The run-up to the congressional vote will give us time to think more deeply about the controversy surrounding investor-state dispute settlement (ISDS). This mechanism allows foreign investors to sue governments over discriminatory and abusive practices, such as unreasonable government seizure of assets.
Why is ISDS so controversial? What safeguards has the TPP installed to address the wide public concerns? Can further improvements still be made?
Posted 15 February 2016 - 09:47 AM
Posted 14 March 2016 - 10:30 AM
Edited by amor de cosmos, 14 March 2016 - 11:16 AM.
- sebberry and lanforod like this
Posted 17 March 2016 - 03:55 PM
While it might be good if Vietnam eliminated its tariffs on U.S. cars and machines, it is highly unlikely that the U.S. will ever export any significant number of cars and machines to Vietnam. It is certainly possible that U.S. corporations General Motors and GE will export cars and machines (???) to Vietnam, but these products will almost certainly be produced in other Asian countries. That might be good for the bottom lines of General Motors and GE, but not especially good news for workers in the United States.
The 18,000 tariffs are a joke line that the Obama administration came up with for ill-informed members of Congress and pundits. As Public Citizen points out, the U.S. exports in less than half of these 18,000 categories and in most of the others the volume of exports is trivial. Among the 18,000 tariffs on the Obama administration’s list are Malaysia’s shark fin tariffs, Vietnam’s whale meat tariffs, and Japan’s ivory tariffs. (Would Donald Trump really spend time negotiating the removal of these tariffs?)
But the really good part is when Friedman told readers about how the TPP gets tough on enforcing intellectual property rules for U.S. corporations:
“He certainly would have insisted on strong intellectual property protections for America’s software industry, one of our greatest export assets, and taken an approach to pharmaceuticals that splits the difference between what the big drug companies want in the way of intellectual property protection time for their products and what the generic manufacturers want.”
Getting more money for Microsoft and Merck is of course good news for shareholders of Microsoft and Merck, but it’s bad news for the rest of us. As the Peterson Institute’s new study of the impact of the TPP pointed out:
“The model assumes that the TPP will affect neither total employment nor the national savings (or equivalently trade balances) of countries.”
If the trade balance of the United States does not change, and we get more money for Microsoft’s software and Merck’s drugs, then we must get less money for everything else. It is hard to see why most people would be celebrating a rise in the U.S. trade deficit in manufactured goods and other items that is offset by higher royalty and patent fees for our software and drug companies.
Posted 18 March 2016 - 11:08 AM
The proponents of the protectionist Trans-Pacific Partnership (TPP) trade agreement are getting ever more shrill as it becomes clearer that the public is not buying what they have to sell. David Ignatius does the rant for the deal in his column in the Post today. The title of his column warns against "Trump and Sanders' dangerous revolt against free trade."
The first point that everyone should remember is "free trade" is just a term that the proponents of these deals throw around to make themselves feel virtuous and so that they can their political opponents names. These deals are actually about selective protection, where protections that benefit some groups are left in place, while other groups (i.e. ordinary workers) are forced to compete with much lower paid workers in the developing world.
As far as the protectionism in the TPP, the deal is quite explicitly about increasing the length and strength of patent and copyright protection. Yes, that is "protection" as in "protectionism." Patent and copyright protection do serve a purpose in providing an incentive for innovation and creative work, but all forms of protection serve a purpose. The question that serious people ask is whether there is a better way to serve the purpose.
There are lots of reasons for thinking that our rules on patent and copyright protection are already too strong, as they have led to massive abuses. This is especially true in the case of prescription drugs. To take one prominent example, generic versions of the Hepatitis C drug Sovaldi can be profitably manufactured for $300 to $500 per treatment. The list price for the drug in the United States is $84,000.
And raising the price of a drug by more than 10,000 percent as a result of patent monopoly causes all the economic waste and corruption that imposing a 10,000 percent tariff would. The market doesn't care that we call the intervention a "patent" rather than a "tariff."
Posted 23 November 2016 - 10:16 AM
In fact, Prime Minister Justin Trudeau acknowledged last month that it would be hard for Canada to turn its back on an agreement that included the U.S.
Despite the fact that the TPP cannot take effect without the U.S., there has been some desperate commentary urging the Canadian government to move ahead with the TPP without the U.S. on board. Gerry Ritz, the Conservative MP and former Agriculture Minister says Canada doesn’t need the U.S. to be part of the TPP. Yesterday in the House of Commons he stated that “as they pull back on the TPP, there is no reason to believe that we cannot join the other six countries that are gung-ho guaranteed to move forward on it, that we cannot join them and rewrite TPP without the Americans. Let us get it done.”
Yet as Lawrence Herman noted over the summer that “a trade deal without the United States would be a vastly diminished proposition.” Canada paid a heavy price for joining for the TPP: ratification would require reforms to intellectual property laws that go beyond international requirements, limitations on cultural policies, restrictions on local regulations, and implementation of investor-state dispute settlement rules that do not even meet the CETA standard. Paying those costs without any gains from an enforceable treaty makes no sense whatsoever.
The TPP was crafted as a trade agreement with the U.S. squarely at the centre. With the U.S. out, further trade agreements in the region must go back to the drawing board, with the opportunity to remove contentious U.S. demands on IP, ISDS, and other issues. Instead, a new agreement, negotiated with the transparency that was missing from the TPP process, would open the door to increased trade without many of the regulatory demands and dispute settlement rules inserted largely at the behest of the U.S. delegation.
While Trump rails against America’s growing trade deficit with China, the reality is that the largest category of imports from that country (about 28%) is electrical equipment (for example information technology (IT) products) very often generated (designed, outsourced or contracted) by U.S. companies. These companies, like Apple, hold the patents, copyright and trademarks.
This has paved the way for some serious distortions in accounting. For example, recent research has shown that the full value of the sale of iPhones in the United States (which are assembled in China) are counted against China’s trade deficit with America.
In reality, China contributes only around 3.6% of the value of iPhone sales in parts and labor, itself importing the remainder of the more (and less) technologically advanced parts (from Japan, Germany and South Korea and beyond). U.S. companies contribute only 6% to the total parts and labor of an iPhone, but Apple takes the lion’s share of the final sale price thanks to its patent and trademark ownership.
So when an iPhone sells in the United States for about $500, only $159 of this reflects content imported from China. The rest goes to American firms. And while that $159 is counted against China’s deficit with the United States, China itself only accounts for $6.50 of that value.
Seen in this light, we should not be surprised that 55% of the price U.S. consumers pay for goods imported from China actually goes to U.S. companies. Following from this, were Trump to make good on his promise to slap tariffs on imports from China, this would effectively penalize many U.S. companies.
The related problem is that decades of downsizing the manufacturing workforce and moving production overseas have gradually denuded America’s industrial ecosystem whereby the networks of equipment makers, suppliers and manufacturers needed to turn innovative ideas into products are disappearing. As one of us has shown in research, extreme offshoring is not only undermining skilled employment in the U.S. but also putting at risk the innovation that has underpinned American technological dynamism since the end of World War II.
Consequently, it’s increasingly difficult to find workers with the skills necessary to make the technologically sophisticated goods associated with the better-paid jobs of yesteryear. For example Silicon Valley, the home of most U.S. technology companies, is now a misnomer since very few semiconductors, which are primarily made of silicon, are produced there. Indeed, a more appropriate name today would be “App Valley” – and apps are not exactly the basis for a vibrant economy.
when a victoria brewery sends a truckload of beer to its warehouse in vancouver it isn't considered trade, but it is when apple or gm or ford, etc do the exact same thing. what difference does it make if it happens to cross a border in the process? why isn't a distinction made between actual trade & a corporation just moving things from one factory to another? that must be another of the "serious distortions in accounting" these authors refer to. why does the media equate the general principle of trade with a specific trade agreement, as if to say canada never traded with another country before 1994?
Posted 25 January 2017 - 10:35 AM
It comes as little surprise, then, that the European Commission finds Canada an eager partner in spearheading a trade initiative that could change the way governments and companies interact in the field of international investment.
EU trade commissioner Cecilia Malmström and Chrystia Freeland, then Canada’s international trade minister, held exploratory talks in Geneva last month to discuss the establishment of a multilateral investment court. Such a body would be designed to resolve investment disputes. It would be open to all interested countries and, critically, would replace the current much maligned, ad hoc mechanisms for investor-state dispute settlement (ISDS).
This initiative aims to answer criticism of ISDS, which reached a peak last year amid heated debate over regional trade agreements including Ceta, the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership. Whether accurately or not, ISDS has been associated with unaccountable tribunals prone to awarding companies outsized awards behind closed doors, leaving governments no chance of appeal.
While these criticisms are exaggerated, traditional ISDS provisions are no longer fit for purpose. The current apparatus is largely a legacy of the free-trade agreements that proliferated in the 1960s and 1970s. Times have changed. Now there is an increasing sense that big businesses are just as likely as states to abuse privileges, behave badly and operate outside existing rules. The time is right, therefore, to revisit the arcane world of ISDS and to consider whether there is scope for improvement.
What is surprising, on the other hand, is Prime Minister Malcolm Turnbull’s declaration that he will push ahead with the TPP’s implementing legislation in Australia, despite America’s withdrawal. So what is the sense in such a move?
Not surprisingly, domestic politics goes someway towards explaining Turnbull’s actions. The Turnbull-led government – like the Abbot-led one before it – has put trade agreements at the centre of its otherwise sparse economic policy agenda.
Upon signing the deal, the Liberal-National Coalition heralded the TPP as a landmark win that would deliver enormous economic opportunities to Australia (just as it claimed the Japanese, South Korea and Chinese deals before it would). Never mind that modelling showed only modest gains would flow from the TPP (and other deals) to quite a narrow set of Australian constituents. According to the World Bank, the TPP was expected to increase Australia’s GDP by only 0.7% by 2030.
And never mind that the government’s “big win” narrative ignored the obvious costs associated with these deals for Australians more generally, thanks to intellectual property and investor state dispute provisions. Putting facts aside, the government’s messaging was that the TPP was a massive win for Australia.
Like most of the trade agreements signed by Australia over the past decade or so, the TPP is only marginally about the “conventional” trade issue of expanding exports and imports through the removal of tariff and other barriers to trade. This is why economic modelling has estimated that only very modest gains will accrue to Australia from TPP-related export expansion over the next decade – despite the government touting the deal as a huge economic win for Australia.
In fact, the most significant and most controversial aspects of the TPP embody the opposite of “free trade” principles. Take the deal’s intellectual property (IP) provisions. These would further extend the monopoly rights (and rent-seeking behaviour) of large corporations through changes to patent and copyright laws, delaying competition and keeping the price of IP-protected goods (like pharmaceuticals) higher for longer.
Then there are the deal’s investor state dispute settlement (ISDS) provisions. These would give foreign companies the right (not afforded to local firms) to sue the Australian government for regulatory changes aimed at advancing important health, environmental and other social and economic goals.
In this brave new world, regulations to prevent profit shifting by multinational corporations or to mitigate climate change could be subject to legal action – and hefty fines imposed on the Australian government (read: Australian taxpayers). This is precisely the fate that befell the Canadian government and its citizens after it agreed to ISDS provisions in its trade deal with the United States.
In sum, the TPP is not principally – or even largely - about “free trade”. This is precisely why so many people across Australia and around the globe are opposed to it, and precisely why it is so disingenuous of the PM to brand all of its detractors as “anti-free traders” or “protectionists”.
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