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Trans-Pacific 鈥榝ree-trade鈥 charade puts corporate profits ahead of citizens鈥 interests
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You will hear much about the importance of the Trans-Pacific Partnership (TPP) for 鈥渇ree trade.鈥 The reality is that this is an agreement to manage its members鈥 trade and investment relations 颅鈥 and to do so on behalf of each country鈥檚 most powerful business lobbies.
Make no mistake: It is evident from the main outstanding issues that the TPP is not about 鈥渇ree鈥 trade.
New Zealand has threatened to walk away from the agreement over the way Canada and the US manage trade in dairy products. Australia is not happy with how the US and Mexico manage trade in sugar. And the US is not happy with how Japan manages trade in rice. These industries are backed by significant voting blocs in their respective countries. And they represent just the tip of the iceberg in terms of how the TPP would advance an agenda that actually runs counter to free trade.
For starters, consider what the agreement would do to expand intellectual property rights for big pharmaceutical companies. Economic research clearly shows the argument that such intellectual property rights promote research to be weak at best. In fact, there is evidence to the contrary: When the Supreme Court invalidated Myriad鈥檚 patent on the BRCA gene, it led to a burst of innovation that resulted in better tests at lower costs. Indeed, provisions in the TPP would restrain open competition and raise prices for consumers in the US and around the world 鈥 anathema to free trade.
The TPP would manage trade in pharmaceuticals through a variety of seemingly arcane rule changes on issues such as 鈥減atent linkage,鈥 鈥渄ata exclusivity,鈥 and 鈥渂iologics.鈥 The upshot is that pharmaceutical companies would effectively be allowed to extend 鈥 sometimes almost indefinitely 鈥 their monopolies on patented medicines, keep cheaper generics off the market, and block 鈥渂iosimilar鈥 competitors from introducing new medicines for years. That is how the TPP will manage trade for the pharmaceutical industry if the US gets its way.
Fighting regulations
Similarly, consider how the US hopes to use the TPP to manage trade for the tobacco industry. For decades, US-based tobacco companies have used foreign investor adjudication mechanisms created by agreements like the TPP to fight regulations intended to curb the public-health scourge of smoking. Under these investor-state dispute settlement (ISDS) systems, foreign investors gain new rights to sue national governments in binding private arbitration for regulations they see as diminishing the expected profitability of their investments.
International corporate interests tout ISDS as necessary to protect property rights where the rule of law and credible courts are lacking. But that argument is nonsense. The US is seeking the same mechanism in a similar mega-deal with the EU, the Transatlantic Trade and Investment Partnership, even though there is little question about the quality of Europe鈥檚 legal and judicial systems.
To be sure, investors 鈥 wherever they call home 鈥 deserve protection from expropriation or discriminatory regulations. But ISDS goes much further: The obligation to compensate investors for losses of expected profits can and has been applied even where rules are nondiscriminatory and profits are made from causing public harm.
The corporation formerly known as Philip Morris is currently prosecuting such cases against Australia and Uruguay (not a TPP partner) for requiring cigarettes to carry warning labels. Canada, under threat of a similar suit, backed down from introducing a similarly effective warning label a few years back.
Imagine what would have happened if these provisions had been in place when the lethal effects of asbestos were discovered. Rather than shutting down manufacturers and forcing them to compensate those who had been harmed, under ISDS, governments would have had to pay the manufacturers not to kill their citizens.
Taxpayers would have been hit twice 鈥 first to pay for the health damage caused by asbestos, and then to compensate manufacturers for their lost profits when the government stepped in to regulate a dangerous product.
It should surprise no one that America鈥檚 international agreements produce managed rather than free trade. That is what happens when the policymaking process is closed to non-business stakeholders 鈥 not to mention the people鈥檚 elected representatives in Congress.
Joseph E. Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University and Chief Economist at the Roosevelt Institute. Adam S. Hersh is Senior Economist at the Roosevelt Institute and Visiting Scholar at Columbia University鈥檚 Initiative for Policy Dialogue.
Copyright: Project Syndicate, 2015.
www.project-syndicate.org. Shanghai Daily condensed the article.
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