The Three Industries That Love The TPP: Hollywood, Big Pharma & Wall St.

from the also:-three-big-funders-of-politicians dept

Tons of people seem (quite rightly) concerned about the Trans Pacific Partnership (TPP) agreement. As we pointed out last week after the final text was finally, released, the agreement has a lot of really big problems. But if you want to understand just how bad the agreement is, perhaps you should just look at the industries that like it. Vox notes that Big Pharma and Hollywood love the agreement while The Intercept notes that Wall Street loves it.

It should be noted that, actually, Big Pharma is apparently a bit disappointed that the TPP doesn't go far enough in locking up exclusivity for biologics.

That said, talk about three of the most hated industries around: Hollywood, Big Pharma and Wall Street. But, more importantly, talk about three of the most protectionist, anti-free trade industries around. We've been repeating over and over again that the TPP is not a free trade deal and this should be more confirmation. Hollywood, Big Pharma and Wall Street are probably three of the biggest industries to rely heavily on government regulations as a way to limit competition, limit innovation and to use that exclusivity to artificially increase prices at the expense of the public.

And they like the deal.

That's because it's not a free trade deal at all. It's not about "taking away" barriers to trade, it's about building bigger barriers in the form of protectionism to protect big, legacy industries from innovation and competition. Of course, it's no surprise that Hollywood, Big Pharma and Wall Street are also three of the most powerful lobbying industries in Washington DC, because when you can no longer innovate, and you rely on government protectionism, you focus your efforts on "political entrepreneurship" -- better known as getting the government to protect you from real entrepreneurship. So, no wonder the USTR went this direction. They only hear from these kinds of industries, and the end result is a fake free trade agreement that is designed to do the exact opposite. It's designed to build up barriers to protect old, stodgy industries who have relied on protection from competition from decades, and don't want to see that dissolve against foreign competition.

Filed Under: big pharma, free trade, hollywood, protectionism, tpp, trade, ustr, wall street

Once More: The TPP Agreement Is Not A Free Trade Agreement, It's A Protectionist Anti-Free Trade Agreement

from the get-your-story-straight dept

We've pointed out a few times in the past that while everyone refers to the Trans Pacific Partnership (TPP) agreement as a "free trade" agreement, the reality is that there's very little in there that's actually about free trade. If it were truly a free trade agreement, then there would be plenty of reasons to support it. But the details show it's not, and yet, time and time again, we see people supporting the TPP because "well, free trade is good." The Washington Post, for example, pushed out a ridiculous editorial arguing that the TPP is cause for celebration because it will "slash tariffs and harmonize regulatory regimes."

But it's that "harmonizing regulatory regimes" thing where the real nastiness lies, and where you quickly discover that most of the key factors in the TPP are not at all about free trade, but the opposite. It's about as protectionist as can be. That's mainly because of the really nasty corprorate sovereignty clauses in the agreement (which are officially called "investor state dispute settlement" or ISDS in an attempt to make it sound so boring you'll stop paying attention). Those clauses basically allow large incumbents to force the laws of countries to change to their will. Companies who feel that some country's regulation somehow takes away "expected profits" can convene a tribunal, and force a country to change its laws. Yes, technically a tribunal can only issue monetary sanctions against a country, but countries who wish to avoid such monetary payments will change their laws.

Remember how Eli Lilly is demanding $500 million from Canada after Canada rejected some Eli Lilly patents, noting that the new compound didn't actually do anything new and useful? Eli Lilly claims that using such a standard to reject patents unfairly attacks its expected future profits, and thus it can demand $500 million from Canadian taxpayers. Now, imagine that on all sorts of other systems.

And, add in a bunch of other rules that have absolutely nothing to do with free trade -- like granting more exclusivity on pharmaceuticals or extending copyright terms. As Tim Lee writes in a detailed report on the TPP, what's really happening here is empowering the elite incumbents:

As the opportunities for trade liberalization have dwindled, the nature of trade agreements has shifted. They're no longer just about removing barriers to trade. They've become a mechanism for setting global economic rules more generally.

This trend is alarming to Simon Lester, a free trader at the Cato Institute. "We've added in these new issues that I'm skeptical of," he says. "It's not clear what the benefits are, and they cause a lot of controversy."

And this system for setting global rules has some serious defects. We expect the laws that govern our economic lives will be made in a transparent, representative, and accountable fashion. The TPP negotiation process was none of these — it was secretive, it was dominated by powerful insiders, and it provided little opportunity for public input.

The Obama administration argues that it's important for TPP to succeed so that the United States — not China — gets to shape the rules that govern trade across the Pacific. But this argument only makes sense if you believe US negotiators have been taking positions that are in the broad interests of the American public. If, as critics contend, USTR's agenda is heavily tilted toward the interests of a few well-connected interest groups, then the deal may not be good for America at all.

Again, it's hard to see how this has anything to do with free trade. While it may have begun as a free trade process, the entire "trade agenda" has long since been almost entirely co-opted by special interests who realized that the easy way to pass legislation globally is to sneak it into a "trade agreement" behind closed doors with no public discussion or debate -- and then get it approved because it's under the banner of "free trade," even if the policies actually are protectionist for large industries.

It would almost be a clever move if it wasn't so destructive for competition and innovation.

So, remember, any time you see someone saying they support the TPP because they support "free trade," they're either lying or totally uninformed. The TPP is not about free trade. It's about the opposite. It's about locking in protectionist rules for incumbent providers, which is exactly the kind of thing free trade is supposed to take away.

Filed Under: barriers, free trade, incumbents, innovation, protectionism, regulations, tpp, trade agreements

Tom Friedman: If We Don't Sign The TPP Agreement, The World Will Be Overtaken By ISIS, Anarchy And China

from the who-said-what-now? dept

Famed NY Times columnist Tom Friedman is pretty widely mocked for his ridiculous platitudes that are designed to sound smart (or, more directly, to make readers think that Tom Friedman is smarter than you). But, outside of corporate boardrooms and elite politicians, it seems plenty of people recognize that Friedman's musings don't make much sense. There's even a Thomas Friedman OpEd Generator that does a pretty good job, showing how formulaic his articles are.

The key element in a Tom Friedman piece is to take some basic, simplified conventional wisdom, and try to gussy it up so that it sounds really profound. Often, this means ignoring all of the nuances and complexity behind the simple idea. A decade ago, he turned this into a whole book, The World is Flat, about globalization and how it was changing the world. He wasn't wrong, but his insights weren't particularly insightful or useful. Furthermore, he's so wedded to his thesis, that he still fails to realize that he was focused on a very exaggerated view of things, without understanding all of the related forces and consequences of what he was selling.

Given the premise of that book (and he's apparently working on a followup), it's little surprise that he's now stepped up to defend the TPP in his NY Times column space. Of course, he's going to do that, because he has a kneejerk reaction to defend "free trade deals" based on his book -- and he doesn't even seem to recognize that the TPP isn't really about free trade, other than at the margins. At least his colleague, Paul Krugman, seemed to immediately recognize that the TPP couldn't possibly help much on trade (because most trade barriers are already gone), and after talking to lots of folks realized that the TPP was likely dangerous.

Friedman, on the other hand, insists it's necessary, because without it... ISIS wins. Or something like that. Honestly, it's hard to parse out what he's actually saying because the broad meaningless platitudes just take over:

Because these deals are not just about who sets the rules. They’re about whether we’ll have a rule-based world at all. We’re at a very plastic moment in global affairs — much like after World War II. China is trying to unilaterally rewrite the rules. Russia is trying to unilaterally break the rules and parts of both the Arab world and Africa have lost all their rules and are disintegrating into states of nature. The globe is increasingly dividing between the World of Order and the World of Disorder.

When you look at it from Europe — I’ve been in Germany and Britain the past week — you see a situation developing to the south of here that is terrifying. It is not only a refugee crisis. It’s a civilizational meltdown: Libya, Yemen, Syria and Iraq — the core of the Arab world — have all collapsed into tribal and sectarian civil wars, amplified by water crises and other environmental stresses.

From there, he wanders through random musings about the collapse of civilization in the Middle East that has absolutely nothing whatsoever to do with a trade agreement concerning countries in the Pacific Rim. Then he magically brings it back around to the TPP by arguing "something something New World Order World of Order."

What does all this have to do with trade deals? With rising disorder in the Middle East and Africa — and with China and Russia trying to tug the world their way — there has never been a more important time for the coalition of free-market democracies and democratizing states that are the core of the World of Order to come together and establish the best rules for global integration for the 21st century, including appropriate trade, labor and environmental standards. These agreements would both strengthen and more closely integrate the market-based, rule-of-law-based democratic and democratizing nations that form the backbone of the World of Order.

What's amusing is that just paragraphs above, Friedman talks about the importance of "bottom-up communities" -- and yet here he seems to be saying that the big countries have to do the exact opposite and create top down order. And what kind of "order" is this? As far as I now, Tom Friedman doesn't have access to the text of the TPP because President Obama refuses to make it public.

So, as far as I can summarize, Friedman's argument is that "The Middle East is turning to anarchy, so the rest of the world needs to create strict authoritarian rules." Why? Because if we don't, China will. Because....

As Obama told his liberal critics Friday: If we abandon this effort to expand trade on our terms, “China, the 800-pound gorilla in Asia will create its own set of rules,” signing bilateral trade agreements one by one across Asia “that advantage Chinese companies and Chinese workers and ... reduce our access ... in the fastest-growing, most dynamic economic part of the world.” But if we get the Pacific trade deal done, “China is going to have to adapt to this set of trade rules that we’ve established.” If we fail to do that, he added, 20 years from now we’ll “look back and regret it.”

So, wait, now it won't be ISIS and anarchy we need to be afraid of, but China and its own rules? This entire piece makes no sense at all.

Meanwhile, actual experts in trade, like Simon Lester at Cato (who obviously is also a big supporter of free trade, but actually understands these issues), note that the whole "if we don't make the rules, China will" argument makes no sense in the real world.

And here we see yet another reason why the negotiators have made sure to keep the TPP a secret. This way, people who only vaguely think they know what "trade agreements" are about can project whatever they want on to them. And thus, magically, a "trade agreement" concerning countries in the Pacific Rim that the public can't see magically saves the world from an ISIS takeover and Chinese-made rules that aren't likely to actually show up.

Filed Under: free trade, isis, order, rules, tom friedman, tpp, trade, trade agreements

If You Really Think TPP Is About 'Trade' Then Your Analysis Is Already Wrong

from the don't-fall-for-the-marketing. dept

George Mason University professor Bill Schneider recently had an interesting blog post over at Reuters in which he discusses how Hillary Clinton is in a tough spot concerning the TPP and TTIP agreements, in that much of the Democratic party is now vehemently against these "trade" deals, while historically, the Clintons have been for them. The piece argues that whichever side Hillary takes will create a problem for her presidential campaign. The politics in the piece may be right, but almost the entire thing is built on the assumption that the TPP agreement really is about "trade" and that such an agreement will lead to cheaper goods and such. Take this passage for example:

Trade is not an ideological issue. It’s a populist issue — the people versus the establishment. Ordinary Americans are suspicious of trade deals. Economists have a hard time understanding this, but most people see trade not as an economic issue but as a moral issue.

People think it’s wrong for them to benefit as consumers from lower prices for foreign-made goods if it throws Americans out of work. Will they purchase the foreign-made goods? Of course they will — as long as they’re cheaper. That’s rational economic behavior. They just don’t think they should be allowed to.

I don't think that's actually what people are thinking at all, but even if we run with it, it's based on the very faulty premise that these agreements have anything to do with free trade at all. As we've discussed in the past, they do not. They are quite clearly often about the opposite of free trade. In the past, we've strongly recommended Michael Goodwin's epic comic about TPP where he shows how it's really got little to do with free trade, and everything to do with the ability to move investment capital around: Perhaps an even better explanation comes from Tim Lee over at Vox, who goes into the history of these agreements, noting that the "free trade" stuff has mostly already been taken care of, as there aren't that many meaningful tariffs/trade barriers left. Instead, trade agreements have become a sort of secret playground for big corporations to abuse the process and force favorable regulations to be put in place around the globe. He discusses the history and how organized labor, the copyright industries, the pharmaceutical industries and more now basically use trade agreements as a secretive, anti-democratic process to force through regulations they want.

As the opportunities for trade liberalization have dwindled, the nature of trade agreements has shifted. They're no longer just about removing barriers to trade. They've become a mechanism for setting global economic rules more generally.

This trend is alarming to Simon Lester, a free trader at the Cato Institute. "We've added in these new issues that I'm skeptical of," he says. "It's not clear what the benefits are, and they cause a lot of controversy."

And this system for setting global rules has some serious defects. We expect the laws that govern our economic lives will be made in a transparent, representative, and accountable fashion. The TPP negotiation process is none of these — it's secretive, it's dominated by powerful insiders, and it provides little opportunity for public input.

If you make the facile assumption that the TPP is actually about free trade, then you might be confused about all the hubbub about it. If you actually take the time to understand that much of what's in there has nothing to do with free trade and, in fact, may be the opposite of free trade, you realize why there's so much concern.

Filed Under: free trade, hillary clinton, investment, non-tarriff barriers, regulations, secrecy, tpp, trade, trade agreements, ttip

Latest Trade Agreements Are About The Opposite Of Free Trade: Protectionism For Big Business

from the this-is-not-free-trade dept

We've been talking a lot about the various big "trade agreements" that are being worked on around the globe -- with a major focus on the TPP (Trans Pacific Partnership) and the TTIP (Trans-Atlantic Trade and Investment Pact). These are frequently referred to as "free trade agreements." But an important point that gets lost in the various debates is that, generally speaking these are not free trade agreements at all. In many ways, they're the opposite. Free trade is about removing barriers to trade -- which are, generally speaking, a good thing. But the simple fact is that for the most part we already have pretty low trade barriers with most of the countries involved in these negotiations. Instead, this is almost entirely about a combination of regulatory arbitrage, and the ability to better move money around by giant multinational companies. The economics comic artist Michael Goodwin did a nice job demonstrating all this in a comic about the TPP a while back. Here's just two panels, though I highly recommend the whole thing: Economist Dean Baker has a good article describing this in more detail as well, showing that these agreements aren't about "free trade" at all. As he notes, basic free trade generally makes sense. But, that's not what's really being discussed in these agreements:

In TPP and TTIP we are not talking about the textbook trade story. The actual trade barriers between the United States and the countries in these deals, with few exceptions, are already quite low. This means that there is little to be gained by lowering them still further.

Instead, he notes -- as we have in the past -- that these "trade agreements" are really just the opposite. They're about gifts for certain big businesses that they couldn't get through legislation:

TPP and TTIP are about getting special deals for businesses that they would have difficulty getting through the normal political process.

He lists out a bunch of examples, but here are a couple we've been focused on:

The pharmaceutical industry and entertainment industries will get longer and stronger patent and copyright protection.

Note how this is the opposite of true free trade. Longer and stronger copyrights and patents are actually barriers to trade. They're putting up regulatory barriers to the free flow of information, protecting certain legacy businesses at the expense of innovative firms. And, it's all done in secret, with basically only input from businesses. The only time voters actually get to see what's in it is when it's a done deal, and fully negotiated. At that point, the parties are too committed to actually allow any fixes that protect consumers or innovation.

So, when you hear people talking about these agreements as if they're "free trade" agreements, just recognize that calling them free trade agreements is a lie -- and it's a lie that's used to convince the gullible that these agreements must be good for the economy. And it appears to work on some people:

As Thomas Friedman once famously said in reference to his support of CAFTA, "I didn't even know what was in it. I just knew two words: free trade." Others in the media may be too sophisticated to express themselves so bluntly, but undoubtedly most share Friedman's view. Under such circumstances, there will be few politicians prepared to stand up for principle or their constituents and vote against the pacts regardless of what it is in them.

In short: people (correctly) believe that free trade is generally a good thing. Businesses recognize this -- and even though we generally have an awful lot of free trade around the globe these days, with fewer and fewer tariffs and trade barriers, governments are working on "free trade deals" because they know by calling them that, people will often support them, believing blindly that they're good things. Instead, there's very little that's actually about free trade, and an awful lot that's about propping up and protecting legacy business models, while stifling the important free flow of information.

Filed Under: corporate sovereignty, dean baker, economix, free trade, investment, isds, michael goodwin, tafta, tpp, trade agreements, ttip

Canada's Strict New Anti-Corruption Rules Might Lead To Yet More Corporate Sovereignty Lawsuits Against It

from the no-good-deed-goes-unpunished dept

Recently, we wrote about the extraordinary free trade agreement between Canada and China that places itself above the Canadian constitution. Here's another development where Canada can serve as a warning to the rest of the world about the dangers of giving too much power to corporations in free trade agreements, as reported by the The Globe and Mail:

Canada risks being hit with a World Trade Organization challenge and NAFTA investor lawsuits over its threat to bar some companies from selling to the government for up to 10 years, warns a report commissioned by the Canadian Council of Chief Executives (CCCE) and delivered to federal officials.

And a number of foreign multinationals are already exploring possible trade action, according to an industry source, who declined to be named.

The problem is that Canada has introduced new anti-corruption rules:

Under the newly revised federal regime, companies seeking to bid on federal contracts must certify that neither they nor their affiliates have been charged with a long list of criminal offences anywhere in the world, including bribery and fraud, dating back 10 years.

Apparently, the inclusion of affiliates is much stricter than anti-corruption laws elsewhere, and that might open up Canada to claims that it is unreasonable for Canadian subsidiaries of foreign companies to be held responsible for the actions of other affiliates over which they have no control. No lawsuits have yet been filed, so it's too early to say how serious this threat is. But it certainly emphasizes how signing up to corporate sovereignty chapters in free trade agreements -- in this case, the 1994 North American Free Trade Agreement -- increases the risk that companies will use them in unexpected ways to attack governments when they introduce new policies, however praiseworthy those may be.

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Filed Under: anti-corruption, canada, china, corporate sovereignty, free trade, isds, trade agreements

Colombian Student Facing A Minimum Of Four Years In Prison For Uploading An Academic Article To Scribd

from the yeah,-nothing-excessive-about-this-sort-of-enforcement dept

Upload a document to Scribd, go to prison for at least four years. Ridiculous and more than a bit frightening, but in a case that has some obvious parallels with Aaron Swartz's prosecution, that's the reality Colombian student Diego Gomez is facing. In the course of his research, he came across a paper integral to his research. In order to ensure others could follow his line of thinking, Gomez uploaded this document for others to view.

According to Gomez, this was a common citation practice among Colombian students.

The important thing is to make a correct citation, attributing researchers’ work by indicating their name and year of publication and, of course, not claiming the work of another researcher, but to recognize it and value it. Therefore, what we usually do is to reference the findings and make them available to those who need them.

The paper's author obviously disagreed and sued Gomez. But unlike civil lawsuits in the US, copyright-related lawsuits in Columbia carry with them the threat of imprisonment.

Under the allegations of this lawsuit, Gomez could be sent to prison for up to eight years and face crippling monetary fines.

To be clear, Gomez did not try to profit from the paper. He also wasn't acting as some sort of indiscriminate distributor of infringing works. But under Colombian law, none of that matters. But to really see who's to blame here for this ridiculous level of rights enforcement, you have to look past the local laws, past the paper's author and directly at the US government.

[Gomez] is being sued under a criminal law that was reformed in 2006, following the conclusion of a free trade agreement between Colombia and the United States. The new law was meant to fulfill the trade agreement's restrictive copyright standards, and it expanded criminal penalties for copyright infringement, increasing possible prison sentences and monetary fines.

More details on the awfulness of Colombia's law (spurred on by US special interests) are available in the EFF's earlier coverage. Colombia gave the US copyright industry everything it wanted in order to secure this free trade agreement… and then it just kept going.

Colombia passed a criminal reform bill in 2006 that enacted many of these provisions, but Bill 201 goes even further. Under it, copyright infringers could face harsh criminal penalties, whether or not the individual is aware of committing infringement. It sets up severe penalty provisions including a minimum prison sentence of four years and significant monetary fines.

This 2012 bill compounded problems existent in the 2006 free-trade agreement.

Like previous US FTAs, it misleadingly defines “commercial scale” to include non-commercially motivated infringement, forcing US trading partners to adopt the US legal standard.

This bill was hastily passed as a welcoming gift for President Obama, shoved through the legislative process in order to get out ahead of the administration's appearance at a Colombia-hosted conference. This deference to the US government could cost Gomez at least four years of his life.

While Colombia seemed very eager to take the worst parts of US copyright law (and make them even more terrible), it was less inclined to take any of the good.

Colombia does not have flexible fair use system like in the United States. It has a closed list of exceptions and limitations to the rights of authors (derecho de autor). This list was issued more than 20 years ago and are narrowly tailored to some specific situations that are not at all applicable to the digital age. Therefore none of these will apply directly to his case even if it was done for educational purposes.

The only silver lining here is that the court still needs to consider two aspects before making its decision: mens rea and whether there was any actual economic harm to the author. On the first factor, it seems pretty clear Gomez didn't upload the document to purposefully "rob" the author of his earnings. On the latter, Gomez never made a cent from his infringing upload and actually took it down when he discovered Scribd was planning to charge unregistered users to download papers.

Beneath all of this lies the ugly reality of the academic research market. Just as in the US, plenty of useful information is locked up and inaccessible to anyone unable to afford the frequently exorbitant fees charged by various gatekeepers. Copyright's original intent -- "to promote the progress of science and the useful arts" -- isn't served by this behavior. Instead, it's deployed to further separate a large percentage of the population from knowledge. And in Colombia, it's being used to imprison someone actively "promoting the progress of science."

Filed Under: academic publishing, academics, colombia, copyright, criminal, diego gomez, fair use, free trade, free trade agreement, international obligations, knowledge, sharing

Free Trade Supporter Cato Institute Says Drop Corporate Sovereignty Provisions In Trade Agreements

from the so-that's-everyone,-then dept

Even though the formal negotiations for TAFTA/TTIP have begun only recently -- earlier meetings were largely exploratory -- it is already clear what the most contentious chapter will be: that dealing with corporate sovereignty, or "investor-state dispute settlement" (ISDS) as it's more formally known. Indeed, even back in January, ISDS was generating so much negativity that the European Commissioner responsible for TTIP, Karel De Gucht, decided to pull the corporate sovereignty chapter from the negotiations for a three-month EU consultation in an attempt to draw the sting from the criticisms.

It hasn't worked. As the Financial Times noted this week (subscription or registration required):

Faced with an increasingly vocal opposition to a landmark EU-US trade agreement, a growing number of backers of the deal are starting to ask a simple question: might the future of transatlantic trade be better served if one of its most controversial provisions was simply dropped?

Almost nine months after negotiations opened with great hope and fanfare, opponents of the mooted Transatlantic Trade and Investment Partnership, or TTIP, are rallying against a plan that would allow private investors to use the pact to sue governments if they felt local laws threatened their investment.

One fan of free trade agreements is Daniel Ikenson, director of the Herbert A. Stiefel Center for Trade Policy Studies at the Cato Institute. He's written a great post on the Cato Institute Web site with the title: "A Compromise to Advance the Trade Agenda: Purge Negotiations of Investor-State Dispute Settlement." As he points out with reference to the faltering TPP negotiations (but it applies equally to TAFTA/TTIP):

Characterizations of the TPP as a scheme to boost the fortunes of tobacco, oil and gas, banking, and pharmaceutical companies at the expense of worker protections, the environment, public health, and food and product safety have gone viral. And without so much as a single public repudiation of these claims by the president those perceptions are sticking.

As is true of most populist causes, buried beneath the enabling mythology and hyperbole are some kernels of truth. One such truth, which this paper seeks to distill from the vacuous, anti-capitalist hyperventilation surrounding the trade agenda, is that the so-called Investor-State Dispute Settlement (ISDS) mechanism, which enables foreign investors to sue host governments in third-party arbitration tribunals for treatment that allegedly fails to meet certain standards and that results in a loss of asset values, is an unnecessary, unreasonable, and unwise provision to include in trade agreements. Although detractors may not know it by name, ISDS is a significant reason why trade agreements engender so much antipathy. Yet, ISDS is not even essential to the task of freeing trade. So why burden the effort by carrying needless baggage?

Purging both the TPP and the TTIP of ISDS makes sense economically and politically, would assuage legitimate concerns about those negotiations, splinter the opposition to liberalization, and pave the way for freer trade..

After filling in the historical background to corporate sovereignty provisions in free trade agreements, Ikenson then goes to offer what he calls "Eight Good Reasons to Drop ISDS from TPP and TTIP":

First, ISDS is overkill. Governments are competing to attract productive investment to keep their citizens employed and their economies growing. Accordingly, it is imperative to maintain smart, transparent, predictable policies that are administered fairly and nondiscriminatorily. Asset expropriation or other forms of shabby treatment of foreign companies is not likely to be rewarded by new investment.

We don't need corporate sovereignty provisions to protect investors in foreign markets because those same companies will soon shun any country where investments are seized or investors discriminated against. It's true that such investments can be risky, but Ikenson points out that multinational companies (MNCs) are actually rather good at managing that risk. And if they're really worried, they can always take out private insurance.

Second, ISDS socializes the risk of foreign direct investment. When other governments oppose, but ultimately concede to, U.S. demands for ISDS provisions, they may be less willing to agree to other reforms, such as greater market access, that would benefit other U.S. interests. That is an externality or a cost borne by those who don't benefit from that cost being incurred. In this regard, ISDS is a subsidy for MNCs and a tax on everyone else.

It is not just other companies that are subsidizing MNCs, but also the public, which must bear most of the burden of corporate sovereignty's costs. That's because awards to foreign investors that sue and win against national governments are paid out of taxes. But the benefits of ISDS only accrue to those companies actually investing abroad.

Third, ISDS encourages "discretionary" outsourcing.

This is an interesting point. Corporate sovereignty is designed to make investing overseas less risky and more attractive. But the ironic effect of this is to make the US less attractive as an investment. As Ikenson says:

Access to ISDS could be the decisive factor in a company's decision to invest in a research center in Brazil, instead of the United States. Why should U.S. policy reflect greater concern for the operations of U.S. companies abroad than for the operations of U.S. and foreign companies in the United States? Why should ISDS effectively subsidize outsourcing, and not insourcing?

His next point has been made by a number of commentators:

Fourth, ISDS exceeds "national treatment" obligations, extending special privileges to foreign corporations.

Corporate sovereignty has the effect of giving foreign corporations more privileges than domestic ones -- hardly a policy aim for either the US or EU here.

Fifth, U.S. laws and regulations will be exposed to ISDS challenges with increasing frequency.

This is hugely important, because it exposes the fact that the current push for corporate sovereignty is based on a naïve extrapolation from current corporate sovereignty experiences. Hitherto, ISDS has been a weapon for Western countries to deploy against developing nations -- something that has few downsides. But if corporate sovereignty is included in TTIP, say, we will see US companies routinely challenging EU laws and regulations -- and EU companies challenging US laws and regulations. Suddenly, Western nations will be the victims, as well as the bullies.

Sixth, ISDS is ripe for exploitation by creative lawyers.

This will come as no surprise to Techdirt readers, who have seen post after post about the abuse of the patent system by trolls and their lawyers. Introducing a supranational legal system with ill-defined rules will produce a new class of more aggressive and better-funded trolls attracted by the even higher stakes involved when the defendant is not just a company, but an entire country.

Seventh, ISDS reinforces the myth that trade primarily benefits large corporations.

Some might argue that's no myth, but Ikenson is right: the revolt against corporate sovereignty and the power that it might give transnational companies is now such that the entire TAFTA/TTIP agreement is in doubt -- recently, the influential German news magazine Der Spiegel wrote: "The battle for TTIP seems as good as lost" (German original.)

Eighth, dropping ISDS would improve U.S. trade negotiating objectives, as well as prospects for attaining them.

The idea here is to divide the opposition to TAFTA/TTIP by sacrificing ISDS. The hope is that enough organizations and people will then support the agreement, isolating those that still do not. Yes, it's cynical, but it's also a sensible approach for those in favor of such trade agreements. Ikenson concludes:

For practical, economic, legal, and political reasons, ISDS subverts prospects for U.S. trade liberalization. Yet it is tangential, at best, to the task of freeing trade. Any benefits to availing MNCs to third-party adjudication are all but totally overwhelmed by the additional costs. In the proverbial airplane that is down one engine and losing altitude, throwing ISDS out of the cargo hold to reduce unnecessary weight is the best solution.

It's a great piece, cogently argued, that is particularly important given the affiliations of the author. Quite apart from the specific reasons it lays out as to why corporate sovereignty should go, its mere existence is proof that ISDS now lacks support across the entire political spectrum. Time to drop it.

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Filed Under: corporate sovereignty, daniel ikenson, free trade, investor state dispute resolution, isds, tafta, tpp, trade agreements, ttip

Krugman Gets Informed, Changes His Tune On TPP

from the it's-not-about-free-trade dept

Late last year, we were dismayed by a Paul Krugman opinion piece in the NY Times in which he judged the TPP based on how it might impact free trade, saying he didn't understand why people were so upset about it. After lots of people called him out on that, including other economists who highlighted that the problems of TPP have little to do with "free trade" but with exporting questionable regulations and giving up corporate sovereignty, Krugman admitted to knowing little of the details and promising to spend more time reviewing them.

He's now done so and put forth a revised opinion on the TPP, in which he more or less admits that it's not a very good agreement. He doesn't think it's horrible, just like he didn't think it was wonderful before. He basically shifted from lukewarm support to lukewarm disapproval of it. However, at least he now recognizes that it's not about trade, but about helping out a few big companies:

What the T.P.P. would do, however, is increase the ability of certain corporations to assert control over intellectual property. Again, think drug patents and movie rights.

Is this a good thing from a global point of view? Doubtful. The kind of property rights we’re talking about here can alternatively be described as legal monopolies. True, temporary monopolies are, in fact, how we reward new ideas; but arguing that we need even more monopolization is very dubious — and has nothing at all to do with classical arguments for free trade.

Now, the corporations benefiting from enhanced control over intellectual property would often be American. But this doesn’t mean that the T.P.P. is in our national interest. What’s good for Big Pharma is by no means always good for America.

He then wonders why the Obama administration is so gung ho on the deal, and thinks they've been sold a bill of goods, believing the bill must be good because it has been labeled as a free trade agreement, with no one bothering to really think through the details.

So what I wonder is why the president is pushing the T.P.P. at all. The economic case is weak, at best, and his own party doesn’t like it. Why waste time and political capital on this project?

My guess is that we’re looking at a combination of Beltway conventional wisdom — Very Serious People always support entitlement cuts and trade deals — and officials caught in a 1990s time warp, still living in the days when New Democrats tried to prove that they weren’t old-style liberals by going all in for globalization. Whatever the motivations, however, the push for T.P.P. seems almost weirdly out of touch with both economic and political reality.

While I think Krugman underplays the potential downsides of a TPP agreement, at the very least his assessment this time actually involved taking the time to look at what's actually happening. His initial assessment was much more like what he now accuses TPP supporters of doing: just taking conventional Beltway wisdom, combined with a 1990s time warp.

Filed Under: economics, free trade, paul krugman, tpp, trade agreement

USTR Claims It's Transparent On TPP Because Congress Is 'The People's Representatives'

from the do-they-even-believe-the-crap-they're-spewing? dept

The NY Times has, somewhat bizarrely, almost totally ignored the mess that is the Trans Pacific Partnership (TPP) agreement, and all of the secrecy behind it. There was a bizarre editorial in December that seemed to present support for the agreement, while admitting that they hadn't actually seen the agreement. There was a terrible piece by Paul Krugman in which he incorrectly assumed that the TPP was just like any other trade deal. Last week there was an OpEd by David Bonior that highlighted the failures of NAFTA and pointed out that the TPP would likely make income inequality worse in the US, despite the President's claimed desire to reduce that problem.

However, there's now finally a piece that takes a look at the key issue most of us have had about the agreement from the beginning: the insane lack of transparency -- and the fact that it's been set up entirely to be about benefiting legacy industries, rather than actually benefiting the public. The piece, by Thomas Edsall, highlights what a disaster the USTR and President Obama have done in negotiating the agreement in such a secretive manner. He notes that while it's expected that certain groups (such as unions) will almost always fight free trade agreements, the TPP's secrecy has resulted in supporters of free trade coming out against it as well.

Indeed, if this agreement were actually about free trade -- i.e., decreasing tarriffs and lowering barriers to trade across nations -- many folks (likely including myself) would be a lot more interested in supporting it. And while there are some elements of that in the agreement, that's not the problematic stuff. Having an entire chapter on IP? That's not about lowering barriers to trade, but increasing them. The "corporate sovereignty" section that allows companies to sue governments for not having regulations they like? That's just an out and out corporate handout designed to harm the public.

But the real issue here is the incredible level of secrecy that the USTR has engaged in throughout this process -- and the constant lies it tells anytime anyone calls them on it. In the past, we've pointed to Senator Elizabeth Warren's point that if, as former USTR Ron Kirk claimed, they can't make the text public because the public wouldn't allow the agreement to move forward, well, then that seems like a reason not to move forward.

Edsall has that quote from Warren, and then gets the USTR to respond -- though the "spokesperson" for the USTR was apparently too chickenshit to actually sign their name to the statements. There's a reason for that. Whoever said the following knows that it's pure crap:

“Members of Congress, as the people’s representatives, and staff for our Congressional committees of jurisdiction see and advise the Executive Branch not only on U.S. proposals, but also negotiating text for the TPP. Negotiators are available to walk Members and committee staff through that text and have done so on request. Moreover, USTR regularly briefs additional Congressional staff on the negotiations and U.S. approaches, taking input there as well. All told, we’ve held more than 1,100 briefings on Capitol Hill on TPP alone.”

This is just smoke and mirrors. The idea that Congress is actually "the people's representatives" is a joke that no one believes. Sure, they're supposed to be that, but find me anyone who actually believes that's accurate? Are there a few members of Congress who do really represent the public? Absolutely, but it's few and far between. In an era where politicians spend between 40% and 50% of their time "dialing for dollars" from wealthy donors and companies, the idea that Congress is actually looking out for the best interests of the public is clearly hogwash.

Of course, even if we accept that crazy statement as true, the rest of the quote is still crap. The USTR loves to tout all those "briefings" it holds with Congress, but most of those are one-directional, in which the USTR hears what someone is saying, but provides no real transparency on what they're doing. The claim that they allow members and staff to see the agreement? Well, note the careful choice of words. They say "staff for our Congressional committees of jurisdiction." And yet, as we pointed out not too long ago, when Senator Ron Wyden tried to get his senior staffer who's an expert on international trade access to the document, he was denied. And Wyden chairs the Senate's subcommittee on international trade (and is likely to take over the Senate Finance Committee, which is in charge of the whole "fast track" thing). You'd think his staffer wouldn't have any trouble getting access. But he did.

Given all this, Edsall quotes the still nameless USTR official who argued -- apparently with a straight face -- that there was transparency because of the USTR's "advisory committees."

Froman’s spokesperson, who declined to be identified by name, argued that outside groups are able to present their views on trade negotiations through a system of so-called “advisory committees.”

I like that sleight of hand. "Outside groups." Except, as we've detailed multiple times, these "advisory committees" -- such as ITAC-15, which handles intellectual property, is almost entirely made up of giant legacy players looking to protect their position, with no room for input on the impact on the public, or even innovative upstarts who provide a better product for the public. Instead, it's all about the giant old guard who play the political game to protect their position against upstarts.

Edsall notes that this is a bogus response from the USTR which apparently chose not to respond at all any further.

The good news in all of this, though, is that it highlights that this is a much bigger issue than just the usual opponents of free trade. It's become such a problem that a lot of traditional supporters of free trade have recognize that the secrecy and lack of transparency over the TPP has resulted in a horrible document that is damaging for the American public and the basic concepts of democracy.

Filed Under: congress, free trade, secrecy, tpp, transparency, ustr