Obama's Trade Deals Are About Regulatory Harmonization, Not Free Trade

By DAVID GREWAL at The American Conservative

As early as the end of this week, the House of Representatives could vote to approve “fast track” authority for President Obama’s massive new trade deals. The Senate narrowly passed “fast track”—now known as “Trade Promotion Authority”—last month, and its full passage now awaits only the House’s decision.

Fast track commits Congress to an up-or-down vote on whatever the president’s trade negotiators deliver, without the possibility of filibuster in the Senate or further amendments. It thus streamlines and expedites the process of Congressional approval: under fast track, trade deals get special treatment unavailable to other kinds of legislation. And without fast track, it is unlikely that President Obama will be able to pass two controversial trade agreements with our Asian and European allies and competitors.

Fast track approval in the House now hinges crucially on Republican votes because most Democrats are bucking their president to vote against his trade agenda. But why are so many conservatives willing to trust the Obama administration on this issue, while otherwise trying to thwart it at every turn?

Conservatives are caught between their general support for “free trade” and a concern to uphold American national sovereignty. The support for free trade doesn’t just come from a general pro-business orientation; it reflects an older idea that trade unencumbered by government regulation is not only good for business, but good for individuals and for society as a whole, continuous with rights of property and liberty generally.

But today’s trade agreements aren’t really about free trade, at least not as traditionally understood. They are efforts to achieve regulatory harmonization across borders, initiatives in what is now called “global governance.” They don’t keep the state out of the marketplace so much as bring it in, on selective terms, to favor powerful corporate interests at the expense of national sovereignty.

Nowhere is this more clear than in the new enthusiasm for special “investor-state dispute settlement” (ISDS) mechanisms. ISDS gives foreign corporations the right to sue national governments for regulations that interfere with their expected profits. It allows multinational litigants to bypass the national courts and instead empowers panels of private arbitrators—most of whom are practicing attorneys who cycle in and out of arbitral work—the right to sit in judgment of national laws. These arbitrators owe no special allegiance to any particular system of justice. They are not bound by precedent, and what precedent there is has often been developed by earlier ad hoc panels, not judges vested with constitutional authority. And the decisions of ISDS panels are typically final, not subject to review by any higher court.

The inclusion of ISDS in the proposed trade deals shows just how far the trade agenda has been transformed in recent decades. The old trade agenda—the plan to bring down tariffs in the postwar era—was largely successful. Tariffs are now lower than they have ever been and, in many sectors, almost gone altogether. But instead of declaring victory, the trade agenda morphed into something else: a subtle and ongoing push to integrate regulatory regimes across borders. Obama’s trade agreements represent a vigorous new effort to construct new global rules that go beyond simply freeing up trade to bind individual nations to new international regulations.

The president assures us that this new international rule-making process is needed because it will allow America to set the rules for the 21st-century global order. But there are good reasons to doubt his assertion. For example, the massive Asian trade deal—the “Trans-Pacific Partnership” (TPP)—has been advertised as a way to manage China’s growing power through a new trading bloc that excludes it. But just last week, the president admitted that China might one day join the TPP. If he is not having it both ways, then he has an undue confidence that setting up new rules will keep globalization on our terms. After all, China has been empowered, not hemmed in, by its membership in the WTO, which it joined in 2001. The WTO was a U.S.-backed agreement created without any Chinese input; China is thus already playing by “our rules,” and succeeding spectacularly. There is no reason to think the TPP will be any different, in part because these trade rules aren’t “our rules” but were crafted in part by multinational corporate lobbies with their own economic interests in mind rather than those of the United States as a whole.

If we turn from the Asian agreement to the European one—dubbed the “Trans-Atlantic Trade and Investment Partnership” (TTIP)—we can see several other problems with granting fast track authority. Most immediately, the TTIP will put US industries into greater competition with the power of the German export industry, which is subsidized by what amounts to currency manipulation in effect, if not intent. Germany is an export powerhouse, which would, under the old Deutschmark, mean its currency would rise relative to those of its trading partners. But the ongoing instability in the Eurozone gives German exports a paradoxical boost. It means German goods trade on the global market in Euros more cheaply than they would otherwise—owing to the economic pain in Italy, Greece, and Spain.

More generally, the TTIP will be a practical and symbolic reward to the Germans who now dictate European economic policy, which is causing such misery across the continent. It will also confirm a drift into executive-driven international agreements of the kind that built the European Union we see today. Under fast track, the United States will be taking a step into ongoing regulatory harmonization with that supranational body.

What now proceeds under the banner of free trade thus looks much more like stealth integration—all the more so as the drafts of these trade agreements remain aclosely guarded secret with national security classification. Admittedly, there may be reasons to have greater regulatory harmonization with the European Union, or Japan—or for that matter, China—but the Obama administration is not making that case to the American people. Nor are Obama’s current Republican allies defending global governance achieved via trade agreement. Instead, both sides recite old slogans about the benefits of free trade, even as the trade agenda has moved on.

One of the great ironies of the debate over Obama’s trade agreements has been that progressives—among them Sherrod Brown, Elizabeth Warren, Bernie Sanders and others—have been the main defenders of American sovereignty, while conservatives have been mainly silent on this point. The House Freedom Caucus, for example, is divided over fast track.

But the choice for conservatives should be clear. A vote for fast track is not, at root, a vote for free trade. Rather, it is a vote to grant the White House broad authority to make treaties, in secret, for a new era of global economic governance.

David Singh Grewal is an Associate Professor at Yale Law School, where he teaches international trade law.

Source: Why Fast Track Isn’t Free Trade | The American Conservative

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