Trans-Pacific Partnership: The Devil Is in the Details for This Massive Trade Deal

April 7, 2016 | 5:57 pm
Celia Wexler
Former contributor

Finally, after six years of negotiation, and a final agreement reached late last year, the massive Trans-Pacific Partnership (TPP) trade deal is making the headlines. All the four major presidential candidates oppose it, perhaps the only issue on which they’ve shown agreement.

Negotiated in secret, its text considered classified information that limited access even to members of Congress, the TPP largely has been influenced by a small group of trade advisors, most of whom represent corporations or business trade groups.

While it has been agreed to by the U.S. and 11 Pacific Rim nations, TPP can’t move forward without the approval of Congress. Members of Congress who support the deal, including House Majority Leader Paul Ryan, are reluctant to bring it up for a vote until they are sure it will pass. Recent polls show public wariness about trade and its benefits.

When TPP does come up for a vote, perhaps not until after the election, it will be considered under a “fast-track” process Congress approved last year. The deal can’t be amended, and can be passed with just 51 votes in the Senate, escaping the threat of a filibuster, which would require 60 votes.

Why is TPP getting so much push-back? The mainstream media mostly has termed this a fight between labor and business over jobs, and whether this trade deal will be good for workers. But now that the public finally has access to the full text of the sprawling agreement, more than 5,000 pages in length, it’s clear that there are other reasons that TPP has raised so many concerns among those who care about the environmental, public health and safety, and addressing climate change.

Looking under the hood

The TPP has been agreed to by the U.S. and Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Together these 12 countries comprise 40 percent of the world’s GDP, and 30 percent of global trade. Its 30 chapters detail agreements on scores of separate issues, ranging from food safety to protection of endangered species and federal procurement policies.

The U.S. Trade Representative hailed the agreement because it “advances both our interests and our values abroad.” But the devil in such a wide-ranging treaty is in the details, and the details have raised a number of concerns. It is not enough to look at individual chapters of the deal, you have to look at those chapters in the context of the entire agreement.

Take the TPP’s environmental chapter. A few environmental groups, including the World Wildlife Fund and the Nature Conservancy, have praised the TPP’s environmental chapter. WWF stated that its “conservation commitments … could be game changers.” But WWF went on to say that whether the commitments worked would depend on going “beyond good words and intentions in the agreement to support and implement effective environmental protections as TPP requires.”

However, the BlueGreen Alliance, Natural Resources Defense Council and the Sierra Club all have opposed the TPP, and contend that the treaty fails to protect the environment.

They argue that while the environment chapter is big on lofty goals, and asks member nations to make efforts to improve their protections of endangered flora and fauna, it largely fails to impose strong, enforceable environmental requirements.

The future of science-informed regulation

While the TPP will reduce tariffs, this trade negotiation also is valuable to multinational corporations primarily because it promises to eliminate what many members of the public consider crucial regulations to protect public health and safety and the environment, but what businesses often consider “trade barriers.” Business groups have actively promoted efforts to “harmonize” regulations, with the aim of reducing the cost of compliance.

The TPP creates a regulatory cooperation council that in theory will bring together regulators from 12 trade partners to discuss strategies to “harmonize” their public health and safety, worker and environmental regulations. In theory, this could raise the standards of all nations. But when you read the chapter on regulatory cooperation, it is clear that better standards will not be the goal of such a council. Instead, regulators will be asked to assess their rules based on whether they help or harm trade, and conform to “good regulatory practices.”

“Good regulatory practices” as defined by the TPP means a regulatory process that considers the cost of compliance along with the benefits, even though cost-benefit analysis is likely to exaggerate the costs of compliance, since those costs are provided by regulated industries, and minimize the value of benefits in terms of protecting public health and safety and the environment, which often are much harder to quantify. What is the monetary value of IQ points lost to lead poisoning, or a childhood free of asthma attacks?

“Good regulatory practices” also means considering alternatives to regulation that might be friendlier to business, and giving regulated industries the opportunity to comment on proposed rules. Another benchmark for good practices is whether a nation periodically reviews existing rules with an eye to cutting or relaxing them.

This focus on making regulations work for business raises serious questions: Will our science-informed regulations that protect us from tainted food, unsafe drugs and medical devices, defective consumer products, and polluted air and water be weakened and compromised in the future?

If regulators have to consider the impact of rules on trade, and if their approaches are monitored by an extra-national body, at the very least, this could delay needed regulations, and may discourage strong regulations that benefit the public.

Impact on fossil fuel use

The deal opens the door to unrestricted exports of natural gas from the U.S. to Japan, now the largest importer of natural gas in the world. Vietnam also is interested in natural gas.

Canada also will be able to export “billions of dollars” worth of crude oil to the U.S. without paying duties. This not only encourages more use of fossil fuels, but will make it more difficult for nations to address climate change by transitioning to renewable energy and reducing energy consumption.

Malaysia is a party to the TPP, and it is likely that will encourage the export of palm oil from that country. This increase in demand could exacerbate the problem of palm oil plantations that expand by using fire to clear forests, adding to carbon emissions, and harming public health. Deforestation also contributes to global warming.

Investor State Dispute Settlement and climate change

The TPP also will permit a foreign corporation that feels a state, local or national government has taken an action that unfairly harms its profitability to bypass domestic courts and sue for damages before an international tribunal. Since the TPP partners have 9,000 subsidiaries in the U.S., the potential for a trade suit is quite high.

ISDS lawsuits have grown substantially over the past several years, and America’s exposure to suits through the TPP now has been roughly doubled.

A lawsuit under ISDS doesn’t force a country to change its laws or regulations, but it can have a chilling effect. Faced with the pressure of multi-billion-dollar damages, countries or state and local governments may think twice before imposing strong protective environmental and public health standards. When threatened by a lawsuit, they may settle by relaxing those standards.

ISDS also may have a profound effect on state and regional agreements to address climate change. A foreign corporation that believes its profits have been harmed by policies to address climate change can bypass domestic courts and sue in an international three-person ISDS tribunal.  The judges come from the arcane world of international trade, many of them trade lawyers with ties to corporations.

Late last year, when the Obama Administration cancelled TransCanada’s Keystone XL pipeline project, the company used the North American Free Trade Agreement (NAFTA) to sue the U.S. under ISDS, asking for $15 billion in damages.

Democratic Senator Barbara Boxer (CA) has raised concerns that her state’s landmark AB 32 law, which commits the state to sharply cutting its carbon pollution, could be sued under ISDS.

For Democratic Senator Elizabeth Warren, ISDS alone is reason enough to oppose the TPP. The trade deal as drafted, and unable to be revised by Congress, she writes, will make things “more dangerous for American families.”

Nobel-prize-winning economist Joseph Stiglitz agrees. The TPP, he writes, “may turn out to be the worst trade agreement in decades.”