  12. participant-observer-observed

    To a trade negotiator, there is nothing extraordinary about coming to the table with a full hand to deal, and attempting to extract the most possible concessions.

    Since representative democracy has long since been prostituted away to the plutocrats, the “People’s” negotiators, with very few exceptions, who could eliminate all of anti-democratic and non-trade related parts of TPP has long abandoned their oaths to defend the constitution.

    The public already knows there is no representation in either party; all they can hope to do is smoke their pot pipes while slaving for master. How the public would think it not futile to call their so-called reps in DC and get any benefit is hard to fathom. It is a docile public at best.

    Of course, if another earthquake hits Fukishima and rods crash together triggering a reaction, there won’t be much left to trade across the Pacific anyway except irradiated products, which, of course, it will become “illegal” not to import!

    I guess we can at least pretend there is hope and call DC reps anyway.

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