The Free-Trade Regime: Oligarchy in Action
TRADE, 19 May 2014
Moritz Laurer – Foreign Policy In Focus
Free trade agreements like the Trans-Pacific Partnership undermine democracy and sovereignty.
The United States is not really a democracy. That’s the (simplified) conclusion of a recent study from Princeton University. Instead, economic elites and special interest groups enjoy tremendous sway in Washington, while “the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy.”
Let’s put this assertion to the test by looking at the concrete example of free trade agreements and their relation to democracy and national sovereignty.
“Democracy” typically refers to a system of government in which people decide on the rules of their sovereign nation. In the true spirit of democracy and sovereignty, all spheres of policy — including the environment, trade, finance, intellectual property, and culture — must be subject to a fair political process and self-determination.
In the modern, globalized world, the institutions of democracy and sovereignty exist in tension with another powerful institution: the global market and its free trade regimes.
In one sense, the free-market system sustains democracy. It generates wealth and tempers the centralization of power — two preconditions for democracy. But in another sense, global free-market capitalism conflicts with democracy and sovereignty. This is particularly true for the “neoliberal” variety of capitalism, which has been on the rise since the 1980s. It one-sidedly promotes the principles of global deregulation, liberalization, privatization, and the rollback of the welfare state — all of which increase inequality and redistribute economic and political power to corporations and wealthy individuals.
The Trans-Pacific Partnership
One of the most vivid recent examples of the conflict among democracy, sovereignty, and global capitalism is the Trans-Pacific Partnership (TPP) — the so-called “free-trade” agreement among 12 states bordering the Pacific Ocean. They include the United States, Chile, Vietnam, Malaysia, and Japan, among others.
According to U.S. president Barack Obama, who strongly supports the agreement, “the TPP will boost our economies, lowering barriers to trade and investment, increasing exports, and creating more jobs for our people.” From this perspective, the TPP is a win-win situation, in which workers, businesses, and the nation at large will benefit.
In sharp contrast to the president’s enthusiastic endorsement, however, many critics view the TPP as deceptive and dangerous. In the words of Lori Wallach of Public Citizen, the agreement is a “Trojan horse” — a trap disguised as a gift, which will in reality serve the interests of few multinational corporations and the executive branch rather than the public at large.
In this critical perspective, the TPP’s tendency to undermine democracy and sovereignty is due to two factors: the process through which it’s being designed, and the likely outcome of negotiations.
First, let’s look at the process.
In democracy, binding rules gain legitimacy through a process of collective bargaining and compromise — a way of balancing power among all interest groups in a country. For that to happen, citizens and legislators need to know the content of the laws being discussed.
In the TPP, the opposite has been true. Very little detailed information has been made available to the public, or even to Congress, to enable them to discuss the pros and cons of the treaty. Much of what we do know has only emerged through leaks.
This level of secrecy has not always been the norm. As recently as the Bush era, agreements were treated with more transparency. For example, the governments involved in negotiations for the Free Trade Area of the Americas (FTAA) — the proposed extension of the North American Free Trade Agreement (NAFTA) throughout most of the western hemisphere — released drafts of the agreement, albeit with some portions withheld.
Not coincidentally, after civil society summits and massive protests conveyed widespread opposition, the parties ended their efforts to create the FTAA in 2004. In contrast, and despite its stated commitment to transparency in government, the Obama administration has thus far opposed revealing the TPP drafts.
While a small number of labor unions and NGOs appear to have some involvement in the process, critics note that many relevant actors have been shut out. As renowned economists Joseph Stiglitz and Dean Baker contend, it is mostly the executive branch and some privileged big corporations that are involved in the process, and are therefore able to shape the treaty to fit their narrow interests.
And the obstruction to public input may go even further. In the United States, Congress must approve any deal that the executive branch negotiates. However the Obama administration is seeking to have this done under “fast-track” trade authority, which will allow only limited time for debate and permit no amendments.
It’s Not Actually About Trade
So what’s not to like about this agreement that’s being negotiated behind closed doors?
Contemporary trade agreements actually have very little to do with trade. Rather, the TPP will probably have its greatest impact on domestic regulations and standards. While the details remain unclear, countries will likely face increased pressure to roll back food safety rules, environmental standards, internet freedom, and even recently enacted financial regulations.
And what happens if a country refuses to comply? Private investors can sue governments if, for example, they believe that environmental regulations have reduced their projected profits — even if those regulations were democratically enacted and apply equally to all businesses in the country. These cases will be decided by unelected international tribunals that are not accountable to any nation’s citizens.
With all this in mind, it becomes apparent that so-called “free trade” agreements like the TPP are at serious odds with democracy and national sovereignty.
Dani Rodrik, former professor of international political economy at Harvard University, calls this inherent tension among democracy, national sovereignty, and radical economic globalization the “globalization paradox.” He contends that it is impossible to uphold these three elements simultaneously — only two can co-exist at the same time. He therefore argues that we must curb extreme economic liberalization and deregulation (what he calls “hyper-globalization”) in order to uphold democracy and sovereignty.
So far, that’s not the direction we’re heading in. As President Obama has said, “the TPP has the potential to be a model not only for the Asia Pacific but for future trade agreements.” We already have 20 years of bad experience with NAFTA to go by. Meanwhile, Europe and the United States are currently negotiating the Trans-Atlantic Free Trade Agreement (TAFTA — also known as the Transatlantic Trade and Investment Partnership, or TTIP), which has similar provisions.
So what will it be: Our right to control decisions that affect us? Or the rights of corporations and the executive branch to make secret decisions that undermine checks and balances? If we don’t make the choice, it will be made for us.
Moritz Laurer is a contributor to Foreign Policy In Focus.
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