The Age of “Free Trade” Agreements

“Free trade agreement” might be one of the worst misnomers in economic policy. After all, how much do free trade agreements have to do with real free trade, given that the US already has an average tariff rate of 1.6%? Following the great success of NAFTA, which displaced Mexican farmers, increased food prices, and provided little economic growth, the US government under Obama has tried to negotiate three more free trade agreements: TAFTA (with the EU), TPP (with East Asia minus China), and the newest TISA (with 50 different countries).

All the agreements are being pushed by promises of growth, employment, and lower prices. Economists point to comparative advantage to extol the virtues of free trade, and even though it’s unclear whether the theory of comparative advantage applies to the real world given its numerous assumptions, these FTA’s have little to do with free trade in the first place.

Here, I’ll break down the free trade agreements’ provisions, trends, and effects.

TAFTA (Also known as TTIP)

TPP

  • Investors’ rights: Same type of provision as the one in TAFTA.
  • Weaken environmental protection: Similar to TAFTA, the TPP aims to strip down barriers to natural gas exports and prevent countries from enacting any environmental regulations that are “unnecessary obstacles to international trade,” i.e. all of them.
  • Intellectual property rights: In public health, this means that pharmaceutical/biotech companies will have stronger patent protections for their drugs. Medecins sans Frontiers, the humanitarian NGO, has opposed the provision because it will raise medicine prices in the Third World. Other copyrights protected will include those for the entertainment industry, as in TAFTA.
  • Encourage privatization of utilities: The deal will likely prevent governments from regulating public utilities in a way that hurts investors’ profits.
  • Weaken financial regulation: In the face of opposition from developing countries, the US is pushing for provisions limiting governments’ ability to regulate capital flows (speculative, short-term “hot” money that flows in and out of the country). This is despite conclusions from economists and the IMF that regulating capital flows is key for stable financial markets.

TISA

  • Encourage privatization: Similar to the TPP, TISA makes it harder for governments to expand public services by making them compensate for investors’ lost profits.
  • Weaken financial regulation: TISA would make it so that countries “stand still” when it comes to financial regulation – no new laws limiting capital flows, even in response to future crises, which may be imminent. This may even be a stand-still from an earlier date, which would make financial regulations passed since then a violation of trade laws, thus rolling back measures that were passed in response to 2008 crisis.

While we identify the individual provisions of the trade deals, a few common (and alarming) trends emerge:

  • Corporate Wishlists: Each of these provisions has backing from powerful corporations and lobbies that hold significant clout within American politics. Pharmaceutical companies, the entertainment industry, oil and gas companies, and Big Finance have made sure to get their wishes in these “free trade” deals.
  • American Hegemony: In these trade deals, the US has used its economic power to push for policies friendly to US investors and restrictive for developing countries’ governments.
  • Secrecy Everywhere: TISA had to be unearthed by WikiLeaks, while TTIP’s whole text is still unavailable. These deals largely remain privy to corporations and high-ranking government officials. The TPP remains classified, and Congress members must read it alone without taking notes, and reveal nothing to the public.
  • Undermining Democracy: Senator Elizabeth Warren (D-MA) has been told that the trade deals “have to be secret, because if the American people knew what was actually in them, they would be opposed.” Indeed, as I’ve pointed out, many of the provisions are opposed by the public. That’s why Obama has tried to get “Fast Track Authority” to push these deals through – this would give Congress power to approve or disapprove the deal, but little time to debate it, and no authority to amend it. The trade deals also undermine democracy in the developing world, where governments would have to get investors’ approval before making any laws in the public interest.

People seem to recognize that corporate interests are not the same as the public interest, and these trade deals have been met with furious opposition globally. Indeed, thwarting these corporate wishlists will require an engaged and activist public committed to defending democracy.

Author: Edwin Jain

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1 Comment

  1. Absolutely delightful. Not the writing, you. kawaii~

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