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December 31, 2012


Parts I and II of this series of essays dealt with an overview of the problem and trade as it affects domestic employment. This part will deal primarily with trade and its effects on our sovereignty. This essay is based in part on an article written by Jeff Madrick and published in the current edition of Harper’s Magazine.

I think multi-lateral trade partnership trade deals are not the way to go, but Obama disagrees. We are on the edge of approving what is called the Trans-Pacific Partnership.  The TPP was initiated under George Bush and has been endorsed by President Obama. I am opposed to it for a variety of reasons, some of which I offer below, but first, just what is the TPP and the claims that undergird Obama’s desire to finalize such a broad trading partnership?

There is a political component involved in our eagerness to see the TPP in place. It is viewed as a bulwark against spreading Chinese influence, part and parcel of the current Administration’s focus on Asia. It proposes to be a trade pact between nine nations, including Viet Nam, whose labor conditions are some of the worst in the world. Membership in the TPP will not require better wages and working conditions for labor in any of the signatories.

However, Viet Nam has a large and growing economy, and American businesses (read Wall Street, hedge and equity funds, big banks and American multinational corporations) are anxious to see the TPP signed, sealed and delivered. If history is any measure, these international players will have scant concern for labor standards among members, having prospered greatly in venues such as China where labor was (perhaps) one step ahead of slave designation, a continuing situation where Wall Street and its handmaidens export capital to China and import poverty and unemployment to America.

It seems Obama is ready to ignore this reality, and though he talks vaguely on occasion about improving labor standards among our trading partners, such understandings are not in the TPP in writing as of this date. Some economic writers theorize that he is backing off such a requirement to placate a business community which is angry with his calls for re-regulation under Dodd-Frank and higher taxes for the rich, which is a possibility since the TPP benefits no one so much as exporters and companies that invest overseas, least of all American labor which will again be consigned to a race to the bottom with a toothless trade pact and no enforcement mechanisms to escape such a race.

I think a strong labor condition plank should be in all such trade pacts, and it’s not all for altruistic reasons. If wages and working conditions for our trade partners are reasonable, then we will be better enabled to compete with such partners industry-to-industry and get out of this race to the bottom we have endured for years, a race in which Wall Street and its handmaidens have made historic profits while the rest of us suffer the results of unemployment, poverty, greatly increased incidents of bankruptcy, deficits in government revenues, chronic underfunding of education, infrastructure etc.

Bad as all the foregoing may seem, it gets worse. Just as Clinton caved on a provision in the NAFTA trade pact, Obama is caving on a provision in the proposed TPP. Both presidents were and are so determined to stimulate investment that they have and are giving individual companies the right to sue national and state governments over regulations such as capital controls or minimum wages that might present obstacles to trade. Under the provisions of both NAFTA and the soon to be signed TPP trade pact, such formal complaints must first be referred to an INTERNATIONAL tribunal of experts, which effectively decides whether the regulations in question ought to be changed and whether a nation will be sanctioned with fines. Based on such findings, further deregulation of our government standards on matters ranging from worker safety to even unionization could be watered down as well.

An international tribunal could by the terms of such an agreement effectively make or change our national and/or state rules and regulations and even as a practical matter overrule or amend our statutes. We are deliberately giving up our sovereignty when agreeing to such a travesty to be enforced by boards and tribunals composed of members who are not Americans, or, for that matter, even if composed of Americans.

The article upon which this essay is based cites a 1999 case under NAFTA where a Canadian company sued the state of California for a billion dollars for barring the sale in the state of the gasoline additive Methanex which the company made (a university research report had shown that the additive could contaminate groundwater). The Canadian company did not win the suit but trade analysts stated that the suit had a chilling effect on the creation and enforcement of subsequent state regulations. Thus such provisions in trade agreements may adversely affect not only enforcement of current laws, rules and regulations but may also slow or prevent creation and enforcement of new rules, regulations and even legislation otherwise deemed to be necessary or desirable for fear of litigation leading to adverse court orders, money damages and/or other such negative results.

Such provisions in trade agreements effectively give the right to make or amend rules, regulations and even statutes on both national and state levels to aliens and unelected Americans who may sit on such tribunals. Unless such trade agreements are defined as treaties (which are on a par with the Constitution), such agreements in their application in this connection are clearly unconstitutional.

Such a problem is easily avoided – just never include such a provision in any international trade agreement. There are many ways to litigate trade disputes that do not include a loss of our sovereignty– the right to run our own business.

The fundamental rationale for the American Revolution from Britain was sovereignty, the right to conduct our own business free from British tyranny and its Tea Tax, Stamp Act etc. It seems strange to me that we would bleed and die for such a precious right but some 230 years later would bargain it away for commercial advantage and profit of the few among us under the terms of a trade agreement.

If I were president and otherwise disposed to enter into such multilateral trade agreements (which I am not), I would insist that such an agreement contain a provision that set out fair labor standards and working conditions among the signatories, and that contained no mention of the right of any party signatory giving any such member any right to peremptorily invade the sovereignty of any other member of the trade agreement. I would also insist on a clear procedure in the agreement having to do with enforcement of trade rules in re dumping, currency manipulation, export subsidies etc. Part IV of this series will involve so-called “free trade,” its costs and challenges to America’s workforce.  GERALD  E

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