UPDATE (Monday, Oct. 5): The United States and 11 other Pacific Rim nations reached final agreement on the Trans-Pacific Partnership, the largest trade agreement in history. It now faces exhaustive debate in Congress, where bipartisan opposition remains strong.
(This article was originally published June 23, 2015)
Let’s be honest: there’s nothing too sexy about international trade agreements.
But we think they’re still worthwhile to know a little something about.
Here’s why:
Like it or not, we live in a globalized world. And if you buy stuff on a regular basis, you’re probably more affected by international trade agreements than you might realize.
The majority of products we purchase — from cars to clothing, computers to smartphones, even lots of foods — are manufactured (or grown) through a vast global production process.
Trade deals can make it easier or harder for companies to produce things — impacting jobs, pay, working conditions, and the price tag of products once they hit the store … like that shiny new iPhone you’ve been eyeing.
And unlike those painfully dull 19th century trade deals you likely snoozed through in high school history class, modern-day trade agreements address all kinds of controversial political issues that hardly seem connected to trade at all, like climate change, collective bargaining rights, music piracy — even rules about how your online data is stored.
If you’re not sure where to start, we’ve put together a relatively painless guide to the newest trade deal under consideration: the Trans-Pacific Partnership.
And if you still have questions, feel free to leave us a comment. We’ll do our best to get back to you.
What is the Trans-Pacific Partnership (TPP)?
The TPP is a proposed trade deal between the U.S. and 11 other Pacific Rim countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The deal would remove barriers to trade between these countries, which together are responsible for about 40 percent of global gross domestic product (GDP). Other countries could join in the future as long as they agreed to the TPP’s rules.
The big player missing from the deal, of course, is China, Asia’s largest economy. The Obama administration has pitched the deal as a way to deepen ties with growing economies that would otherwise be part of China’s orbit. China itself has taken a “wait and see” stance, leaving open the possibility of joining the TPP in the future (although it already has its own free trade agreements with most of those countries).
What’s covered in the TPP?
The deal is still being negotiated, and a lot of the details remain secret, and that in itself has soured many to the deal (more on that in a minute). That said, here are some of the big known issues that the TPP would cover:
Tariffs
The deal would reduce or eliminate tariffs (taxes on imports and exports) among signatory countries, making it easier for those countries to trade with each other.
Environmental and labor standards
The TPP addresses topics ranging from illegal fishing to climate change to labor rights. The environment chapter was actually leaked to WikiLeaks and is available here. The labor chapter, however, remains classified, so we still don’t know much about what it covers.
Intellectual property rights
The U.S. is pushing for stricter international enforcement of intellectual property rights, like patents and trademarks. Right now, U.S. law provides for longer copyright terms (life + 70 years) than most of the other TPP countries. The TPP could require those other countries to lengthen their copyright terms to match the U.S. standard.
Companies suing governments
Known as an “investor-state dispute settlement,” this measure would allow a company to sue another PTT-member government if it had reason to believe that government had hurt business interests. Let’s say, for instance, the Canadian government were to ban a certain U.S.-produced pesticide because of environmental concerns. The U.S. chemical company manufacturing it might then be able to sue the Canadian government to try to recover damages.
Read more about what’s on the negotiating table in this report from the Peterson Institute on International Economics.
Who supports the TPP?
The Obama administration is pushing hard for the TPP, arguing that the deal will strengthen the U.S. economy by increasing American exports to fast-growing Asian economies. If it takes effect, the TPP would be a powerful demonstration of the administration’s “pivot to Asia,” and a foreign policy legacy for the president. Many Republican leaders in Congress also support the TPP. Interestingly, the Obama administration actually has stronger congressional support from Republicans than from fellow Democrats on the issue.
Business groups like the Chamber of Commerce and the National Association of Manufacturers are lobbying hard for the deal, as are some of the biggest U.S. companies, including ExxonMobil, Disney, Pfizer, Wal-Mart, Coca-Cola, Microsoft and Facebook. Companies like Disney and Pfizer (a pharmaceutical company) like the deal’s stringent intellectual property protections, while retailers and producers like Wal-Mart and Coca-Cola want to more easily sell their products to Asian consumers. A separate Peterson Institute report finds that the deal could yield $78 billion in annual income gains for the U.S. –and $295 billion in annual global gains.
Who opposes it?
A lot of Democrats in Congress oppose it, largely due to the lack of transparency during the closed-door negotiations. Some have also expressed concern that the deal may pose a serious job security threat to some U.S. workers.
Many labor and environmental groups are also skeptical. The AFL-CIO argues that the TPP focuses more on increasing corporate profits than on protecting American jobs and wages. (See this report from the left-leaning Center for Economic and Policy Research on the TPP’s effect on income inequality). Unions are worried that the deal would make it easier for U.S. companies to move jobs offshore, substituting American workers for lower-paid foreign labor.
Meanwhile, the Sierra Club and a number of other environmental groups say that the deal’s environmental regulations aren’t strong enough. Some international health groups like Doctors Without Borders oppose the deal on the grounds that it would strengthen intellectual property laws in ways that could restrict access to generic drugs in poor nations. And open Internet and privacy advocates, like the Electronic Frontier Foundation, argue that the deal would limit “freedom of speech, right to privacy and due process, and hinder peoples’ abilities to innovate.”
Have TPP negotiations been as secret as critics claim?
For the most part, yes. The Office of the U.S. Trade Representative notes that “governments routinely keep their proposals and communications with each other confidential.” This is to encourage negotiators to be as flexible as possible — to be willing, for example, to consider ideas that might be domestically unpopular.
The Trade Representative, however, does brief about 600 “cleared advisers,” most of whom represent business interests. One of those cleared advisers, trade expert Michael Wessel, recently criticized the lack of transparency, writing that the TPP negotiations are “much more restrictive than those under past administrations.”
Members of Congress can read the deal in a soundproof room in the basement of the Capitol building, but they can’t walk out with any notes, and they can’t publicly discuss what they’ve read.
And that means, the rest of us can read only what’s been leaked.
How similar is the TPP to NAFTA?
NAFTA, or the North American Free Trade Agreement, is a trade deal between the U.S., Mexico and Canada. It took effect in 1994, under the Clinton administration, and got rid of most tariffs on goods traded among those countries. The TPP has similar goals, but it’s a much larger deal, covering the three NAFTA countries plus nine others.
The Central America Free Trade Agreement (CAFTA), which essentially extended NAFTA provisions to five Central American nations, was ratified a decade later, with the Dominican Republic signing on shortly thereafter.
NAFTA was highly contested when it passed, and Americans have continued to disagree about its costs and benefits. NAFTA supporters argue that the TPP will expand those benefits while opponents insist it will exacerbate the downsides. Obama, however, has spent a lot of time making the case that the TPP is different and superior to NAFTA.
It’s hard to tease out how NAFTA has affected the U.S. economy. After NAFTA took effect, trade among the three countries did increase. Some companies also moved manufacturing jobs to Mexico, causing some Americans to lose their jobs. But it’s hard to say to what extent NAFTA caused those changes. The nonpartisan Congressional Research Service comes to a muted conclusion: In the end, it says, NAFTA “did not cause the huge job losses feared by the critics or the large economic gains predicted by supporters.”
In the years since NAFTA went into effect, trade deals have continued to stir up strong feelings. In 1999, some 40,000 protesters set up camp around the World Trade Organization meeting in Seattle, which became known as the “Battle in Seattle,” after clashes erupted between protesters and police. The activists there included many of the same kinds of groups that opposed NAFTA and that now oppose the TPP — unions, environmental activists and consumer protection organizations.
How do trade agreements gets approved, and what’s Trade Promotion Authority (TPA)?
As if this thing wasn’t complicated enough …
The Constitution gives Congress the authority to approve international trade agreements. For much of U.S. history, these agreements were mostly just tariffs, and setting and approving them was a fairly straightforward procedure. In the 1970s, though, as trade negotiations grew more complex, President Richard Nixon successfully pushed legislation to allow him to independently negotiate trade agreements with partner nations free of congressional interference, and then to send any deal to Congress for an up-or-down vote without the possibility of amendments.
This is what’ s known as Trade Promotion Authority — also called fast-track authority. In effect, the TPA reduces legislative involvement in the nitty-gritty of trade deals, improving the chances of a successful international trade agreement. But the catch is that it has to be reauthorized by Congress every five years. It’s an interesting balance of power between the executive and legislative branches: in effect, the president is asking members of Congress for authority to negotiate a treaty without their oversight.
Whoever said free trade was easy?