Backlash Against Trade Deals: The End of U.S.-Led Economic Globalisation?

By Jayati Ghosh, Professor of Economics and Chairperson at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. Originally published at The Frontline

There is much angst in the Northern financial media about how the era of globalisation led actively by the United States may well be coming to an end. This is said to be exemplified in the changed political attitudes to mega regional trade deals like the Trans Pacific Partnership Agreement (TPP) that was signed (but has not yet been ratified) by the US and 11 other countries in Latin America, Asia and Oceania; and the Trans-Atlantic Trade and Investment Partnership Agreement (TTIP) still being negotiated by the US and the European Union.

President Obama has been a fervent supporter of both these deals, with the explicit aim of enhancing and securing US power. “We have to make sure America writes the rules of the global economy. We should do it today while our economy is in the position of global strength. …We’ve got to harness it on our terms. If we don’t write the rules for trade around the world – guess what? China will!”, he famously said in a speech to workers in a Nike factory in Oregon, USA in May 2015. But even though he has made the case for the TPP plainly enough, his only chance of pushing even the TPP through is in the “lame duck” session of Congress just before the November Presidential election in the US.

However, the changing political currents in the US are making that ever more unlikely. Hardly anyone who is a candidate in the coming elections, whether for the Presidency, the Senate or the House of Representatives, is willing to stick their necks out to back the deal.

Both Presidential candidates in the US (Donald Trump and Hillary Clinton) have openly come out against the TPP. In Clinton’s case this is a complete reversal of her earlier position when she had referred to the TPP as “the gold standard of trade deals” – and it has clearly been forced upon her by the insurgent movement in the Democratic Party led by Bernie Sanders. She is already being pushed by her rival candidate for not coming out more clearly in terms of a complete rejection of this deal. Given the significant trust deficit that she still has to deal with across a large swathe of US voters, it will be hard if not impossible for her to backtrack on this once again (as her husband did earlier with NAFTA) even if she does achieve the Presidency.

The official US version, expressed on the website of the US Trade Representative, is that the TPP “writes the rules for global trade—rules that will help increase Made-in-America exports, grow the American economy, support well-paying American jobs, and strengthen the American middle class.” This is mainly supposed to occur because of the tariff cuts over 18,000 items that have been written into the agreement, which in turn are supposed to lead to significant expansion of trade volumes and values.

But this is accepted by fewer and fewer people in the US. Across the country, workers view such trade deals with great suspicion as causing shifts in employment to lower paid workers, mostly in the Global South. Even the only US government study of the TPP’s likely impacts, by the International Trade Commission, could project at best only 1 per cent increase in exports due to the agreement up to 2032. A study by Jeronim Capaldo and Alex Izurieta with Jomo Kwame Sundaram (“Trading down: Unemployment, inequality and other risks of the Trans Pacific Partnership Agreement”, Working Paper 16-01, Global Development and Environment Institute, January 2016) was even less optimistic, even for the US. It found that the benefits to exports and economic growth were likely to be relatively small for all member countries, and would be negative in the US and Japan because of losses to employment and increases in inequality. Wage shares of national income would decline in all the member countries.

But in fact the TPP and the TTIP are not really about trade liberalisation so much as other regulatory changes, so in any case it is hardly surprising that the positive effects on trade are likely to be so limited. What is more surprising is how the entire discussion around these agreements is still framed around the issues relating to trade liberalisation, when these are in fact the less important parts of these agreements, and it is the other elements that are likely to have more negative and even devastating effects on people living in the countries that sign up to them.

Three aspects of these agreements are particularly worrying: the intellectual property provisions, the restrictions on regulatory practices and the investor-state dispute settlement provisions. All of these would result in significant strengthening of the bargaining power of corporations vis-à-vis workers and citizens, would reduce the power of governments to bring in policies and regulations that affect the profits or curb the power of such corporations, and

For example, the TPP (and the TTIP) require more stringent enforcement requirements of intellectual property rights: reducing exemptions (e.g. allowing compulsory licensing only for emergencies); preventing parallel imports; extending IPRs to areas like life forms, counterfeiting and piracy; extending exclusive rights to test data (e.g. in pharmaceuticals); making IPR provisions more detailed and prescriptive. The scope of drug patents is extended to include minor changes to existing medications (a practice commonly employed by drug companies, known as “evergreening”). Patent linkages would make it more difficult for many generic drugs to enter markets.

This would strengthen, lengthen and broaden pharmaceutical monopolies on cancer, heart disease and HIV/AIDS drugs, and in general make even life-saving drugs more expensive and inaccessible in all the member countries. It would require further transformation of countries’ laws on patents and medical test data. It would reduce the scope of exemption in use of medical formulations through public procurement for public purposes. All this is likely to lead to reductions in access to drugs and medical procedures because of rising prices, and also impede innovation rather than encouraging it, across member countries.

There are also very restrictive copyright protection rules, that would also affect internet usage as Internet Service Providers are to be forced to adhere to them. There are further restrictions on branding that would reinforce the market power of established players.

The TPP and TTIP also contain restrictions on regulatory practices that greatly increase the power of corporations relative to states and can even prevent states from engaging in countercyclical measures designed to boost domestic demand. It has been pointed out by consumer groups in the USA that the powers of the Food and Drug Administration to regulate products that affect health of citizens could be constrained and curtailed by this agreement. Similarly, macroeconomic stimulus packages that focus on boosting domestic demand for local production would be explicitly prohibited by such agreements.

All these are matters for concern because these agreements enable corporations to litigate against governments that are perceived to be flouting these provisions because of their own policy goals or to protect the rights of their citizens. The Investor-State Dispute Settlement mechanism enabled by these agreements is seen to be one of their most deadly features. Such litigation is then subject to supranational tribunals to which sovereign national courts are expected to defer, but which have no human rights safeguards and which do not see the rights of citizen as in any way superior to the “rights” of corporations to their profits. These courts can conduct closed and secret hearings with secret evidence. They do not just interpret the rules but contribute to them through case law because of the relatively vague wording of the text, which can then be subject to different interpretations, and therefore are settled by case law. The experience thus far with such tribunals has been problematic. Since they are legally based on “equal” treatment of legal persons with no primacy for human rights, they have become known for their pro-investor bias, partly due to the incentive structure for arbitrators, and partly because the system is designed to provide supplementary guarantees to investors, rather than making them respect host countries laws and regulations.

If all these features of the TPP and the TTIP were more widely known, it is likely that there would be even greater public resistance to them in the US and in other countries. Even as it is, there is growing antagonism to the trade liberalisation that is seen to bring benefits to corporations rather than to workers, at a period in history when secure employment is seen to be the biggest prize of all.

So if such features of US-led globalisation are indeed under threat, that is probably a good thing for the people of the US and for people in their trading partners who had signed up for such deals.

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42 comments

  1. human

    … his only chance of pushing even the TPP through is in the “lame duck” session of Congress just before the November Presidential election in the US.

    “just _after_ the November Presidential election”

    Oy!

  2. Uahsenaa

    I was watching a speech Premier Li gave at the Economic Club of NY last night, and it was interesting to see how all his (vetted, pre-selected) questions revolved around anxieties having to do with resistance to global trade deals. Li made a few pandering comments about how much the Chinese love American beef (stop it! you’re killing me! har har) meant to diffuse those anxieties, but it became clear that the fear among TPTB of people’s dissatisfaction with the current economic is palpable. Let’s keep it up!

    1. allan

      On a related note:

      U.S. Court Throws Out Price-Fixing Judgment Against Chinese Vitamin C Makers [WSJ]

      A federal appeals court on Tuesday threw out a $147 million civil price fixing judgment against Chinese manufacturers of vitamin C, ruling the companies weren’t liable in U.S. courts because they were acting under the direction of Chinese authorities.

      The case raised thorny questions of how courts should treat foreign companies accused of violating U.S. antitrust law when they are following mandates of a foreign government. …

      “I was only following orders” might not have worked in Nuremberg, but it’s a-ok in international trade.

    2. a different chris

      Jesus, if the Chinese started eating 1/4 the beef that Americans eat…. we would quickly need another planet.

      1. polecat

        Not to fear …. Our feckess Leaders will condone turning all those starved 99%’s … into ‘new beef’ …to be exported to the wanting Chinese ….. planet problem solved, for the immediate time ……

        payback for all those dodgy imported melamine products ! ;'( … ;’)

          1. polecat

            ‘Soylent Beef’ …..now that’s a keeper !!

            definitely nothing ‘green’ about it, that’s for sure ! …. with the exception of the unwashed shlubs being put out to pasture, to die in penury …. by the venal actions of our high% betters ….

  3. Robert Hahl

    Trump really will stop these trade agreements. I can’t believe I am thinking this, but a vote for Stein is a vote for Hillary!

      1. different clue

        The question arises: is Trump evil? Or merely awful?

        If Trump is merely awful, then we are not faced with voting for the Lesser Evil or otherwise voting Third Party in protest. If we are faced with a choice between Evil and Awful, perhaps a vote for Awful is a vote against Evil just by itself.

        1. jsn

          Global warming: I submit, as the seas lap my ankles, that climate change denialism is evil.

          Your views may differ, I don’ know where else to live but earth.

          1. different clue

            Manmade global warming is a fact, obvious to some now and obvious to more as more of its effects spread and strengthen. If you care to read the last few years worth of threads here, you will discover my views on global warming without having to take my word-in-this-comment for it.

            Global warming denial is part of Trump’s awful awfulness. The fact that he doesn’t even believe his own denial, as witness his request to the Irish government for permission to build a seawall around his seaside golf resort in Ireland to protect it from the global warming ocean rise he expects to threaten its value just compounds the awfulness of his awful awfulness in this matter. (Pray the Irish government cites his own denialism in his presidential campaign and denies his request for a seawall).

            But he appears to want to lower the risk of all out nuclear war with Russia, whereas Clinton appears happy to raise that risk. And if we have a nuclear war with Russia, we won’t survive to worry about global warming.

            The states which vote for Trump most and hardest will be the states which feel the unfolding effects of Big Heat Rising first and worst. Some Trump voters will have their denialism cured by yet more warming. And the worse it gets, the more will be cured.

            And a President Clinton will cement the Big Heat Rising into place just as much as Trump would, only by a different pathway. She will support the Trade Treason Agreements already made, and will support all the new ones which will prevent America from taking unilateral action to prevent the entry into America of goods made more carbon-inefficiently in enemy-economy countries than those goods could be made ( and used to BE made within America itself . . . . before the Free Trade driven Bonfire of the Industries). So a vote for Clinton is just as much of a vote for more global warming as a vote for Trump is.

            So the question circles right back around to: if its a choice of Evil Clinton versus Awful Trump, which is the more short-term-survival-enabling vote?

  4. Wellstone's Ghost

    Trump has already back peddaled on his TPP stance. He now says he wants to renegotiate the TTP and other trade deals. Whatever that means. Besides, Trump is a distraction, its Mike Pence you should be keeping your eye on. He’s American Taliban pure and simple.

    1. sgt_doom

      While I do not disagree with your comments, they must be placed in proper context: there is no substantive difference between Mike Pence and Tim Kaine, and the people who staff the campaigns of Trump and Clinton are essentially the same. (Fundamentally a replay of the 2000 election: Cheney/Bush vs. Lieberman/Gore.)

      Trump was run to make Hillary look good, but that has turned out to be Mission Real Impossible!

      We are seeing the absolute specious political theater at its worst, attempting to differentiate between Hillary Rodham Clinton and the Trumpster – – – the only major difference is that Clinton has far more real blood on her and Bill’s hands.

      Nope, there is no lesser of evils this time around . . .

      1. Quanka

        Great Comment. Important to knock down the meme that “this is the most significant or important election of our time” — this is a carbon copy of what we have seen half a dozen times since WW2 alone and that’s exactly how our elite handlers want it. Limit the choices, stoke fear, win by dividing the plebes.

      2. different clue

        Really? Well . . . might as well vote for Clinton then.

        First Woman President!
        Feminism!
        Liberation!

  5. TedWa

    Let’s face it, trade without the iron fist of capitalism will benefit us schlobs greatly and not the 1%. I’m all for being against it (TPP etc) and will vote that way.

  6. a different chris

    >only 1 per cent increase in exports due to the agreement up to 2032.

    At that point American’s wages will have dropped near enough to Chinese levels that we can compete in selling to First World countries…. assuming there are any left.

    1. different clue

      The Red Fascist ChinaGov’s plan is that there not be any First World countries left. All countries are to be assimilated into China’s One Belt One Road Co-Prosperity Sphere.

      The governating elites of all the First World countries are to be paid richly and handsomely as their reward for delivering their countries into the OBOR CPS.

      One Belt to bring them all
      One Road to Find them
      One Sphere to Rule them all
      And in the Darkness Bind them.

      Not that different from TPP when you get down to it.

    2. oh

      We’d also have put in enough puppet dictators in resource rich countries that we’d be able to get raw materials cheaply. The low labor/raw material cost will provide a significant advantage for exports but alas, our 99% won’t be able to afford our own products.

    3. sgt_doom

      Naaah, never been about competition, since nobody is actually vetted when they offshore those jobs or replace American workers with foreign visa workers.

      But to sum it up as succinctly as possible: the TPP is about the destruction of workers’ rights; the destruction of local and small businesses; and the loss of sovereignty. Few Americans are cognizant of just how many businesses are foreign owned today in America; their local energy utility or state energy utility, their traffic enforcement company which was privatized, their insurance company (GEICO, etc.).

      I remember when a political action group back in the ’00s thought they had stumbled on a big deal when someone had hacked into the system of the Bretton Woods Committee (the lobbyist group for the international super-rich which ONLY communicates with the Speaker of the House and the Senate Majority Leader, and who shares the same lobbyist and D.C. office space as the Group of Thirty, the lobbyist group for the central bankers [Larry Summers, Timothy Geithner, Mario Draghi, Ernesto Zedillo, Bill Dudley, etc., etc.]) and placed online their demand of the senate and the congress to kill the “Buy America” clause in the federal stimulus program of a few years back (it was watered down greatly, and many exemptions were signed by then Commerce Secretary Gary Locke), but such information went completely unnoticed or ignored, and of course, the TPP will completely outlaw any possibility of a “Buy America” clause in the future!

      http://www.brettonwoods.org
      http://www.group30.org

  7. Arthur J

    The cynic in me wonders if under say NAFTA it would be possible for a multinational to sue for lost profits via isds if TPP fails to pass. That the failure to enact trade “liberalizing” legislation could be construed as an active step against trade. the way these things are so ambiguously worded, I wonder.

    1. Carla

      In June 2016, “[TransCanada] filed an arbitration claim under the North American Free Trade Agreement (NAFTA) over President Obama’s rejection of the pipeline, making good on its January threat to take legal action against the US decision.

      According to the official request for arbitration, the $15 billion tab is supposed to help the company recover costs and damages that it suffered “as a result of the US administration’s breach of its NAFTA obligations.” NAFTA is a comprehensive trade agreement between the United States, Canada, and Mexico that went into effect in January 1, 1994. Under the agreement, businesses can challenge governments over investment disputes.

      In addition, the company filed a suit in US Federal Court in Houston, Texas in January asserting that the Obama Administration exceeded the power granted by the US Constitution in denying the project.”

      http://www.earthisland.org/journal/index.php/elist/eListRead/transcanada_complains_nafta_sues_us_15_bn_keystone_xl_rejection/

      Six states have since joined that federal law suit.

  8. Kris Alman

    Here’s Obama’s actual speech at the Nike headquarters (not factory).
    http://www.americanrhetoric.com/speeches/barackobama/barackobamatradenike.htm

    It should be noted that the Oregon Democrats who were free traitors and supported fast track authority were called out that day: Bonamici, Blumenauer, Schrader and Wyden.

    The only Oregon Ds that opposed: Sen. Merkley and Congressman DeFazio.

    Obama’s rhetoric May 5, 2015 at the Nike campus was all about how small businesses would prosper. Congresswoman Bonamici clings to this rationale in her refusal to tell angry constituents at town halls whether she supports the TPP.

    The Market Realist is far more realistic about Oregon’s free traitors’ votes. http://marketrealist.com/2015/05/trans-pacific-partnership-affects-footwear-firms/
    “US tariffs on footwear imported from Vietnam can range from 5% to 40%, according to OTEXA (Office of Textiles and Apparel). Ratification of the TPP will likely result in lower tariffs and higher profitability for Nike.”

    That appeals to the other big athletic corporations that cluster in the Portland metro: Columbia Sportswear and Under Armour.

    A plot twist!

    Vietnam will not include ratification of the Trans-Pacific Partnership (TPP) on the agenda for its next parliament session.
    http://www.bangkokpost.com/news/asia/1087705/vietnam-delays-tpp-vote

    So what’s the incentive for Oregon’s free traitors to support the TPP now?

    1. Vatch

      So what’s the incentive for Oregon’s free traitors to support the TPP now?

      Perhaps they still need to show loyalty to their corporate owners and to the principle of “free trade”.

  9. hemeantwell

    Obama: “We have to make sure America writes the rules of the global economy.”

    Thank you, Mr. President, for resolving any doubts that the American project is an imperialist project!

    1. ChrisFromGeorgia

      Yes, and I would add a jingoistic one as well. Manifest destiny, the Monroe doctrine, etc. are not just history lessons but are alive and well in the neoliberal mindset. The empire must keep expanding into every nook and cranny of the world, turning them into good consumerist slaves.

      Funny how little things change over the centuries.

      1. Brad

        The West Is The Best, Subhuman Are All The Rest.

        The perpetual mantra of the Uebermensch since Columbus first made landfall. Hitler merely sought to apply the same to some Europeans.

        “How the West Came to Rule: The Geopolitical Origins of Capitalism”, 2015, Alexander Anievas and Kerem Nisancioglu.

    2. OpenThePodBayDoorsHAL

      The Dem candidate’s husband made it appallingly clear what the purpose of the TPP is: “It’s to make sure the future of the Asia-Pacific region is not dominated by China”.
      Would be nice if they had even a passing thought for those people in a certain North American region located in between Canada and Mexico.

      1. different clue

        Bill Clinton doesn’t even care about “the rise of China”. That’s just a red herring he sets up to accuse opponents of TPP of soft-on-China treasonism. It’s just fabricating a stick to beat the TPP-opponents with. Clinton’s support for MFN for China shows what he really thinks about the “rise of China”.

        Clinton’s real motivation is the same as the TPP’s real reason, to reduce America to colonial possession status of the anti-national corporations and the Global OverClass natural persons who shelter behind and within them.

  10. different clue

    If calling the International Free Trade Conspiracy “American” is enough to get it killed and destroyed, then I don’t mind having a bunch of foreigners calling the Free Trade Conspiracy “American”. Just as long as they are really against it, and can really get Free Trade killed and destroyed.

  11. Chauncey Gardiner

    Excellent post. Thank you. Should these so called “trade agreements” be approved, perhaps Investor-State Dispute Settlement (ISDS arbitration) futures can be created by Wall Street and made the next speculative “Play-of-the-day” so that everyone has a chance to participate in the looting. … Btw, can you loot your own house?

  12. Carla

    One or more words are missing at the end of paragraph 8.

    I attempted to search for the original article and it does not seem to come up using either Start Page or Google.

    Without the end of paragraph 8, the post is less useful.

  13. KYrocky

    Obama. Liar or stupid?

    When Elizabeth Warren spoke out about the secrecy of the TPP, Obama, uncharacteristically, ran to the cameras to state that the TPP was not secret and that the charge being leveled by Warren was false. Obama’s statement was that Warren had access to a copy so how dare she say it was secret.

    At the time he made that statement Warren could go to an offsite location to read the TPP in the presence of a member of the Trade Commission, could not have staff with her, could not take notes, and could not discuss anything she read with anyone else after she left. Or face criminal charges.

    Yeah. Nothing secret about that.

    Obama (and Holder) effectively immunized every financial criminal involved in the great fraud and recession without bothering to run for a camera, and to this day has refused and avoided any elaboration on the subject, but he wasted no time trying to bury Warren publicly. The TPP is a continuation of Obama’s give-away to corporations, or more specifically, the very important men who run them who Obama works for. And he is going to pull out all stops to deliver to the men he respects.

    1. sgt_doom

      And add to that everything from David Dayen’s book (“Chain of Title“) on Covington & Burling and Eric Holder and President Obama, and Thomas Frank’s book (“Listen, Liberals“) and people will have the full picture!

  14. Spencer

    It’s a virtual “black market” of “money laundering” (sterilization). In foreign trade, IMPORTS decrease (-) the money stock of the importing country (and are a subtraction to domestic gDp figures), while EXPORTS increase (+) the money stock and domestic gDp (earnings repatriated to the U.S), and the potential money supply, of the exporting country.

    So, there’s a financial incentive (to maximize profits), not to repatriate foreign income (pushes up our exchange rate, currency conversion costs, if domestic re-investment alternatives are considered more circumscribed, plus taxes, etc.).

    In spite of the surfeit of $s, and E-$ credits, and unlike the days in which world-trade required a Marshall Plan jump start, trade surpluses increasingly depend on the Asian Tiger’s convertibility issues.

  15. Praedor

    I don’t WANT the US writing the rules of trade any longer. We know what US-written rules do: plunge worker wages into slave labor territory, guts all advanced country’s manufacturing capability, sends all high tech manufacturing to 3rd world nations or even (potential) unfriendlies like China (who can easily put trojan spyware hard code or other vulnerabilities into critical microchips…the way WE were told the US could/would when it was leading on this tech when I was serving in the 90s). We already know that US-written rules is simply a way for mega corporations to extend patents into the ever-more-distant future, a set of rules that hands more control of arts over to the MPAA, rules that gut environmental laws, etc. Who needs the US-written agreements when this is the result?

    Time to toss the rules and re-write them for the greatest benefit of the greatest number of NON-wealthy and for the benefit of the planet/ecosystems, NOT for benefit of Wall St.

  16. larry

    Your link to The Frontline does not work. It goes to Triple Crisis and not to this article that Ghosh wrote.

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