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The Case Against Free Trade

Was there ever a time when trade wasn't a polarizing subject? Judging from the endless debate, it's either the key to economic prosperity, or a catastrophe for the common worker. There seems to be no middle ground.

The Case Against Free Trade

In recent months, the battle has flared up anew on two fronts: negotiations over a pair of massive free-trade agreements between the U.S. and key trading partners in Asia and Europe, and a push to give the President fast-track negotiating authority to expedite approval of those pacts. 

The two issues are tightly intertwined. Neither the proposed Trans-Pacific Partnership (TPP) nor Trans-Atlantic Trade and Investment Partnership (TTIP) would have much chance of being ratified by the U.S. without the benefit of fast-track authority, which expired for new agreements in 2007. They’re just too controversial to survive a fractious U.S. Congress. That’s why much of the discussion over the giant free-trade pacts centers on the question of the President’s power to negotiate with minimal input or criticism from legislators back home.

Whether the two camps can ever come together is an open question. But a constructive debate begins with the airing of both sides, so let’s start with the anti-free trade side.

Ben Beachy is research director of Global Trade Watch, a division of the consumer-advocacy group Public Citizen. He says the U.S. Constitution grants exclusive authority to Congress over the content of trade policy and domestic policymaking. Fast-track authority, which first surfaced as part of the Trade Act of 1974, subverts the founders’ intent.

Fast-track “empowers the executive branch to unilaterally negotiate and sign sweeping trade deals such as the proposed TPP, locking their content into place before Congress gets a meaningful opportunity to certify that its objectives have been met,” says Beachy. U.S. legislators are forced into an expedited voting process, with amendments prohibited and debate strictly limited.

In the process, the President acquires sweeping power over domestic policy in such areas as medicine, food safety, internet freedom, currency manipulation and environmental law. TPP, which would extend the model crafted by the North American Free Trade Agreement to 11 Pacific Rim countries in addition to the U.S., is only the latest “anti-democratic maneuver” by free-trade proponents.

Doesn’t Congress get the last word on FTAs anyway? They might be negotiated by the Administration, but they can’t take effect without legislative approval. Beachy replies that an agreement the size and scope of the TPP or TTIP can run to thousands of pages, with countless details buried in the text over which Congress has no say. An up-or-down vote on the entire pact “is hardly consolation” to lawmakers who were cut out of the loop.

The proposed pacts do contain mandatory provisions for notifying and consulting with Congress. But there’s nothing new about that, says Beachy. Previous versions of fast-track legislation included similar language. Whether such consultation is useful or binding is another matter entirely.

Select members of Congress are free to say what they think about the TPP and its sister agreement in Europe. “And the executive branch is free to summarily ignore Congress’s negotiating objectives.”

“Consultation is only meaningful,” Beachy says, “if it results in action.”

For example, the Administration has defied majorities in both houses of Congress by refusing to include within TPP binding rules against currency manipulation. (That has been a particular sore spot in U.S. relations with China in recent years.) What’s more, implementing legislation for an FTA often alters aspects of U.S. law to conform to the provisions of the agreement in question.

“If there is a conflict between domestic U.S. law and the terms of the agreement, there is nothing in that language to stop a trade partner from challenging it and seeking to impose trade sanctions against us,” said Beachy. The dispute can be elevated to an international trade tribunal like the World Trade Organization.

“Buy American” policies are yet another aspect of U.S. law to be threatened by FTAs. The deals often ban the enforcement of such provisions for foreign businesses operating in signatory countries, Beachy said.

The environment has been a particular sore point with past FTAs, most notably NAFTA. Recently the New York Times reported that the Obama Administration was backing away from earlier demands for strong environmental-protection language within TPP. Even worse, friction among prospective partners of the agreement could undo existing global measures.

The TPP’s chapter on investment, which was recently leaked to the public, empowers foreign corporations to challenge the domestic environmental and health policies of sovereign governments, Beachy notes. An international tribunal, consisting of three private-sector attorneys, would rule on whether the policy in dispute is a violation of rights accorded foreign businesses by TPP. Should the tribunal find in favor of the complainants, taxpayers of the offending company would be required to compensate the foreign corporation for the impact of the challenged law.

Beachy says similar language already exists in NAFTA and other U.S. trade agreements. In fact, he claimed, more than $400m in penalties has already been extracted from domestic governments who are party to FTAs signed by the U.S. And there’s $14bn worth of investor claims pending under existing trade pacts, all related to energy, the environment or public health.

Beach cited the case of a shut-down metal smelter in La Oroya, Peru, which is said to have been the cause of elevated blood lead levels in nearly all local children under the age of six. Renco Group Inc., the U.S.-based parent of the local entity that operates the smelter, is suing the Peruvian government for $800m in damages arising from closure of the smelter, citing provisions of the U.S.-Peru Trade Promotion Agreement.

Bans on toxics in Canada have drawn pressure from U.S. corporations, again leaning on the language of NAFTA. Actions by foreign business have been taken against fracking in Quebec, a clean jobs program in Ontario and anti-smoking policies in Uruguay. “Worldwide,” Beachy said, “we’ve seen a huge expansion of these kinds of cases.”

If Beachy is right, though, the TPP, TTIP and agreements of similar scope will not soon come to pass. Presidential fast-track authority “is dead on arrival in the U.S. Congress,” he says. “Almost all Democrats in the House, and a sizeable bloc of Republicans, have said they will not support it.”

Next: The case for free trade.

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