POV: The Problem with Obama’s New Trade Pact

Photo by Flazingo Photos (Flickr)

President Obama is rushing to sell the country a new trade pact, the Trans-Pacific Partnership (TPP), with Pacific Rim countries such as Japan, Malaysia, Peru, Chile, and others. His goal is to convince Congress to provide him with fast track trade authority, which would require Congress to vote on the TPP within 90 days of its submission and prohibit all amendments. After years of negotiations, TPP talks are almost complete, and while many details remain undisclosed, some have leaked.

Amidst Obama’s full-court press, the key point is getting lost: the TPP will bring little in terms of economic benefits for the majority of Americans, but will involve considerable risks.

For these two reasons, the vast majority of members of Congress from the president’s own party opposes fast track authority for the TPP. During the past six years of negotiations, they pushed without success for a deal that would lessen the downside risks and safeguard the core values of American capitalism at home and abroad. Interestingly in these very partisan times, a sizable number of Republican members also are greatly concerned about both fast track and the TPP.

In any negotiation, a key question is: what’s in it for me—in this case, the US economy and the American people? A look at the numbers is revealing. A government study by the US Agriculture Department shows that the deal would have no economic benefits for the economy, concluding that “the TPP is unlikely to have substantial macroeconomic effects.”

Specifically, the study found that the TPP, even under the unlikely scenario that it slashed all tariffs and tariff-rate-quotas US firms face to zero, would alter our gross domestic product (GDP) by 0.00 percent in 2025. You read that right—0 percent. It doesn’t get any lower than that.

Given those sobering numbers, it is no surprise that the Obama administration, rather than use its own studies, cites work by the Washington-based pro-trade Peterson Institute for International Economics. Peterson’s study reveals that the proposed deal would boost US GPD by a mere 0.38 percent—way out in 2025.

 Our loss is not our trading partners’ gain. The benefits for all the TPP countries are estimated by the Peterson Institute to be 0.49 percent of their combined GDP. The TPP is estimated to actually hurt the economies of Indonesia, Thailand, the Philippines, and many South Asian countries.

With the economic gains so small, and even then only materializing a decade from now, it is no wonder that members of Congress at least want to make sure the agreement, at a minimum, does not put US businesses or workers at a disadvantage or undermine the public health, safety, and environmental policies on which Americans rely.

And even that is in question. The recently leaked text of part of the TPP confirms that bona fide regulations to protect public welfare have been recast as illegal barriers to trade by the big corporations that are in on writing the rules of US trade policy. What is worse, the TPP would let the private corporations themselves govern key parts of these treaties.

Despite the rhetoric from the Office of the United States Trade Representative, the nearly done TPP makes few improvements on labor and environmental standards beyond a compromise deal struck with the Bush administration in 2007. A 2014 Government Accountability Office study signaled the inadequacy of the 2007 compromise, finding that labor violations remain rife in post-2007 treaties. On the environment, Peru has become a hotbed for illegal logging and the murders of environmental activists, despite the 2007 compromise.

The TPP also would expand draconian intellectual property rules that would choke access to medicines. What is more, it would limit the ability of our trading partners to prevent and mitigate financial crises.

As Senator Elizabeth Warren (D-Mass.) argued in a recent Washington Post opinion article, perhaps the most egregious aspect of Obama’s trade deals is that they allow foreign investors to govern the core aspects of the agreement. “Agreeing to ISDS in this enormous new treaty would tilt the playing field in the United States further in favor of big multinational corporations,” she writes. “Worse, it would undermine U.S. sovereignty.”

Warren is referring to the system under many US treaties referred to as investor-state dispute settlement (ISDS), which allows private corporations the right to challenge US laws, and the laws of our trading partners, and then directly sue them in private tribunals, without ever stepping into a court of law.

This stands in stark contrast to the procedures of the World Trade Organization, where nation-states and regulators take cases against each other that are decided in relatively public tribunals. This is not a road to create more fairness and higher standards, but an avenue to hollow out and undermine American achievements made to date.

Given that the Obama administration is not willing to work toward a more lucrative deal that balances the rights and interests of citizens and corporations, Congress would be right to preserve its constitutional trade authority and oppose fast track.

Parts of this commentary originally appeared on the site delawareonline.

Kevin Gallagher is a College of Arts & Sciences associate professor of international relations and of global development policy at the Pardee School of Global Studies, where he codirects the Global Economic Governance Initiative and the Global Development Policy Program. He is the author or coauthor of six books, among them Free Trade and the Environment: Mexico, NAFTA and Beyond and The Clash of Globalizations: Essays on the Political Economy of Trade and Development Policy. He can be reached at kpg@bu.edu.

“POV” is an opinion page that provides timely commentaries from students, faculty, and staff on a variety of issues: on-campus, local, state, national, or international. Anyone interested in submitting a piece, which should be about 700 words long, should contact Rich Barlow at barlowr@bu.edu. BU Today reserves the right to reject or edit submissions. The views expressed are solely those of the author and are not intended to represent the views of Boston University.