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