So What's All the Fuss About Fast Track, TPP, TTIP?

Nothing less than the prevention of corporate plutocracy is at stake

by Hank Van den Berg
University of Nebraska-Lincoln
Economics Professor Emeritus

Many Americans are aware that there have been some negotiations with some other countries about some new international trade and investment agreement, but few have any idea of the meaning of these negotiations. The media have not helped much; they have either been ignoring the negotiations or, when they do bring them up, they report them as “trade negotiations.” The agreements currently being negotiated between the U.S. negotiators and foreign governments are actually a large step towards diminishing the nation state and replacing it with a global corporate plutocracy.

TPP, TTIP & Fast Track

Few news accounts have provided much relevant information about the “Trans Pacific Partnership” (TPP) negotiations between the United States and Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The negotiations have been underway since 2005, and like the Bush Administration that began the negotiations, the Obama Administration has continued to aggressively pursue the agreement while intentionally preventing the public from getting any information on the content of this prospective agreement. Only some parts of the emerging document have been made available through Wikileaks. According to Bernie Sanders, the Vermont Senator and presidential candidate:

Incredibly, while Wall Street, the pharmaceutical industry and major media companies have full knowledge as to what is in this treaty, the American people and members of Congress do not. They have been locked out of the process.

More recently, in 2013, negotiations towards the “Transatlantic Trade and Investment Partnership” (TTIP) between the U.S. administration and the European Commission of the European Union (EU) were begun in near-complete secrecy. After information on the negotiations was leaked in Europe, there have been more open consultations, although many groups with legitimate interests have been largely prevented from having any real influence on the shape of the agreement. At least the TTIP has a somewhat more accurate name in that is refers to investment as well as trade, although the agreement that is taking shape at the insistence of the United States and certain leading European leaders is much more complex than even this name suggests.

The Obama Administration has been more direct (although still very deceptive) in its push for so-called ‘fast-track’ authority to pursue foreign trade agreements for the next six year—a period that covers the remainder of the Obama tenure and the full term of the next president. Fast track is the formal permission given by Congress, which has the constitutional power over international foreign treaties, to let the administration engage in negotiations with other countries, and a promise by Congress to hold a quick up-or-down majority vote without the possibility of amendments when a completed trade and investment agreement is presented for ratification. In other words, fast track would effectively allow the administration to negotiate in secret, and as long as there are pro-corporate majorities in both houses of Congress (which is normally the case), such secret agreements will become U.S. law without much open debate or discussion.

The Changing Look of Globalization

When the media misleadingly describe the TPP and TTIP as free trade agreements, people tend to think of agreements to take away costly barriers to American exporters seeking to sell American goods overseas and American importers seeking to acquire cheap foreign goods for sale to American consumers. However, the global trading system is a bit more complex than that picture suggests. First of all, today well over one-third of all U.S. foreign trade in goods and services never leaves the corporation that produces or sells the products. These exports and imports are just the shifts of goods, parts, components, services and financial transactions between different parts of the same corporation located in different countries. And nearly all international trade in services and goods involves a relatively small number (500-1,000) of large corporations—mostly corporations engaged in outsourcing and exploiting low-wage labor in other countries. These intricate commercial relations among corporations and among transnational branches of the same corporation are called “global value chains” (GVCs). International trade is thus intimately linked to investment, finance and corporate business planning.

GVCs imply that transnational corporations no longer view their existence from a national perspective. Their perspectives (and loyalties) are less and less national and more and more global. That is why I prefer the term transnational corporation to the traditional ‘multinational’ firm. This means that, in combination with corporations’ emphasis on short-term profit, the world is effectively governed by a small number of autocratic, single-minded business organizations with no particular loyalty to any one national government or society. It is well known that transnational corporations routinely exploit differences in taxes, regulations and legal structures to enhance their profits and force governments to grant them greater privileges. It is also alarming how much power large corporations already have over what we want to buy, where we work, how much we earn, who gets on election ballots and who controls personal information. These new international agreements will allow transnational corporations to gain even more power over our governments and our lives.

What We Know about the TPP and TTIP

These emerging trade agreements are not really free trade agreements at all. Rather, these agreements cover mostly other issues of importance to the 500 or so transnational corporations that dominate the global economy, such as protection of property, enforcement of patents and copyrights, environmental regulations, worker rights, product standards and health regulations. Recently leaked information shows that the TPP agreement under negotiation already contains provisions to establish “Investor-State Dispute Settlement” (ISDS) procedures that will allow corporations to recover damages from any changes in national policies, laws and regulations that negatively impact corporate profits. These procedures use privately-operated courts where the judges are corporate-approved ‘experts’ who are more often than not former corporate executives and lawyers. Also, the ISDS procedures are designed to focus singularly on corporate profits—not the underlying social, environmental or political implications of the corporate claims for compensation for democratic -government policy decisions.

ISDS-like procedures have been included in trade agreements for several decades, and they have also been mandated under the large number of bi-lateral investment treaties that the U.S. has been stealthily negotiating with countries all over the world for the last several decades. For example, the bilateral investment treaties agreed to between the U.S. and the governments of Australia and Uruguay are now being used by the U.S. transnational corporation Philip Morris to demand compensation for Australia’s and Uruguay’s new laws requiring that cigarette packages carry warning labels and graphic images showing the consequences of smoking. Because the new packages are working and cigarette sales have declined, Philip Morris is demanding compensation for lost profits. As the well-known economist Joseph Stiglitz writes: “The manufacturer is suing governments for restraining them from killing people.”

Another example of such a case is currently underway within the European Union, which has set up similar ISDS procedures. The Swedish private utility Vattenfall, which operated several atomic power plants in Germany, is suing the German government for more than 5 billion euros (U.S. $6 billion) because it decided to phase out nuclear power in light of the reassessment of the dangers following the Fukushima disaster.

While the TPP does not prohibit anti-smoking measures, the fact that foreign corporations can sue for damages means that countries will be much less willing to enact such ‘costly’ legal changes. The TPP will give such ISDS courts even greater power to overrule government laws and regulations. This is the reason Elizabeth Warren and Bernie Sanders have been such vocal critics of the Obama Administration’s pursuit of the TPP and TTIP. The fact that any change in national laws after a firm has invested in a country can require damages will make it less likely that progressive legislation or any serious types of financial, environmental or business regulations will be enacted. Note that under the proposed TPP, transnational corporations can even create subsidiaries in other countries that have signed on with the TPP through which to invest back home, and then sue, giving them a new channel to block regulations. In short, the safest and cheapest route for governments becomes one of giving corporations free rein towards ever greater profits, no matter how those profits are achieved.

It should be pointed out as well that leaked versions of the TPP show that legal recourse is only available for corporate investors overseas. If there is a violation overseas of labor agreements or environmental agreements, citizens, labor unions and civil society groups have no recourse.

ISDS Gives Transnational Corporations More Power over National Governments

This is the crux of the matter: the TPP, the TTIP, and the fast-track procedures to sneak these agreements through Congress are a large step towards giving transnational corporations even greater power in the world. Granted, corporate complaints about having to deal with myriad different rules, regulations and laws across different countries seem legitimate. So companies plead for “harmonization of the rules.”

Indeed, operating a transnational firm in many different countries is not easy, especially when rules, laws and regulations differ. But what gets quickly lost in the many media accounts of globalization and the pending international negotiations is that in a democratic system, the rules, regulations and laws are not designed exclusively to satisfy the desires and incentives of the owners of corporations. Higher profits are not equal to higher well-being for the citizens of a particular country—certainly not when corporate behavior explicitly causes unemployment, lower wages, environmental damage, health problems or a distorted political system. Corporate profit generally differs in important ways from the national interest that a democratic government is responsible to.

At the same time, we should note that there are few complaints from the corporate sector when one country slashes corporate taxes below those of other countries, or when they lower labor standards below those of other countries. The fact is that companies routinely exploit the differences by moving production to the lax labor-law country and shifting financial accounting to the low-tax jurisdiction. Of course, corporate and financial lobbyists then begin pleading for harmonization of other countries’ laws and regulations with those of the most pro-business countries. Hence, the fact that the TPP and the TTIP both include provisions for harmonizing regulations is troublesome to many citizens of countries with strong and effective social, environmental, financial and other economic regulatory regimes. Will a race to the bottom result during the negotiations to harmonize?

Our Corrupt Politicians

We all know that we do not have a democratic system in our country. ‘One-person, one vote’ has long since been replaced by ‘one dollar, one vote.’ But the ways in which the TTP and TTIP are being pushed through Washington is setting new lows. The secrecy is astounding. Only selected senators and representatives are allowed to see selected parts of the agreements negotiated so far, and then only in a supervised office beneath the Capitol somewhere. And no written notes may be taken, so nothing complex can be judged by outside experts, much less actual interested parties. The hope by the Obama Administration seems to be that if they suppress all information, most people will never hear of the TPP or the TTIP and never know how corporations came to have so much power over them.

Realistically, we should not be too surprised at the Administration’s approach. After all, President Obama long ago showed that his campaign promise to “renegotiate NAFTA” and rid the agreement of its ISDS procedures was a complete lie; as soon as he took office he began to push for similarly ominous trade agreements with Central America, Colombia, Korea, etc.

Congress’ behavior has not been much better. While he was majority leader of the Senate, Harry Reid refused to bring fast-track legislation to the floor. But now the Republican majority is allied with President Obama to pass the fast-track and subsequent TPP and TTIP agreements as their corporate patrons paid them to do. Interestingly, the Senate at first could not muster the 60 votes to push the legislation forward, thus raising the hope that honest minds would prevail after all. But it seems that the surprising Democratic solidarity only reflected some Democratic senators’ anger that a provision on prohibiting foreign governments from manipulating exchange rates was not included in the bill. Just two days later, a ‘compromise’ had been reached that would allow for separate votes on the basic fast-track provisions and the bill allowing the U.S. government to punish foreign governments for exchange rate manipulation. The fast-track legislation was quickly passed with 65 votes—13 from Democrats including Oregon’s Nike Senator Wyden, Washington’s Boeing Senators Cantwell and Murray and Delaware’s ‘corporate haven’ Senators Carper and Coons. When the actual negotiated agreements come back to the Senate in the future, fast track requires a simple majority for approval. Therefore, barring a sea-change in the makeup of the Senate, we will eventually end up with more trade agreements and less national sovereignty, unless other countries resist.

With regard to this second bill on exchange rate manipulation, I can assure you as an international economist that there is no obvious way to determine whether exchange rates are realistic or intentionally manipulated, much less why they are manipulated. In fact, given the fact that the dollar is the reserve currency of the world (to our very great advantage, by the way), all other countries have to run trade surpluses with us in order to accumulate reserves to protect themselves from speculative attacks and the potential economic crises that would result from such attacks. In short, it is not clear what the whole protest by the corporate Democrats was about, other than to let them say that at one point the voted against fast track.

In Europe, the European Commission (the executive branch of the European Union) had to reluctantly permit public hearings after some of the preliminary text of the agreement was leaked to the public. Massive protests across European capitals followed the revelations of pending inclusion of ISDS procedures in the agreement. Over 150,000 people, almost all in opposition to the agreement, attended the public hearings in 2014, but the Commission decided after the hearings to continue with the agreement as it was. Apparently public hearings do not outweigh corporate lobbyists. Opponents then began to organize a petition under the EU’s “European Citizen Initiative” provisions, for which one million signatures are enough to force an open political discussion in the European Parliament dealing with the secret negotiations currently being conducted by the European Commission. Unfortunately, the Commission has the power to deny the initiative for procedural reasons, and they promptly ruled that the initiative was not an ‘initiative’ because it sought to reverse an established procedure—not initiate a new one. So the signatures went for naught. And we thought “Citizens United” was the worst example of the corruption of government by corporate power.

Be Concerned, Speak Up

More protests are to be expected in Europe, where the public is generally better informed on trade negotiations. Whether the protests can stop the corporate takeover of the global economy remains to be seen, of course. In the meantime, we must make the issue more clear to Americans. Citizen ignorance will most certainly doom us to life under a corporatocracy.

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