Economy

Obama’s Free Trade Deal Lets Corporations Impose Their Will

CREDIT: AP Photo/Shizuo Kambayashi

Progressives who usually make up President Obama’s base of supporters are mounting loud protests against his newest proposal on international trade, the Trans-Pacific Partnership (TPP), as a key Democrat in the Senate reportedly prepares to strike a deal that would send the TPP hurtling toward passage.

While liberal objections to free trade deals often spring from concerns about lost jobs, the newest round of that fight centers on more fundamental questions about the kind of country America should be. The TPP’s most objectionable components are less about actual trade, and more centered on the future of online freedom of speech and the balance of public power between corporations and citizens. The deal appears to give high-powered corporate interests the right to edit the American social contract.

Most of the TPP is still secret, but draft versions of a couple of key chapters published by WikiLeaks contain worrying provisions on secret corporate tribunals, intellectual property law, and how the companies that run the internet will manage people’s free speech online. Where past trade fights have centered on the risk of job losses, the biggest criticisms of the TPP have zeroed in on provisions that have less to do with trade in the traditional sense and more to do with helping corporate shareholders and executives impose their will and extract profits from the public.

The leaked drafts describe a tribunals system called Investor-state Dispute Settlement (ISDS) that would allow corporate interests to sue countries over an alarming range of actions intended to defend the public interest. ISDS represents a warped version of a basically reasonable idea, according to the Economic Policy Institute’s Josh Bivens. Traditional trade tribunals are meant to protect foreign businesspeople from having their investments in a country snapped up by soldiers and nationalized. “If a US corporation opens a big production facility somewhere else you don’t want foreign governments to just come in and take it from them,” Bivens said.

But the ISDS system used in modern trade deals goes far beyond protecting investors from forceful expropriation of their factories. It allows corporations to punish countries for things like environmental regulations and work safety laws. “Corporations have been known to bring suit based on, ‘You have passed a regulation that I did not expect when I opened this factory, so my return is lower than I expected,’” Bivens said. In one notorious recent case, drugmaker Eli Lilly sued the nation of Canada for $500 million because, it claims, the Canadian legal system’s treatment of drug patents amounts to stealing Eli Lilly’s future profits.

It might seem that the tribunals system could work both ways, with Americans trying to drive labor standards or environmental regulations higher in partner countries. But “there is no way that ISDS will lead to the US exporting higher standards to, say, Vietnam or Malaysia,” former top congressional trade staffer Gordon Lafer told ThinkProgress. If anything, Lafer said, the reverse is more likely. “Investors will bring suits in various countries that, naturally, will be aimed at increasing their return, not at raising labor standards. This may happen not only in developing countries but in the US too.”

Only investors can bring suit in the tribunals, which exist specifically to protect corporate interests. The result is “a kind of Potemkin democracy, in which citizens are free to choose their flags and holidays but cannot afford to enact any laws that might reduce international investors’ profits,” as Lafer put it in 2014.

Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam.

CREDIT: Dylan Petrohilos/ThinkProgress

It will be even harder to complain about that brave new world online, too, if the other frightening draft provisions are in the final package. The TPP replicates the aggressive, automated, and speech-stifling approach to copyright protection online that the U.S. has used for the past 16-plus years under the Digital Millennium Copyright Act (DMCA).

“We’re seeing an increasing crackdown on supposedly copyrighted content that is uploaded to the internet,” the Electronic Frontier Foundation’s Maira Sutton told ThinkProgress. The DMCA gives both internet service providers (ISPs) and online platforms like Google a huge incentive to automatically remove user content when someone makes a copyright claim. Few sites bother to carefully review copyright claims for validity before removing content or suspending users.

“Many things that are protected by fair use or are in the public domain get automatically taken down with no regard to whether that content is actually legal or not,” Sutton said. Users can challenge a platform or ISP’s decision, but “they’re not required to make a determination of whether it’s a fair use.”

Passing the DMCA regime into the TPP would bring “an increasing movement towards service providers that would be required or incentivized to take down user content in the name of copyright enforcement.” Today, movie studios and record labels take advantage of DMCA-style enforcement systems that side by default with anyone who claims copyright protection. Tomorrow, Sutton warned, it could be political operatives and government officials.

“We’ve seen so many cases where people don’t actually have the copyright to something, and they send a takedown notice because they don’t like what this person is saying or what they’re criticizing,” she said, referencing a case in Ecuador where government officials have claimed their speeches are copyrighted as a way of getting ISPs and sites to silence their online critics. “During an activist campaign, even if things are only taken down for a few hours, there’s a huge cost to that speech being silenced. It’s a system of making people afraid to post content.”

Coalitions of progressive grassroots activists and digital libertarian types have proven effective recently in fighting domestic legislation that corporate America badly wanted. Those groups helped galvanize opposition to other notorious and defeated internet laws like SOPA/PIPA. While Sutton stressed that the TPP’s internet rules don’t replicate those much-hated American proposals, its milder form of the same basic approach to online speech could boost the noisy opposition from mainline labor organizations and anti-inequality activists.

The White House is lobbying hard to break the progressive wave forming against the deal, BuzzFeed reports, going beyond direct meetings with Democrats on the hill to call local activists personally and cajole them into backing down. Ex-Obama staffers recently launched a mysterious new group called the Progressive Coalition for American Jobs to run interference for the White House and muddy the waters for those journalists who can’t tell the grassroots from the astroturf. Progressive organizations and activists who have been around longer than a few weeks are vehemently opposed to the deal.

If progressive opponents succeed in denying Obama “fast-track” authority to demand an up-or-down vote on the finished TPP without amendments, he would be the first president since Richard Nixon to negotiate an international trade deal with his hands tied by lawmakers. But fast-track “would virtually guarantee passage” of the deal by requiring a vote within 90 days, with no amendments, amid “intense pressure from corporate contributors and the media…to support the deal,” as CEPR’s Dean Baker wrote in 2014. Behind that process objection, there is a principle: this is a bad deal for essentially all non-rich Americans.

The economic impact of the deal will look small compared to past trade deals but will still be negative for most workers, according to the Economic Policy Institute’s Josh Bivens.

“It will not be huge, but it will mostly be a drag on wages for non-college educated workers,” Bivens said. “I think it is likely to be very good for US corporations that essentially make a lot of money from intellectual property claims.”

One estimate funded by the conservative Peterson Institute guessed that the TPP will bring a multi-billion-dollar boost to the U.S. economy by 2025 – a very small figure in the context of a nearly $17 trillion economy – and left-leaning economists who have modeled exactly how the deal’s export and import effects would trickle down to working America are sour on the deal. Center on Economic Policy Research economist David Rosnick has estimated that the TPP would drive wages down for the bottom 85 percent of earners while boosting them for economic elites.

“The more that we concentrate on putting lower-level workers in competition, the more inequality we can expect,” Rosnick told ThinkProgress. “I don’t think [TPP] is gonna make a big difference. It’s gonna be a small net loss for most workers. And it’s gonna be a small gain for people at the top,” Rosnick said.

Previous deals like NAFTA are notorious for undermining particular industries. Textile factories in North Carolina were unable to compete with cheaper materials coming in from south of the border after NAFTA and CAFTA, and closed en masse. That’s terrible for textile workers, but it’s also bad for wages in every industry where a laid-off textile worker might try to find a job.

“The wage impacts of trade are not just about workers in the tradable sectors, it’s about workers that resemble them in terms of skills and education and experience all across the economy,” Bivens said. “Waitresses and landscapers don’t lose their jobs because of imports, but their wages are hurt because they have to compete with displaced apparel workers for those same jobs.” Even if the TPP only has a small negative effect on jobs in American exporting industries, it will serve to hurt the earning power of a much larger group of people.

The classic counterargument in favor of trade deals is that they also lower the prices that consumers face at stores. But it’s hard to imagine that effect could be big enough to overwhelm the other negatives for workers.

“If I lose my income as a textile worker and all that’s left to me are highly competitive temp jobs, I’m barely scraping together a living now,” Rosnick said. “The fact that my food might be cheaper is not gonna be much of a consolation.”