"NAFTA on Steroids" Trade Talks to Wrap Up
Concerns over impact on local jobs & state sovereignty remain
Thursday, December 18, 2014 5:04 AM
If you haven't heard of the Trans Pacific Partnership (TPP) already, chances are you will during the coming weeks and months. If approved, the so-called "free trade" agreement between the U.S. and 11 other Asia Pacific nations - Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam - would be the most sweeping international trade pact since the North American Free Trade Agreement (NAFTA) was signed in 1994.
The Citizen Trade Policy Commission and the Legislature’s Agriculture Conservation and Forestry Committee at a public hearing on the TPP November 20, in Farmington. (Photo by Andi Parkinson)
Dubbed "NAFTA on steroids" by its critics, the TPP would govern 40 percent of global gross domestic product and one-third of global trade.
Proponents of the agreement say that the TPP would open up new investment opportunities for American businesses. The Business Round Table, an association of CEOs of major U.S. corporations, points out that 67 percent of Maine's exports of goods and 21 percent of service exports go to TPP countries like Canada that are already free-trade partners. Currently, 100 companies from TPP countries, predominantly Japan and Canada, employ about 8,200 workers in Maine. TPP supporters argue that the agreement will stimulate more commercial activity by opening markets in non-partner countries like Japan, Malaysia, New Zealand and Vietnam.
Harmonizing Barriers to Investment
But what's good for business may not be good for everyone else. TPP opponents worry that the proposed agreement will put profits for multinational corporations over environmental standards, public health, food safety, local agriculture, consumer rights and jobs.
Traditionally, free trade has been about lowering tariffs, but with taxes on imports and exports at historic lows, new trade pacts like the TPP also aim to "harmonize barriers to investment." And critics like former Democratic state Senator Troy Jackson of Allagash say "harmonize" is just a code word for overriding the democratic sovereignty of state and local governments to drive down wages and diminish environmental, labor and consumer protections.
"This whole thing is an attempt to make sure that capitalism runs completely unabated by any legislator or regulator," said Jackson at the November meeting of Maine's Citizen Trade Policy Commission, a panel of state lawmakers and stakeholders who advise federal policy makers on trade policy. "The few elite will decide what's best for all of us, and it won't get debated. It'll get voted up or down, and that is not transparent government in any shape or form."
Although the controversial pact could affect everything from the ability of local legislators to pass laws to the livelihoods of local dairy farmers, state and federal lawmakers have not been allowed to read draft texts of the proposed TPP chapters for fear that they could jeopardize international negotiations. Currently, 600 industry advisors are actively engaged in wrapping up the TPP talks, which have been going on since 2008.
President Obama has made fast-tracking the TPP through Congress a priority for his administration. Under "fast-track" (aka "trade promotion authority"), Congress would only be allowed an up-or-down vote on the finalized TPP, thus avoiding amendments or filibusters that could require the whole agreement to be renegotiated.
However, fast-track is extremely controversial, failing in 1998 under President Clinton and squeaking by under George W. Bush by just one vote in 2002. And while Republican House Speaker John Boehner and Republican Senate Leader Mitch McConnell have stated that trade is likely the one issue that they're willing to work with the president on, a peculiar coalition of Democrats and Tea Party Republicans have been forming to oppose the measure.
Obama to Dems: "Don't fight the last war"
Democrats and labor unions worry about the TPP's impact on jobs as the country reels from an over $40 billion trade deficit. The left-leaning Economic Policy Institute (EPI) estimates that between 1994 and 2010, over 30,000 manufacturing jobs in Maine were lost or displaced to Mexico due to trade deficits with our southern neighbor.
However, speaking with the press at a meeting with the Business Round Table on December 3, President Obama argued that the TPP would be "good for American businesses" and "good for American jobs." He admitted that while NAFTA and China's entry into the World Trade Organization (WTO) in 2001 certainly did effectively move manufacturing jobs offshore, global competition wasn't the cause for economic concerns like wage stagnation. He hinted that he may be forced to take on his own party over the issue.
"Don't fight the last war," the president warned fellow Democrats. "If somebody is wanting to outsource, if any of the companies here wanted to locate in China, you've already done it. If you wanted to locate in a low-wage country with low labor standards and low environmental standards, there hasn't been that much preventing you from doing so."
But job displacements due to international trade agreements have indeed led to wage stagnation, say researchers at the EPI. According to an EPI report released last week titled "China Trade, Outsourcing and Jobs," China's entry into the WTO alone displaced 3.2 million jobs in the U.S. and 11,400 jobs in Maine between 2001 and 2013 due to the U.S. goods trade deficit.
While proponents of that agreement insisted it included safeguards to prevent "the disruptive effects of surging imports from China on domestic producers," the EPI argues that the envisioned flow in U.S. exports to China did not occur due to "China's currency manipulation and other trade-distorting practices, including extensive subsidies, legal and illegal barriers to imports, dumping, and suppression of wages and labor rights." As a result, the report states that the 2.7 million workers who were displaced from jobs paying an average of $1,021.66 per week were pushed into "nontraded industries" paying an average of $791.14 per week, marking a wage decline of 22.6 percent. All told, the EPI estimates that displaced U.S. workers lost $37 billion per year in wages.
"Worse yet, growing competition with workers in China and other low-wage countries reduced the wages of all 100 million U.S. workers without a college degree, leading to cumulative losses of approximately $180 billion per year," the report concluded.
Still, President Obama insists that by "harmonizing barriers to investment," the TPP will actually force member countries with lower standards to boost labor and environmental protections, rather than the opposite.
Meanwhile, the fate of over 600 jobs at New Balance, the last remaining athletic shoe manufacturer in Maine and the country, hang in the balance. Currently, other large shoe manufacturers negotiating the TPP are taking aim at trade tariffs on shoes from Vietnam designed to protect domestic producers. And with labor costs in China rising, low wages in Vietnam make it an attractive destination for manufacturers.
National & Local Sovereignty at Risk
Of particular concern for both Democrats and some Republicans is that the TPP would enshrine a binding system of global corporate governance at the expense of national and local sovereignty. Through a trade agreement mechanism known as the "investor-state dispute settlement" (ISDS), enforcement of trade rules can override democratically enacted local, state and federal laws by allowing companies to sue governments in private international tribunals over rules and regulations that threaten to limit investor profits.
For example, after Germany decided to phase out its nuclear energy program in the wake of Japan's Fukushima disaster in 2011, the Swedish utility Vattenfall sued the German government for 3.7 billion ($4.7 billion) under the ISDS clause of a treaty on energy investments because the company operates two nuclear plants in the country. After El Salvador refused to allow mining company Pacific Gold to dig for gold in the country for fear of further water contamination, the corporation filed a $77 million lawsuit with an ISDS court in 2009, which it later raised to $301 million. According to the United Nations Conference on Trade and Development, the number of "investor disputes" before these secretive international tribunals has surged in recent years, with a record 514 in 2012.
But at the same time, governments are prohibited from bringing claims to the tribunals when communities are negatively impacted by the destructive behavior of foreign corporations. And for Maine lawmakers, it's still unclear whether some of the state's laws will potentially violate the agreement and, if so, would it be Maine or the US who would have to make the pay-out.
The Conference of Chief Justices, an organization of all 50 state supreme court judges, and 48 state attorneys general have officially expressed concerns about the TPP's potential impact on state sovereignty.
According to Maine Attorney General Janet Mills, one of the biggest concerns about the investor-state arbitration process is how it will affect enforcement of state tobacco laws that regulate the marketing of tobacco, taxation and licensing. Depending on what is negotiated in the TPP, Mills fears that tobacco companies could potentially bring suit against the state and even effectively overturn state and federal court decisions.
Last winter Mills and 47 other state AGs sent a letter to the Office of the U.S. Trade Representative expressing their concerns, but reportedly received no official response. Instead, the National Association of Manufacturers replied, raising questions about who is really in charge of trade talks.
"Now how did they get our letter?" Mills asked. "They responded by saying, 'Oh, don't worry about the tobacco laws. That'll be taken care of.' The National Association of Manufacturers? Thanks for responding on behalf of the U.S. Trade Representative."
Worries for Local Farmers
Local agriculture experts are also expressing deep concerns that a series of pending trade agreements including the TPP have the potential to wipe out Maine's struggling dairy industry. In 2004, Maine developed a dairy subsidy program, which helps stabilize the price farmers receive for their milk given the fluctuations occurring under the federal pricing system. However, as Rep. Sharon Treat (D-Hallowell), outgoing co-chair of the Citizen Trade Policy Commission, pointed out at the commission's November meeting, one of the goals of the TPP is for all subsidies to go away.
"What they're negotiating about is to try to get down to the lowest level of subsidy possible throughout all of the countries in these agreements," said Treat.
Maine's dairy industry represents 20 percent of Maine agriculture production, and milk sales generate about $100 million a year, with an economic impact of $525 million a year. The capital-intensive dairy farms also support a vast agricultural infrastructure that could have an adverse effect on all local farming if it collapsed. Since Maine doesn't have as many large-scale commodity farms as other parts of the country, local agricultural experts say most Maine farmers would be unlikely to benefit from the TPP because most of their markets are closer to home.
Maine Congressional Delegation on the Fence
Speaking to the Wall Street Journal in November, New Zealand's trade minister, Tim Groser, said that all of the chapters of the TPP had been agreed to except those on dairy-related issues and the role of governments in the economy, such as state-owned enterprises and national health care. It's been the goal of the U.S. to encourage privatization of public enterprises so that they don't have an "unfair commercial advantage" over private corporations. As the WSJ noted, all parties agree on the right of governments to "adopt environmental rules and promote public health, but the question is where to draw the line." Groser reportedly was adamant that New Zealand's public health system would not be sacrificed in the spirit of harmonizing barriers to private investment.
Last week, President Obama gave it more than a 50/50 chance that a deal could be reached with TPP nations, but members of Maine's Congressional delegation still appear split on whether they would support it. 1st District Congresswoman Chellie Pingree has been very critical of the TPP and past trade agreements. In a statement earlier this year, she said she would oppose fast-track. Senators Susan Collins and Angus King have expressed concerns about the TPP's potential impact on manufacturing jobs, but have been more or less non-committal on whether they would support fast-track. Outgoing Democratic Congressman Mike Michaud is a staunch critic of the TPP and other free-trade agreements, but his successor Republican Bruce Poliquin appears more open to them. Although Poliquin could not be reached for comment, as a candidate back in October Poliquin told MPBN that "free trade is good" when asked about his support of NAFTA, TPP and other free-trade agreements.
And while TPP opponents appear to be waging an uphill battle, Treat says voter engagement with their senators and congresspeople will make all the difference.
"There weren't the votes to do fast-track before the election because of constituent concerns," said Treat last month. "I don't think it is a done deal. And my personal philosophy is that we should fight to the bitter end anyway and not make assumptions."
For more information about Maine's Citizen Trade Policy Commission, future meetings, letters and reports, go to www.maine.gov/legis/opla/citpol.htm.