tag:theconversation.com,2011:/fr/topics/trade-agreement-1457/articlesTrade agreement – The Conversation2021-05-13T14:57:47Ztag:theconversation.com,2011:article/1600482021-05-13T14:57:47Z2021-05-13T14:57:47ZHow trade deals explain the behaviour of West African elites<figure><img src="https://images.theconversation.com/files/399747/original/file-20210510-5598-dvdy8f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Trade partnerships rarely work in the West African region</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The political survival of ruling elites is one of the major determining factors behind their trade policy choices. But trade policy choices can determine whether a country’s economy diversifies to reduce dependence on the production of a few goods or services. This phenomenon is most pronounced in countries whose economies are heavily dependent on a few commodity exports. </p>
<p>To understand this phenomenon better, I have looked at the behaviour of <a href="https://www.tandfonline.com/doi/full/10.1080/07036337.2021.1902318">ruling elites in West Africa</a> since the early 1960s. I focused specifically on their choices of trade policy and relations. I chose West Africa because some of the countries in the region, including Burkina Faso, Senegal and Ivory Coast, have basically been in <a href="http://www.acp.int/node/5">a trade partnership</a> with the <a href="https://europa.eu/european-union/index_en">European Union</a> and its predecessor, the European Economic Community, since independence.</p>
<p>The behaviour of ruling elites is informed by the fact that economic crises often threaten their survival, resulting in political crises. A government that depends on a particular commodity for its revenue will feel threatened when the price of that commodity drops to very low levels, especially over long periods of time. </p>
<p>The ruling elites can respond to the fear of this threat in two ways. The first option is to try to diversify their economies to reduce dependence on one or a few commodity exports. The second option is to enter into trade agreements that guarantee the price of key commodity exports. This is what some West African countries have done. But the second option is a trap.</p>
<p>My <a href="https://www.tandfonline.com/doi/full/10.1080/07036337.2021.1902318">research</a> shows that trade partnerships with the EU generally function as a system of <a href="https://www.jstor.org/stable/pdf/723809.pdf?refreqid=excelsior%3A29a38e321e5e6c8c19bfbc8c9ac36eae">extraversion</a> for West African ruling elites. To ensure their political survival, they tend to fashion their trade relations with the EU as one of dependency. These amount to the continuation of a colonial economic system, a neo-colonial relationship. It comes at the expense of economic diversification.</p>
<p>The key feature of the trade partnerships addressed here is their prevention of economic change in West Africa.</p>
<h2>Neo-colonialism at work</h2>
<p>For this research paper, which spins off from my <a href="http://etheses.whiterose.ac.uk/16954/">doctoral thesis</a>, I focused on the <a href="https://www.cvce.eu/en/education/unit-content/-/unit/dd10d6bf-e14d-40b5-9ee6-37f978c87a01/c303f9ae-1356-4fd2-ad61-b650f07f10ec/Resources">Yaoundé Conventions</a> (1963–1975). I chose Yaoundé because not all West African countries signed up to it. This made it easy to compare the performance of countries that signed up to the convention against those that didn’t. This comparison allowed a better understanding of the convention’s economic impact on West African countries that signed up to it.</p>
<p>Benin, Togo, Burkina Faso, Senegal, Côte d’Ivoire, Mali and Niger signed up to the convention. Nigeria, Ghana, Liberia, Sierra Leone, Guinea and Gambia didn’t.</p>
<p>The economies of the countries that signed the Yaoundé Convention grew twice as fast as those that didn’t. The economy of Côte d’Ivoire, a signatory to the convention, grew at an <a href="https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=1975&locations=CI&start=1961">annual average</a> of 8.1% between 1961 and 1975. Ghana, which was not a member, grew at an <a href="https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=1975&locations=GH&start=1961">annual average</a> of 2.1% during the same period.</p>
<p>Furthermore, countries that signed up experienced fewer political crises during this period than non-members. This finding applies across a range of proxies for political crisis. Non-members of the convention had on average twice as many crisis as the affiliated countries did. Collectively, <a href="https://nigerianscholars.com/tutorials/west-african-constitutional-development/military-coups-in-nigeria/">Nigeria</a>, <a href="http://liu.diva-portal.org/smash/get/diva2:351303/FULLTEXT01.pdf">Ghana</a> and <a href="https://uca.edu/politicalscience/dadm-project/sub-saharan-africa-region/sierra-leone-1961-present/">Sierra Leone</a> experienced <a href="https://journals.sagepub.com/doi/abs/10.1177/0095327X05277885">eight military coups</a> during the period of the conventions, meaning the three had an average of 2.6 coups each. The three didn’t sign up to Yaoundé. Togo, Burkina Faso, Senegal, Ivory Coast, Mali and Niger had six, translating into an average of one coup each.</p>
<p>There were also wide differences in the diversification efforts of the members and non-members. By the end of the Yaoundé Conventions, only two of the affiliated countries had changed one of their top three main export products. All the non-affiliates had changed on average two of their top three export products. This difference has crucial implications for understanding the actual effect of the trade partnership.</p>
<h2>Political survival</h2>
<p>Economic crises often threatens the survival of ruling elites, resulting in political crises. A government that depends on a particular commodity for its revenue will feel threatened when the price of that product reaches a critically low level. Subsequently, ruling elites will seek economic change to safeguard their power base. This explains the diversification undertaken by the countries that didn’t sign up to the Yaoundé Conventions.</p>
<p>For the signatories, the partnership with the EU provided price support that maintained the existing economic system. This helped the signatory countries avoid the political conditions that drove economic change in the non-signatory countries.</p>
<p>Let’s take a look at Ghana and Côte d’Ivoire. In the 1950s, <a href="https://journals.openedition.org/poldev/136">Ghana and Côte d’Ivoire had similar export portfolios</a> (predominantly cocoa beans). Both had roughly the same levels of product and market concentration. This remained the case until the early 1960s when the price of cocoa fell below a sustainable level.</p>
<p>The response of the two countries is telling. Kwame Nkrumah’s <a href="http://www.diva-portal.org/smash/get/diva2:278963/FULLTEXT01.pdf">government in Ghana</a> plotted an economic course away from cocoa, cancelling its pending investment in the sector. This attempt followed a political crisis that had threatened Nkrumah’s position. As in other unaffiliated countries during this period, diversification in Ghana was an attempt to regain political legitimacy. </p>
<p>Côte d’Ivoire, on the other hand, under Houphouët-Boigny’s government, <a href="https://journals.openedition.org/poldev/136">negotiated with the European Economic Community</a> for a guaranteed price that was higher than the world market price. This was done within the framework of the Yaoundé Convention of 1963. This enabled the country to survive the decline in the price of cocoa. But Côte d’Ivoire’s response amounted to a neo-colonial economic system, meaning the continuation of a colonial economic system.</p>
<h2>Diversification</h2>
<p>Economic diversification, particularly diversification from unproductive into highly productive economic activities, has been identified as crucial to sustainable development in Africa. But such changes seldom occur spontaneously without state interventions in the form of production or industrial policies. The logic of such policies follows the pursuit of political survival. </p>
<p>Since the Yaoundé Conventions, ruling elites in West Africa have consciously negotiated trade partnerships with the EU to protect existing economic systems against crisis in order to guarantee their survival. As astutely noted in the mid-1980s by political scientist <a href="https://books.google.com.gh/books/about/Collective_Clientelism.html?id=VLefoAEACAAJ&redir_esc=y">John Ravenhill in 1985</a>, </p>
<p><em>Lomé is a form of clientelist relationship — an attempt by weak states to construct a particularistic arrangement that would preserve their position in the EEC market and provide insurance against the insecurities of the marketplace.</em> </p>
<p>A proper understanding of the EU’s trade partnership with African countries, and how it affects the incentive structure of ruling elites, is needed to truly understand the problems of diversification and industrial development in Africa. While the recent trend towards intra-Africa trade, in the form of the recent African Continental Free Trade Area, is positive, the fact is that the EU trade partnership is more important to some African counties than regional or continental trade.</p><img src="https://counter.theconversation.com/content/160048/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael E Odijie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>EU trade partnership is more important to some African countries than regional or continental trade.Michael E Odijie, Research associate, UCLLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1023062018-09-07T10:45:51Z2018-09-07T10:45:51ZCanada will be part of Trump’s new NAFTA – corporate lobbyists on both sides of the border will ensure it<p>The <a href="https://www.politico.com/story/2018/08/15/trump-nafta-mexico-trade-740632">announcement</a> last month that the U.S. and Mexico had reached an agreement to replace NAFTA without Canada surprised trade experts around the globe. A deadline of Aug. 31 was set for the Canadians to join or <a href="https://www.nytimes.com/2018/08/28/world/canada/trump-nafta.html">be left out in the cold</a> – and hit with <a href="https://globalnews.ca/news/4428474/auto-tariffs-donald-trump-ontario-recession-economists/">fresh tariffs</a>. </p>
<p>The news was stunning because negotiators for all three countries had been trying to hammer out a new accord for over a year, ever since President Donald Trump followed through on his <a href="https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-keeping-promise-renegotiate-nafta/">campaign threat</a> to demand the North American Free Trade Agreement be scrapped or replaced. </p>
<p>After the <a href="https://www.wsj.com/articles/u-s-canada-rush-to-hash-out-nafta-compromise-1535724907">arbitrary deadline passed without any concessions</a> from the Canadians, let alone a finalized deal, Trump once again <a href="https://twitter.com/realDonaldTrump/status/1035905988682018816">threatened</a> to exclude Canada from the new NAFTA via Twitter.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1035905988682018816"}"></div></p>
<p>While his blustering included a threat to end NAFTA entirely, it is all bark and no bite. What <a href="https://scholar.google.com/citations?user=vf1UpqAAAAAJ&hl=en&oi=ao">trade scholars like me</a> know is that Trump does not have the upper hand in these negotiations. </p>
<p>Interest groups on both sides of the border will ensure that Canada is in the deal – and legally, <a href="https://www.wsj.com/articles/union-leader-says-a-new-nafta-wont-work-without-canada-1535903570">it would be cumbersome</a> to do a deal that excludes the Canadians. </p>
<h2>Interest groups usually win</h2>
<p>In his tweets, Trump claimed that there was “no political necessity to keep Canada in the new NAFTA deal.” However, Canada does not seem to be feeling any sense of impending doom – and for good reason. </p>
<p>After Trump’s threats, <a href="https://www.washingtonpost.com/business/economy/top-canadian-official-touts-progress-in-nafta-trade-talks/2018/08/29/f0bea0a6-ab96-11e8-a8d7-0f63ab8b1370_story.html?utm_term=.020ebb1be2c7">Prime Minister Justin Trudeau said</a> a compromise “will hinge on whether there is ultimately a good deal for Canada. No NAFTA deal is better than a bad NAFTA deal.” </p>
<p>In <a href="https://cdn.theconversation.com/static_files/files/272/jwt-article.pdf?1536280018">my own research</a> I’ve studied how interest groups influence trade policy, specifically in World Trade Organization dispute initiation and litigation. My work illustrates how countries depend upon industry interest groups – and in some cases, companies themselves – to help shape trade policy. </p>
<p>This research borrows from the work of Princeton politics professor Andrew Moravcsik, <a href="https://doi.org/10.1162/002081897550447">who theorized that</a> countries – especially democratic ones – primarily represent the preferences of domestic interest groups when engaged in international negotiations, and will rarely kowtow to the desires of trading partners.</p>
<p>In other words, governments want to stay in power and get re-elected. They need votes and campaign contributions to meet that goal, and corporate and industry interest groups can provide both.</p>
<p>That’s why Trudeau continues to stand firm that any deal with the U.S. and Mexico protect Canadian middle class jobs by protecting domestic dairy and poultry production and why he insists a so-called <a href="https://scholarlycommons.law.case.edu/cgi/viewcontent.cgi?article=1855&context=cuslj">cultural exemption</a> that safeguards domestic television and radio from takeovers by U.S. media conglomerates be included in the new NAFTA. </p>
<p>Trudeau and his team of negotiators are not going to sing to the tune of Trump’s tweets. Rather, they’re following the standard political economist playbook: protect those industries and sectors that can help carry Trudeau to another win in the federal elections 13 months from now. </p>
<h2>Americans first</h2>
<p>On the other side of the table, there’s Trump. </p>
<p>He <a href="https://twitter.com/realDonaldTrump/status/1035908242277376001">professes</a> to have American interests at heart in his hard-line handling of Canada in these ongoing NAFTA negotiations. And he has <a href="https://twitter.com/realDonaldTrump/status/1035850173224824832">framed</a> NAFTA as a disaster and an agreement that has brought “the U.S. … decades of abuse” at the hands of Canada. </p>
<p>What Trump hesitates to acknowledge is the interdependence between the U.S. and Canadian economies. Both countries need each other. </p>
<p>Canada is the United States’ <a href="https://ustr.gov/countries-regions/americas/canada">second-largest trading partner</a>, with US$673 billion in total goods and services crossing the border in 2017. The U.S. Department of Commerce estimates that exports to Canada support over 1.5 million jobs, heavily concentrated in border states that went for Trump in the 2016 presidential election. </p>
<p>Take the automobile industry as an example: If Canada was left out of NAFTA, car prices could rise in the U.S. due to <a href="http://www.washingtonpost.com/video/politics/trump-threatens-canada-with-auto-tariffs-renews-call-to-end-nafta/2018/08/27/dfd3690c-aa15-11e8-9a7d-cd30504ff902_video.html">proposed</a> new tariffs on Canadian autos. And Canadians <a href="http://fortune.com/2018/07/05/canada-boycott-usa/">are already discussing</a> a boycott of American goods if negotiations turn sour, which could also lead to a decline in the sales of American cars. </p>
<p>If consumers in Canada and other countries are buying fewer American cars as a result of these <a href="https://apma.ca/north-american-auto-industry-knows-no-borders/">trade disputes</a>, that could lead to layoffs. The possible downward spiral that could result has both the auto industry and labor unions <a href="https://www.wsj.com/articles/union-leader-says-a-new-nafta-wont-work-without-canada-1535903570">concerned</a> about a NAFTA with no Canada. </p>
<p>And it’s not just cars. If Canada is kicked out of the new NAFTA, Americans would see a <a href="https://www.huffingtonpost.ca/2018/07/16/canadian-tourism-to-us_a_23483022/">number of industries</a> negatively affected, from oil production to retail stores to tourism as Canadians will choose to <a href="https://www.ipsos.com/en-ca/news-polls/true-patriot-love-in-all-of-our-canadian-brands-kruger">buy more domestic products to avoid American ones</a>.</p>
<p>Basically, a NAFTA without Canada is a lose-lose situation for all involved. And while Trump may be willing to ignore the wishes of some interest groups since he has two years before he faces re-election, most lawmakers in Congress don’t have that luxury as the midterms fast approach. </p>
<p>It’s hard for me to imagine that Congress would support a NAFTA minus Canada, regardless of who controls the House in January 2019.</p>
<h2>Three is not a crowd</h2>
<p>The idea of throwing NAFTA out all together is, in my view, ludicrous, as industry on both sides of the border will not stand for it and Congress will not support it. </p>
<p>Trump is also legally restricted. While <a href="https://www.wsj.com/articles/four-scenarios-for-the-future-of-nafta-1526376600">he has been granted</a> fast-track authority by Congress to renegotiate NAFTA, this only allows Trump to ask lawmakers to approve a deal, by an up or down vote, that includes all three countries. If the current negotiations fail and Trump presents Congress with a trade deal with Mexico alone, the process will be slow and could be held up significantly – especially if there’s a change in control of the House.</p>
<p>Considering manufacturing interests were pro-NAFTA in 1994 and continues to derive benefits from the treaty today, North Americans can expect whatever replaces that deal to continue with Canada well into the future regardless of how long these negotiations take.</p><img src="https://counter.theconversation.com/content/102306/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christina Fattore does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A political scientist explains why corporate lobbyists and other interest groups will thwart Trump’s efforts to strong-arm or ignore Canada.Christina Fattore, Associate Professor of Political Science, West Virginia UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1022442018-08-28T10:39:22Z2018-08-28T10:39:22ZTentative deal to replace NAFTA puts pressure on Canada in win for Trump<p>President Donald Trump on Aug. 27 <a href="https://www.bloomberg.com/news/articles/2018-08-27/nafta-breakthrough-seems-imminent-after-year-of-fractious-talks">announced an agreement</a> that he said would replace <a href="https://theconversation.com/us/topics/nafta-8512">NAFTA</a>, an almost 25-year-old deal that allows most goods produced in North America to move duty-free across the continent. </p>
<p>Pointedly, the deal excludes Canada, one of the three original North American Free Trade Agreement signatories. All three had been working on a new deal since last August, but recently Mexico and the U.S. began negotiating on their own. </p>
<p>Although Trump said he hoped Canada <a href="https://www.bloomberg.com/news/articles/2018-08-27/nafta-breakthrough-seems-imminent-after-year-of-fractious-talks">would join</a> the new U.S.-Mexico agreement, he <a href="https://www.nytimes.com/2018/08/27/us/politics/us-mexico-nafta-deal.html">threatened</a> Canada with new auto tariffs if it didn’t “negotiate fairly.”</p>
<p>As an <a href="https://scholar.google.com/citations?user=ZWSq4EYAAAAJ&hl=en">expert on international economic law</a>, I believe there are two key takeaways from this deal. </p>
<h2>A tentative deal designed to pressure Canada</h2>
<p>First of all, it does not appear that the U.S. and Mexico have actually concluded negotiations. </p>
<p>The United States Trade Representative <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/august/modernizing-nafta-be-21st-century">said only</a> that they’ve reached a “preliminary agreement in principle, subject to finalization and implementation.”</p>
<p>Therefore, details and legal language remain subject to further negotiation – which means the final agreement could change significantly. Moreover, a new trade agreement with Mexico would require Congress to pass implementing legislation by a majority of both houses before it could come into force. Absent a signed agreement, the Trump administration cannot ask Congress for that legislation.</p>
<p>In addition, Trump threatened to <a href="https://abcnews.go.com/Politics/trump-announces-us-trade-deal-mexico/story?id=57423999">terminate</a> NAFTA to clear the way for the new agreement. But it is <a href="https://theconversation.com/trumps-threat-to-withdraw-from-nafta-may-hit-a-hurdle-the-us-constitution-81444">unclear</a> whether the president has the legal authority to do so without congressional approval, and his lead trade negotiator later <a href="https://www.bloomberg.com/news/articles/2018-08-27/nafta-breakthrough-seems-imminent-after-year-of-fractious-talks">said</a> the United States would not withdraw. Even if Trump were to withdraw from the accord, the legislation <a href="https://theconversation.com/trumps-threat-to-withdraw-from-nafta-may-hit-a-hurdle-the-us-constitution-81444">implementing</a> NAFTA would remain in effect until Congress repeals it. </p>
<p>It’s more likely that the new deal and Trump’s threat to terminate NAFTA are designed to increase pressure on Canada to reach an agreement on his terms.</p>
<h2>Trump’s triumph?</h2>
<p>The agreement does appear to resolve – at least between Mexico and the U.S. – two contentious issues that would represent big wins for the Trump administration.</p>
<p>For instance, under NAFTA, cars exported from one signatory to the next are free of tariffs as long as 62.5 percent of their content comes from a country in the agreement. The <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/august/rebalancing-nafta-support">new deal</a> would increase that to 75 percent. </p>
<p>It would also <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/august/modernizing-nafta-be-21st-century">require</a> that 40 percent to 45 percent be made by workers earning at least US$16.</p>
<p>Officials have <a href="https://www.nytimes.com/2018/08/27/us/politics/us-mexico-nafta-deal.html">said</a> that the agreement would remain in force for 16 years, with a review every six. NAFTA, in contrast, doesn’t have an expiry date. Mexico and Canada <a href="https://www.theglobeandmail.com/world/article-mexico-pushes-for-three-way-nafta-pact-says-sunset-clause-is-deal/">both initially opposed</a> including a sunset provision. </p>
<p>Although much could change in negotiating the final language and Canada’s participation, these compromises would represent significant victories for Trump.</p><img src="https://counter.theconversation.com/content/102244/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tim Meyer represents the plaintiffs in a lawsuit challenging the constitutionality of Section 232 of the Trade Expansion Act of 1962, which is the legal basis for the Trump administration's tariffs on steel and aluminum, as well as the possible tariffs on autos. </span></em></p>The US and Mexico announced a bilateral trade deal that pointedly excludes Canada. A economic law expert explains what it means.Tim Meyer, FedEx Research Professor of Law, Vanderbilt UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/978962018-06-10T13:28:50Z2018-06-10T13:28:50ZRules-based trade made the world rich. Trump’s policies may make it poorer<figure><img src="https://images.theconversation.com/files/222462/original/file-20180610-191943-14f0w0e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Trump against the world?</span> <span class="attribution"><span class="source">Jesco Denzel/German Federal Government via AP</span></span></figcaption></figure><p>Nations sell goods and services to each other because this exchange is generally mutually beneficial.</p>
<p>It’s easy to understand that Iceland should not be growing its own oranges, given its climate. Instead, Iceland should buy oranges from <a href="http://www.idealspain.com/pages/information/oranges-spain.html">Spain</a>, which can grow them more cheaply, and sell Spaniards fish, which <a href="https://www.icelandaircargo.com/products-and-services/fresh-fish-and-seafood/">are abundant</a> in its waters. </p>
<p>That’s why the explosion in <a href="https://theconversation.com/us/topics/free-trade-1698">free trade</a> since the first bilateral deal was penned between Britain and France in the mid-1800s has <a href="https://www.cesifo-group.de/DocDL/forum-4-14-intro3.pdf">generated unprecedented</a> wealth and prosperity for the vast majority of the world’s population. Hundreds of trade agreements later, the U.S. and several other countries established an international rules-based trading system after World War II.</p>
<p>But now the U.S., which has played an integral role in bolstering this system, is actively trying to subvert it. At the <a href="https://theconversation.com/us/topics/g7-17736">recent G-7 summit</a> in Quebec, for example, the Trump administration <a href="https://www.nytimes.com/2018/06/08/world/americas/trump-g7-trade-russia.html">objected</a> to even referring to a “rules-based international order” in the <a href="https://www.reuters.com/article/us-g7-summit-communique-text/the-charlevoix-g7-summit-communique-idUSKCN1J5107">official communique</a> – and the president ultimately <a href="https://www.nytimes.com/2018/06/09/world/americas/donald-trump-g7-nafta.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=span-ab-top-region&region=top-news&WT.nav=top-news">refused to sign it</a>. </p>
<p><a href="https://scholar.google.com/citations?user=x5dB33oAAAAJ&hl=en&oi=ao">My research</a> in <a href="https://www.crcpress.com/The-Economics-of-International-Trade-and-the-Environment/Batabyal-Beladi/p/book/9781566705301">international economics</a> tells me that trade policy – because it is inherently forward-looking and global – requires three interrelated attributes to be successful: It needs to reduce uncertainty, ease long-term decision-making, and be legal and credible. </p>
<p>President Donald Trump’s <a href="https://theconversation.com/g7-summit-trump-could-be-using-advanced-game-theory-negotiating-techniques-or-hes-hopelessly-adrift-97836">recent trade policy</a> fails all three tests. </p>
<h2>Birth of modern free trade</h2>
<p>Britain and France signed the first post-Industrial Revolution trade agreement, dubbed the Cobden-Chevalier treaty, on Jan. 23, 1860. </p>
<p>In it, both countries <a href="http://www.nber.org/papers/w22070.pdf">agreed</a> to either reduce or eliminate import barriers and grant the other most favored nation status, which means any trade concessions offered to another nation would automatically apply to them as well. </p>
<p>Within just 15 years, various countries inked <a href="https://trove.nla.gov.au/work/1482271">56 more bilateral treaties</a>. Thus began the first wave of globalization, which lasted from 1870 until 1914, the beginning of two destructive world wars. </p>
<p>From those ruins emerged a rules-based international trading system, known as the <a href="https://www.wto.org/english/thewto_e/minist_e/min96_e/chrono.htm">General Agreement on Tariffs and Trade</a>, or GATT, which came into force in 1948. <a href="https://www.thebalance.com/gatt-purpose-history-pros-cons-3305578">Its goal</a> was to eliminate the kind of harmful trade protectionism that had <a href="https://www.dartmouth.edu/%7Edirwin/Eichengreen-IrwinJEH.pdf">sharply reduced</a> global trade during the Great Depression with the aim of quickly restoring the global economy’s health after so much devastation.</p>
<p>Almost a half century of negotiations to improve the agreement culminated in the creation of the World Trade Organization in 1995. The lynchpin of the modern rules-based international trading system, the WTO now <a href="https://www.wto.org/english/thewto_e/thewto_e.htm">includes 164 nations</a> that together <a href="http://www.nber.org/papers/w22070.pdf">conduct more than 96 percent</a> of the world’s trade.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=384&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=384&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=384&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=483&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=483&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=483&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Until very recently, the U.S. was a leader in free trade, such as in 1996, when G-7 leaders including former President Bill Clinton met a little more than year after establishing the World Trade Organization.</span>
<span class="attribution"><span class="source">AP Photo/Jerome Delay</span></span>
</figcaption>
</figure>
<h2>Three key attributes</h2>
<p>This system has worked so well for so long because the WTO and its biggest champions, such as the U.S., made three interrelated attributes integral to their trade policies. That is, its members: </p>
<ol>
<li><p>reduced uncertainty by creating predictable trade policies </p></li>
<li><p>created an environment that facilitates decision-making – particularly in the long term – by consumers and producers and </p></li>
<li><p>placed credible and legal directives that are clearly understood by allies and by those who are not. </p></li>
</ol>
<p>Even though the U.S. played a salient role in the creation of both the GATT and the WTO, Trump’s trade policy has not followed these guidelines. To me he seems more interested in wreaking havoc with the current global trading system than with ensuring its continued viability. And he’s frequently – and <a href="https://www.chathamhouse.org/expert/comment/trump-s-tariffs-presage-world-no-rules">very recently</a> – intimated that he might even withdraw the U.S. from the WTO.</p>
<p>Trump seems to think that by issuing tariff threats, being unpredictable, and viewing foreign countries – even allies – as rival businesses he can extract concessions from trading partners. Instead, such tactics <a href="https://www.bloomberg.com/news/articles/2018-05-31/trump-s-art-of-unpredictability-starts-to-backfire-overseas">are proving</a> to be counterproductive.</p>
<h2>Sowing uncertainty</h2>
<p>Perhaps more than anything else, Trump’s policies have created a lot of uncertainty among U.S. trade partners. </p>
<p>His steel and aluminum tariffs are a case in point. In March, the administration announced across-the-board tariffs on imports of the metals of up to 25 percent to punish nations – particularly China – for subsidizing their own industries and dumping their production on U.S. shores. </p>
<p>After key allies including Canada, the European Union and Mexico complained, the administration granted some countries temporary exemptions to the tariffs. But just a few months later, on May 31, it <a href="https://www.nytimes.com/2018/05/31/us/politics/trump-aluminum-steel-tariffs.html">reversed course</a> and began to impose the tariffs on those countries as well, leaving heads spinning. Only a week later, at the <a href="https://theconversation.com/what-each-of-the-g7-countries-wants-and-what-they-need-97828">G-7</a>, Trump <a href="https://www.nytimes.com/2018/06/09/world/americas/donald-trump-g7-nafta.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news">was threatening</a> to cut off all trade with his counterparts one minute, suggesting that everyone eliminate all tariffs the next.</p>
<p>Another <a href="https://www.vox.com/policy-and-politics/2018/5/15/17355202/trump-zte-indonesia-lido-city">recent example</a> of fostering uncertainty is the curious case of the Chinese phone manufacturer ZTE. In March 2017, Trump’s Commerce Department <a href="https://www.pcmag.com/news/352232/zte-will-pay-record-fine-for-sales-to-iran-north-korea">fined ZTE</a> US$1.19 billion for violating U.S. sanctions law by selling technology containing U.S. components to Iran and North Korea. This past April, the agency said ZTE was still violating U.S. law and barred American companies – most importantly chip-maker Qualcomm – from selling anything to ZTE, which led to an <a href="https://arstechnica.com/tech-policy/2018/05/the-trump-administration-just-forced-smartphone-maker-zte-to-shut-down/">announcement</a> that it was shutting down less than a month later. </p>
<p>Within days, however, Trump appeared to have an abrupt change of heart and <a href="https://twitter.com/realDonaldTrump/status/995680316458262533">tweeted</a> that he and Chinese President Xi Jinping were working getting ZTE “back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”</p>
<p>Flip-flops like these make it hard for trade partners to predict what the U.S. government is going to do, breeding enormous uncertainty.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Trump turned heads when he said he wanted to save Chinese tech giant ZTE, shortly after his administration helped bring it to its knees.</span>
<span class="attribution"><span class="source">AP Photo/Ng Han Guan</span></span>
</figcaption>
</figure>
<h2>Decision-making</h2>
<p>Consider the situation faced by an American businessman who produces high-level industrial equipment that is exported to many countries around the world. </p>
<p>His company’s equipment is made using aluminum and steel and, as a result of Trump’s new tariffs, this businessman <a href="https://www.nytimes.com/2018/05/31/upshot/-us-tariffs-real-economic-risk-is-unpredictability.html">will have difficulty predicting</a> what the cost of the metals will be in the future. This will have clear implications for the pricing of his products. In addition, if the U.S. gets into a trade war, this businessman will also not know whether some or all foreign buyers might look elsewhere for similar but cheaper alternatives.</p>
<p>Such thinking affects not just individual business people but <a href="https://www.dallasnews.com/opinion/editorials/2018/06/06/trumps-trade-policies-make-harder-companies-invest-creates-jobs-americans">also companies</a>. </p>
<p>Far from hypothetical, <a href="https://www.dallasnews.com/opinion/editorials/2018/06/06/trumps-trade-policies-make-harder-companies-invest-creates-jobs-americans">companies</a> are already warning about this. Ford and Toyota North America <a href="http://www.businessinsider.com/trump-steel-aluminum-tariffs-means-expensive-cars-trucks-2018-3/">have both complained</a> about the negative impacts of Trump’s metals tariffs on costs and on the ability to make sound investment decisions.</p>
<h2>Act credibly and legally</h2>
<p>Trump’s steel and aluminum tariffs have also raised questions about their legality and credibility. </p>
<p>German Chancellor Angela Merkel and French President Emmanuel Macron <a href="https://www.washingtonpost.com/world/eu-plots-counterstrike-to-american-tariffs/2018/06/01/aa07dfa8-6521-11e8-81ca-bb14593acaa6_story.html?utm_term=.9b95cf0cb455">have both asserted</a> that these tariffs are illegal. As such, the European Union <a href="https://www.theguardian.com/business/2018/jun/01/eu-starts-retaliation-against-donald-trumps-steel-and-aluminium-tariffs">has filed a suit</a> against the U.S. at the WTO. It’s unclear whether the American national security justification will sway the WTO judges.</p>
<p>Prime Minister Justin Trudeau, who <a href="https://www.nytimes.com/2018/06/09/world/americas/donald-trump-g7-nafta.html">was the target</a> of a post-G-7 Trump tweetstorm, <a href="https://www.nytimes.com/2018/05/31/us/politics/trump-aluminum-steel-tariffs.html">has wondered</a> how Canada could possibly be a national security threat to the U.S. Even Defense Secretary James Mattis <a href="https://www.forbes.com/sites/johnbrinkley/2018/03/12/trumps-national-security-tariffs-have-nothing-to-do-with-national-security/#285badc0706c">is reported</a> to have pointed out the implausibility of the national security argument for the tariffs.</p>
<p>This gloomy state of affairs shows that even some of our long-standing friends believe that the Trump administration’s recent actions are illegal and, more generally, that these same allies cannot make head nor tail of the administration’s trade initiatives.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Trump’s policies are irking two of the U.S.’s most important allies, France’s Emmanuel Macron and Canada’s Justin Trudeau.</span>
<span class="attribution"><span class="source">AP Photo/Evan Vucci</span></span>
</figcaption>
</figure>
<h2>A key lesson</h2>
<p>The U.S. is the world’s richest and <a href="https://www.usnews.com/news/best-countries/power-rankings">most powerful nation</a>, in part <a href="https://www.economist.com/briefing/2016/11/12/the-piecemaker">because of its embrace</a> of a rules-based international order that includes the present treaty-based global trading system.</p>
<p>Rather than build on that success, President Trump’s trade actions thus far have <a href="https://www.nytimes.com/2018/03/01/us/politics/trump-chaos-oval-office.html">created chaos</a>, which has not led to any noteworthy success either in terms of extracting concessions from trade partners or creating the “great” agreements he touts in his book “<a href="https://www.thestreet.com/story/13289498/1/10-things-you-learn-reading-donald-trump-s-best-seller-the-art-of-the-deal.html">The Art of the Deal</a>.” </p>
<p>In negotiating deals, trade or otherwise, Trump <a href="https://www.bostonglobe.com/opinion/2018/03/12/trump-breaking-all-rules-and-that-could-great-for-america/xlotc2ETtBEBCLA5Zxpp8O/story.html">seems to like to break</a> all the rules. He needs to learn: That’s not what made America great.</p><img src="https://counter.theconversation.com/content/97896/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amitrajeet A. Batabyal has received research funding from the Giannini Foundation for Agricultural Economics, the United States Department of Agriculture, and the Charles Koch Foundation.</span></em></p>International trade policy requires three traits to be successful and lead to mutual prosperity. Trump’s is missing all three, as he showed at the G-7 summit.Amitrajeet A. Batabyal, Arthur J. Gosnell Professor of Economics, Rochester Institute of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/813012017-07-25T13:57:40Z2017-07-25T13:57:40ZThree big problems with Trump’s new NAFTA plan<p>The Trump administration has <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/july/ustr-releases-nafta-negotiating">outlined its plans</a> to renegotiate the North American Free Trade Agreement (NAFTA). It says the US will seek a “much better” agreement that reduces the trade deficit between the US and its partners, Canada and Mexico. In response, the two countries released brief statements welcoming the proposal. They say they consider a possible renegotiation as a step towards modernising NAFTA to address the new realities and challenges of the 21st century.</p>
<p>Despite these good intentions and purported goodwill, the US objectives for a revised NAFTA are unachievable. Three problems with the US negotiating position reveal the limited understanding of Donald Trump, the US trade representative, Robert Lighthizer (who will lead the negotiations), and their advisers about NAFTA and its side agreements.</p>
<h2>1. A mistaken view of job losses</h2>
<p>The US case for renegotiating the agreement is <a href="http://www.supplychain247.com/images/pdfs/NAFTAObjectives.pdf">based on the claim</a> that NAFTA is to blame for various (and unspecified) “problems for many American workers”. Allegedly, these problems have led to the explosion of US trade deficits since 1994, when the agreement entered into force, and the closure of “thousands of factories”. According to the US trade office, this situation left millions of American workers “stranded” and unable to use the skills in which they had been trained.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/179602/original/file-20170725-5139-1cam79u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/179602/original/file-20170725-5139-1cam79u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/179602/original/file-20170725-5139-1cam79u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/179602/original/file-20170725-5139-1cam79u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/179602/original/file-20170725-5139-1cam79u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/179602/original/file-20170725-5139-1cam79u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/179602/original/file-20170725-5139-1cam79u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A lot of people have a false view of NAFTA.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/borderexplorer/6624054573/in/photolist-b6m1Dt-UQCGyq-9JLk6C-RTzqJf-b6m94r-StLf8R-njoQq3-ShbgW4-Sh61nZ-THM52A-RTuo9L-StnBbc-SpA9aC-b6mbwR-b6mdWn-b6memM-cqqJz-obXeZQ-8nNtrG-8nKk1X-obSYQS-fmakFC-emyh8u-nUxcWT-aDjoCh-nUxXFK-8nKrYD-dBUgeG-6sCUyY-51FaSr-eFvWX4-SthGRk-8nNw2q-8nKsCK-8nKEvD-9KdSJ1-9Kb4Fr-2SjhZ-9xeVhW-2SkFD-9L19Ri-8nKuR6-8nKBAK-8nNEAh-ovm9gR-8nKnB2-9KdSnm-9KdSdN-8nKvcV-53VNGK">Billie Greenwood</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>As candidate and president, Trump has repeatedly claimed that “disastrous trade deals”, including NAFTA, resulted in the loss of manufacturing jobs in the US. But US manufacturing jobs were not lost to Mexico, they were lost to China and technological change.</p>
<p>Following its entry into the World Trade Organisation in 2001, <a href="https://www.bostonglobe.com/opinion/2017/07/17/china-eating-trump-lunch/zxE8GkcH2yUonhJ8u48BeL/story.html">China became the world’s biggest exporter</a>. Between 1999 and 2011, the US lost between 2m and 2.4m jobs to China, because of <a href="https://www.nytimes.com/2016/07/23/business/international/china-jobs-donald-trump.html">increasing American demand for cheaper Chinese products</a>.</p>
<p>Meanwhile, technological change meant that between 2000 and 2010, the US lost <a href="https://www.ft.com/content/dec677c0-b7e6-11e6-ba85-95d1533d9a62?mhq5j=e1">4.8m manufacturing jobs to machines, not foreign workers</a>. Automation led to significant increases in US industrial output and made the US manufacturing sector more productive – at the expense of blue-collar jobs. </p>
<h2>2. The false trade argument</h2>
<p>The US wants to redraft NAFTA into an agreement that provides it with a “more open, equitable, secure, and reciprocal access” to the Canadian and Mexican markets. At the same time, it expects to secure an agreement that allows Washington to establish protectionist “job-creating” policies at home. Such a double-edged agreement is unworkable and incongruous.</p>
<p>The US argument that its market of 321m consumers is twice as large as Canada and Mexico’s combined (36m and 119m, correspondingly) also does not stack up. This is because NAFTA is mainly made up of intra-industry trade – where countries import and export similar goods from and to one another. </p>
<p>For instance, in 2002, the two largest US exports to Mexico were electrical machinery and appliances, and motor vehicles. These products were also the <a href="http://www.oecd.org/economy/outlook/2752923.pdf">most important exports from Mexico to the US</a>. NAFTA promotes this two-way exchange of goods, because it liberalised trade between the three countries in a wide and nearly-equal range of industrial classifications. In other words, it opened the US market to Mexico and Canada as much as it opened the Mexican and Canadian markets to the US.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"824615820391305216"}"></div></p>
<p>The allegedly alarming figure of a <a href="http://abcnews.go.com/Politics/wireStory/trump-nafta-deal-cut-trade-deficit-mexico-48689334">US$64 billion US trade deficit</a> with Mexico is concentrated in three industries: automobile, telecommunications and aeronautics. But because of its intra-industrial nature, the continued expansion in trade that NAFTA sustains does not cause a significant movement of manufacturing in any of these sectors or countries. And because the North American countries mostly trade the same products between them, setting tariffs in any sector will likely hurt workers in the same industries at home.</p>
<h2>3. Lip service on the environment</h2>
<p>Trump’s trade office says it wants to strengthen environmental obligations, which are currently covered in NAFTA’s side agreements, and bring them into the main agreement. Yet the environmental protections proposed are already well-established in the NAFTA’s framework and are governed by the US, Mexico and Canada through the <a href="http://www.cec.org/about-us/about-cec">Commission for Environmental Cooperation</a> (CEC).</p>
<p>Specially, Trump’s trade representative has proposed establishing “a means for stakeholder participation”. It is hard to see how this would be different to the CEC’s existing Joint Public Advisory Committee, which promotes sustainable economic development in the region. </p>
<p>Like the rest of the CEC, this committee is at risk of losing its US share of funding and hence seeing its capacities severely reduced. Over the past 20 years, the CEC, the only trilateral, permanent environmental institution in North America, has received only about <a href="http://www.cec.org/about-us/council/council-resolutions/council-resolution-17-04">US$7m annually to carry out its work throughout the region</a>. </p>
<p>As with many other programmes and initiatives, the Trump administration is paying lip service to the well-being of the US environment, while cutting or committing limited funding for it. It is likely that the current administration will attempt to quietly quit the CEC. The Obama administration made a similar move, when it “temporarily” closed <a href="https://books.google.co.uk/books?id=e6bF-0IHUakC&pg=PA106&lpg=PA106&dq=NAALC+closure+CLC+2010&source=bl&ots=rCt9zK2x7a&sig=loGBi113xD2ngOzxU397zbCyoMM&hl=en&sa=X&ved=0ahUKEwi-l86vsqLVAhXsDsAKHSXvALAQ6AEIJDAA#v=onepage&q=steep%20decline&f=false">the managing institution</a> for NAFTA’s side agreement on labour to review and enhance its operation. It never reopened it.</p>
<p>As with many other Trump campaign promises and government policies, the means, aims, and consequences of the intended renegotiation of NAFTA do not appear to have been carefully considered, let alone planned. Instead, its plans indicate that both the president and his lead negotiator have a very limited understanding of how NAFTA and its side agreements work. </p>
<p>And that is a not a solid basis for the US or its partners to start any negotiations.</p><img src="https://counter.theconversation.com/content/81301/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Iván Farías Pelcastre has previously received funding from the Mexican National Council on Science and Technology, the Mexican Secretariat for Public Education, and the North American Forum on Integration.</span></em></p><p class="fine-print"><em><span>Scott Lucas does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Trump administration has outlined its plans to renegotiate the North American Free Trade Agreement (NAFTA).Iván Farías Pelcastre, Vacation Visiting Research Fellow at the Rothermere American Institute, University of OxfordScott Lucas, Professor of International Politics, University of BirminghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/662862016-10-03T18:57:44Z2016-10-03T18:57:44ZWhy there’s an urgent need to revive the Doha round of trade talks<figure><img src="https://images.theconversation.com/files/140119/original/image-20161003-20200-kkpkkw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">China and the US are at the centre of multilateral trade talk disagreements.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Fifteen years ago the <a href="https://www.wto.org/english/tratop_e/dda_e/dda_e.htm">Doha round</a> of trade negotiations was launched, creating much needed hope that the multilateral trade system carved under the banner of the <a href="https://www.wto.org/index.htm">World Trade Organisation</a> (WTO) would at last be made to work for the benefit of all members. </p>
<p>But those hopes remain dashed. Negotiations have run into the ground, with no progress being made since December 2008. And there are no signs of a resolution. This must rank as a major crisis and a threat to world peace.</p>
<p>The Doha round of trade talks was the ninth since the creation of the General Agreement on Tariffs and Trade (GATT) which was set up in 1947. The GATT, precursor to the WTO, was the brainchild of the US and UK. The Doha round was the first to end in failure.</p>
<p>The GATT arrangement was deficient in many ways. It failed to open the markets of the rich countries to the agriculture and textiles products produced in poor countries. It nevertheless provided the world with a basic framework for the multilateral trading system. It succeeded in <a href="https://www.wto.org/english/thewto_e/whatis_e/10thi_e/10thi09_e.htm">preventing</a> trade competition between nations from descending into conflict on the scale of the First and Second World Wars. </p>
<p>Trade <a href="http://em-journal.com/assets_c/14/141Smith.pdf">tensions</a> between nation states that could lead to conflict are once again beginning to sharpen. This is particularly the case given the <a href="https://www.jstor.org/stable/42704667?seq=1#page_scan_tab_contents">multi-polar world</a> that has emerged in the 21st century and the rise of emerging countries, such as China, India and Brazil.</p>
<p>Added to this is the <a href="http://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1204&context=jil">selfish</a> attitude of the European Union and the US which continues to undermine the multilateral system.</p>
<p>The only way to ensure that the world creates a legitimate and secure world trading system is to rebuild the WTO based on fair trade, balanced rules, inclusivity and transparency. The next opportunity to do this will be when trade ministers meet again at the 11th WTO Ministerial Conference at the end of 2017. They should gun to revitalise the Doha round. </p>
<p>But how should we understand this failure? And how can the situation be resolved? </p>
<h2>Why the Doha round collapsed</h2>
<p>The underlying reason for the collapse of the Doha round has been increased <a href="https://www.theguardian.com/global-development/poverty-matters/2011/oct/11/eu-agriculture-hurts-developing-countries">protectionism</a> in both the US and the EU. This has been matched by formidable new alliances between developing country alliances in the WTO which have provided a real countervailing negotiating power to the US and EU.</p>
<p>The US economy has undergone dramatic changes since the launch of Doha. Big business lobbies have emerged to pressure the US on trade, including an increasingly aggressive competitive services sector and increasingly protectionist agriculture and manufacturing sectors. The EU has also seen a marked rise in the power of its agricultural lobby. </p>
<p>A second significant trend of the new millennium has been the increasing share of world trade of developing countries. Three decades of consistent growth propelled by foreign direct investment in Chinese manufacturing turned <a href="http://www.businessinsider.com/r-special-report-how-smuggled-workers-power-made-in-china-2015-8">China</a> into the “the manufacturing workshop of the world”. </p>
<p>China’s participation in world trade took a dramatic turn after its accession to the WTO in 2001. Its <a href="https://www.wto.org/english/res_e/statis_e/its2015_e/its2015_e.pdf">share of world exports</a> grew from 2.5% in 1993 to 10.3% in 2010 to make it the largest exporting country in the world ahead of Japan, Germany and the US. </p>
<p>At the same time the US’s <a href="https://www.wto.org/english/res_e/statis_e/its2015_e/its2015_e.pdf">share of world exports</a> fell from 13% in 1993 to 8.4% in 2010.</p>
<p>Business lobbies and US strategists began to fear the continuing growth of China’s manufacturing prowess, fuelling protectionist sentiments.</p>
<p>The new trends in the global economy and the interests of US business lobbies led the US negotiators to take a new approach to negotiations, principally by abandoning the understanding that required all the Doha list of issues to be negotiated and concluded at the same time.</p>
<p>At the launch of the Doha round negotiators had agreed to work on the principle that “nothing was agreed until everything is agreed”. The new approach of the US negotiators was to argue in favour of prioritising a “small package of issues”. </p>
<p>In addition, it argued that several major emerging market countries would need to make more concessions if the Doha round was to succeed. These included China, India, Brazil, Argentina, Indonesia and South Africa. </p>
<p>The unravelling of the Doha round began in earnest at the WTO ministerial conference held in <a href="https://www.wto.org/english/thewto_e/minist_e/mc9_e/balipackage_e.htm">Bali</a>, Indonesia in December 2013. There the US persuaded the WTO members to agree to a small package of issues. In addition, it persuaded a group of about 23 out of 164 WTO members to negotiate the further liberalisation of services trade. </p>
<p>By the time of the last WTO ministerial meeting, held in Nairobi in December 2015, the Doha round was effectively “dead”. </p>
<h2>Way forward</h2>
<p>The <a href="https://www.wto.org/english/thewto_e/minist_e/mc10_e/mc10_e.htm">Nairobi ministerial meeting</a> ended with some progress on specific issues, including a commitment by developed countries to finally eliminate export subsidies in agriculture. But the ministers were divided on the vexed issue of the future of the Doha round and how to revitalise the multilateral trading system.</p>
<p>The current trajectory of the US and the EU towards mega-regional trade deals, such as the <a href="http://www.bbc.com/news/business-32498715">Trans-Pacific Partnership Agreement</a> (TPP), is taking the world down a dangerous and highly risky path. These will further marginalise small and poor countries. In addition they threaten to impose new and burdensome rules on these fledgling economies.</p>
<p>Developing countries have long held that the trade arrangements under GATT/WTO are biased against their interests and that they have created an imbalanced system. </p>
<p>To break the current deadlock, the US and the EU must recognise that the main objective of the multilateral trading system is to provide security and stability in world trade rather than advance the interests of specific business lobbies. </p>
<p>China, India, Brazil and other significant developing countries, such as South Africa, also have to recognise that they need to prioritise the needs of the least developed countries and small and vulnerable economies. </p>
<p>Both groups must commit to working together to prevent the re-emergence of protectionism, and strengthening of the rules based trading system, in a way that is fair, development oriented and inclusive. This is the only basis to resolve the current crisis in the multilateral trading system and create a more secure and peaceful world. </p>
<p><em>This article was adapted from a presentation made by Professor Faizel Ismail to the United Nations University conference titled: <a href="https://www.wider.unu.edu/event/responding-crises">Responding to crisis</a>.</em></p><img src="https://counter.theconversation.com/content/66286/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Faizel Ismail does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>With no sign of resolution in the near future the collapse of multilateral trade negotiations, tagged as the Doha round, risks breeding a major crisis.Faizel Ismail, Adjunct Professor, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/483682015-10-19T09:55:40Z2015-10-19T09:55:40ZDoes China care that it was left out of the Trans-Pacific trade club?<p>Earlier this month, the US Trade Representative <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2015/october/trans-pacific-partnership-ministers">announced</a> the completion of negotiations on the <a href="https://ustr.gov/tpp/">Trans-Pacific Partnership</a> (TPP). Despite the agreement’s far-reaching scope, some commentators have heavily <a href="http://fortune.com/2015/10/06/leaving-china-out-trans-pacific-partnership-terrible-mistake/">criticized</a> its exclusion of China.</p>
<p>The disappointment is understandable. China is now the world’s second largest or largest economy – depending on <a href="http://www.vanityfair.com/news/2015/01/china-worlds-largest-economy">whom</a> you ask. Although President Barack Obama rightly <a href="https://www.whitehouse.gov/the-press-office/2015/10/05/statement-president-trans-pacific-partnership">notes</a> that the global economy is too important for China to write its rules, the exclusion of this important market will certainly make the regional pact less attractive.</p>
<p>One question that has not been explored much within the US is whether China actually cares about its being excluded from the TPP. It is also worth asking what followup actions China will take in response to the adoption of this regional pact.</p>
<h2>Why China might care about being left out of TPP</h2>
<p>From its inception, the TPP has been <a href="http://www.upi.com/Top_News/World-News/2015/10/06/Chinas-exclusion-from-Trans-Pacific-Partnership-provokes-reactions/7151444150517/">considered</a> by many as a strategic instrument to isolate or contain China. Given the country’s ambitions, its leaders are understandably concerned about the concerted effort by the US and other Asia-Pacific countries to curtail its economic growth and geopolitical influence.</p>
<p>China’s outsider status could also be seen as an indictment of its inadequacies, such as limited intellectual property protection and a lack of government procurement standards. The exclusion of China not only has caused the country to lose face, but has also provided a painful reminder of its continued struggle to gain an equal status in the international community.</p>
<p>Finally, the lack of TPP membership will prevent China from enjoying new tariff reduction and preferential market access. If this regional pact is to operate according to design, it will <a href="http://www.businessspectator.com.au/article/2015/10/6/china/why-china-should-join-tpp">divert</a> trade and manufacturing from China to TPP members.</p>
<h2>Why China could care less</h2>
<p>Nevertheless, four reasons exist to explain why China may not care much about its being left out of the TPP.</p>
<p>First, China continues to <a href="http://www.usatoday.com/story/news/world/2015/10/09/why-china-doesnt-mind-being-left-out-trans-pacific-partnership/73640192/">actively engage</a> its neighbors and trading partners. Indeed, many Asian countries – including those involved in the TPP negotiations – fear that they will have to pick between China and the US. As policymakers from Australia and New Zealand have reportedly <a href="http://www.eastasiaforum.org/2011/11/09/japan-s-confused-debate-about-the-tpp/">told</a> their US counterparts in the early stages of the negotiations, their countries would withdraw if the TPP were designed to contain China. Without containment, however, countries can still negotiate other bilateral or regional trade agreements with China.</p>
<p>Second, that the US and other like-minded countries have gone outside the World Trade Organization (WTO) and other multilateral fora to negotiate new rules has set an important precedent for China to undertake similar maneuvers. From China’s perspective, such maneuvers could come in handy when the country needs to avoid multilateral intervention in sensitive matters such as those involving Taiwan, Tibet and the South China Sea.</p>
<p>Third, China continues to face myriad challenges within its own economy, which include massive urban migration, widespread unemployment and an enormous gap between the rich and the poor. Although China has worked hard in the past two decades to ensure compliance with WTO rules, the country may not be ready for new and higher trade standards. These standards can be particularly burdensome in view of the <a href="http://www.nbcnews.com/business/markets/five-reasons-why-chinas-woes-are-shaking-worlds-markets-n415946">recent downturn</a> of the Chinese economy.</p>
<p>Finally, China is unlikely to be able to join the TPP unless some of its standards are substantially revised. For example, the agreement’s government procurement standards would drastically alter the structure and operation of Chinese state-owned enterprises. The TPP electronic commerce standards could also deeply affect the country’s censorship and information control policy.</p>
<h2>China’s wait-and-see approach</h2>
<p>Given its ambivalence about the TPP, China may initially take a wait-and-see approach – or what its Ministry of Commerce has called an “<a href="http://www.ibtimes.com/china-responds-cautiously-tpp-deal-which-analysts-say-will-bring-pressure-faster-2128302">open-minded attitude</a>.” After all, the TPP negotiations have only been recently concluded, and it will take some time before the final agreement is adopted. At this point, it remains difficult to predict whether the US and other negotiating parties will quickly ratify the pact.</p>
<p>An instructive point of comparison is the <a href="https://ustr.gov/acta">Anti-Counterfeiting Trade Agreement</a> (ACTA), which was negotiated by the EU, the US and other developed and like-minded countries. Although this controversial agreement was adopted in April 2011, it has yet to enter into force. Thus far, only Japan has ratified the agreement. Many commentators have therefore wondered whether ACTA will ever take effect.</p>
<h2>Three additional lines of response</h2>
<p>Apart from the wait-and-see approach, China could accelerate efforts in three areas.</p>
<p>First, China has been actively negotiating bilateral and regional trade agreements since the early 2000s. Already <a href="http://fta.mofcom.gov.cn/english/index.shtml">established</a> were agreements with Chile, Pakistan, New Zealand, Singapore, Peru, Costa Rica, Iceland, Switzerland, South Korea and Australia. With ASEAN members, China has also developed the ASEAN-China Free Trade Area. If the TPP begins to pose a threat, China will certainly become <a href="http://www.vancouversun.com/business/trans+pacific+partnership+could+benefit+canada+china+trade+relations+analysts/11419094/story.html?__lsa=50f6-f94d">more aggressive</a> in seeking new trade deals through bilateral and regional negotiations.</p>
<p>Second, China may become <a href="http://nationalinterest.org/feature/tpp-vs-rcep-america-china-battle-control-pacific-trade-14021">more active</a> in the negotiation of the <a href="http://www.mfat.govt.nz/Trade-and-Economic-Relations/2-Trade-Relationships-and-Agreements/RCEP/">Regional Comprehensive Economic Partnership</a> (RCEP) within the ASEAN+6 framework, which includes ASEAN, Australia, China, India, Japan, New Zealand and South Korea. Thus far, commentators have been skeptical of this initiative – due in large part to the slow pace of development within ASEAN. Nevertheless, if China considers the RCEP an important instrument to counterbalance the TPP, it may exert greater pressure on its neighbors, or even offer attractive concessions, to ensure the completion of the RCEP negotiations.</p>
<p>Third, in view of the TPP, China may reassess its cooperation with the US. For those embracing a growing <a href="https://www.foreignaffairs.com/articles/asia/2008-06-01/partnership-equals">G-2 partnership</a> between the two countries, the TPP could provide a major setback to US-China cooperation in areas such as climate change, nuclear nonproliferation and cybersecurity. China may also develop a <a href="http://www.cnbc.com/2015/10/08/">closer relationship</a> with the EU, considering that the latter was equally left out of the regional pact.</p>
<p>In sum, the TPP could elicit responses from China that would dramatically alter the trade and power dynamics within the Asia-Pacific region. Yet enough evidence suggests that China may initially take a wait-and-see approach – at least before the TPP enters into force.</p><img src="https://counter.theconversation.com/content/48368/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter K. Yu does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Some say the 12-nation Trans-Pacific Partnership was designed specifically to exclude or even encircle China. So do its leaders mind being on the outs?Peter K. Yu, Professor of Law and Co-Director of the Center for Law and Intellectual Property, Texas A&M UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/487962015-10-08T11:16:04Z2015-10-08T11:16:04ZJapan may have tricky time passing TPP after making concessions on rice, beef<p>Japan, by far the <a href="https://www.fas.org/sgp/crs/row/R42344.pdf">second-biggest economy</a> in the Trans-Pacific Partnership (TPP) behind the US, played a key role in finalizing the trade pact in Atlanta over the weekend. </p>
<p>The <a href="https://theconversation.com/explainer-negotiators-reach-landmark-pacific-trade-deal-so-whats-next-48641">accord</a> represents Act II of the strengthening relationship between Japan and the US (and America’s pivot to Asia), following the milestone achieved this summer when the two countries <a href="http://www.csmonitor.com/World/Asia-Pacific/2015/0918/Japan-s-profound-new-American-military-links-are-all-about-China-Q-A">renewed</a> their military alliance. Japan agreed to step up its role as a full partner by providing military support to the US in the Pacific region. </p>
<p>For Japan, the TPP is also part of Prime Minister Shinzo Abe’s <a href="http://www.cnbc.com/2015/10/07/abenomics-gets-fresh-ammunition-from-tpp.html">aim to strengthen the economy</a> under “Abenomics” by boosting the country’s GDP through increasing exports to other Asian countries, the US, Canada and Peru. A boost is certainly needed, as Japan’s economy is moving toward a real crisis point as its population ages and economic growth stagnates. </p>
<p>But there is a cost, as there always is, and in Japan’s case it was allowing increased imports of farm products and lowering some tariffs, aspects of the agreement that could significantly harm its farmers, especially those who grow its most important traditional crop: rice. </p>
<p>Their growing ire is among the many obstacles that remain before TPP goes into effect, as the pact must still be agreed by legislatures and other bodies in the 12 participating countries. </p>
<h2>Compromised concessions</h2>
<p>For the most part, the current agreement maintains some of Japan’s ability to protect its domestic industries, especially beef and rice, despite heavy pressure from the US during earlier bilateral talks. </p>
<p>Still the current deal that concluded October 4 includes lower tariffs on meat (beef and pork) and rice, considered two of Japan’s five “sacred” domestic products (wheat, barley and sugarcane are the others). </p>
<p>Currently Japan imports 770,000 metric tons of rice to meet the rules established by the World Trade Organization. About half of these imports come from the US, the biggest supplier, followed by Australia (another TPP partner). </p>
<p>Once TPP is fully implemented, rice imports from the US may <a href="http://www.bloomberg.com/news/articles/2015-10-06/tpp-to-cut-food-costs-for-japan-on-lower-tariffs-more-imports">increase</a> by up to 50,000 tons annually during the first three years, up from 10,000 now, and by as much as 70,000 by year 13 of the deal. This figure is much lower than the 215,000 tons per year that the US delegation had demanded leading up to this summer’s negotiations. </p>
<p>Imports of Australian rice will be allowed to rise 6,000 tons a year in the initial phase and as much as 8,400 tons by the deal’s 13th year. Japan will also create a non-tariff import quota for 78,400 tons of rice and a low-tariff quota for milk powder and butter equivalent equivalent to 70,000 tons of raw milk. </p>
<p>For beef, Japan’s current tariff rate of 38.5% will drop to 9% by year 16 of the deal, while those on pork will drop from 482 yen per kilogram to 50 yen per kilo as well. </p>
<p>From the consumer perspective, these changes are significant. Japan depends on imports for 60% of what they eat, and consumers will see lower costs at the grocery store as a result of this deal. </p>
<p>Although Japan made these concessions, it maintained the ability to protect its beef and rice markets in the following ways:</p>
<ul>
<li><p>it will be allowed to return tariff barriers in the 20th year of the agreement for both beef and pork if they see their market flooded by imported products</p></li>
<li><p>the country will purchase an equivalent amount of domestic rice to the amount imported to support local producers.</p></li>
</ul>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/97634/original/image-20151007-7378-15ny8gv.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/97634/original/image-20151007-7378-15ny8gv.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/97634/original/image-20151007-7378-15ny8gv.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/97634/original/image-20151007-7378-15ny8gv.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/97634/original/image-20151007-7378-15ny8gv.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/97634/original/image-20151007-7378-15ny8gv.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/97634/original/image-20151007-7378-15ny8gv.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Author with Mr Mizukami in Joge, Japan.</span>
<span class="attribution"><span class="source">Nicole Freiman</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<h2>Dismayed farmers, GMO fears</h2>
<p>Despite these allowances, Japan’s rice farmers are still worried about the impact of foreign rice. Farmers <a href="https://theconversation.com/japans-sacred-rice-farmers-brace-for-pacific-trade-deals-death-sentence-45280">I spoke with this summer</a> during some field work, for example, expressed deep reservation over the agreement. </p>
<p>In Joge, a small community near Osaka where many young people have left, houses and land are abandoned. Mr Mizukami, who is a lifelong resident there, works several small plots of land and told me that the “TPP deal is an important story, farmers like me feel the consequences directly, I’m afraid the farming lifestyle is becoming rare and will disappear.” </p>
<p>Farmers in Japan’s largest national organization, JA Zenchu, maintain concern about the impact that imported rice from the US and other TPP countries will have on Japan’s most important traditional crop. Japan’s domestic rice production is already threatened by decreasing demand; the addition of foreign competition may be an additional pressure that this long-upheld traditional lifestyle will be unable to bear. The efforts of young entrepreneurial farmers are at the beginning stages in rural communities like Mr Mizukami’s. The foreign competition from the TPP comes at an especially difficult time in the story of Japan’s rural rice-growing lifestyle. </p>
<p>For his part, Prime Minister Abe has stressed his willingness to lower or eliminate some tariffs, essentially ignoring domestic opposition and trying to appeal to Japan’s most important ally, the US, while knowing full well that he can always bring them back if necessary. </p>
<p>But that may not be enough for farmers and consumer groups, who are <a href="http://english.agrinews.co.jp/?p=3818">not staying quiet</a>. There was a protest this week in front of the prime minister’s residence in Tokyo, and marches against the TPP have taken place throughout the summer months leading up to the meeting in Atlanta. </p>
<p>Japanese who value local control of their food supply are also dismayed by the potential introduction of more genetically modified organisms. Japan currently cultivates no GMO crops, but the TPP will bring corporate ownership of agricultural land and the inability of government to restrict the use of GMOs. Japan imports many genetically modified foods, but consumers groups, like the Consumers Union of Japan (CUJ), are <a href="http://www.nishoren.org/en/">against</a> any increase in GMO use because of the threat to biodiversity.</p>
<p>The CUJ and PARC, a nonprofit organization committed in international social and economic justice, <a href="http://parc-jp.org/english/index.html">fear</a> that the TPP and its rules for investment and copyright will open the country to GMO beef and rice from the US (even though the pact doesn’t mention them specifically).</p>
<h2>Tricky timing</h2>
<p>Consumers and farmers should have plenty of time to voice their concerns, as the public text of the TPP will be released in several weeks. <a href="http://www.ibtimes.com/political-capital/trans-pacific-partnership-terms-still-secret-even-nations-agree-trade-deal-2127391">Some parts</a> will remain secret, part of the reason for continuing discontent, and the agreement still has a long way to go before it enters into force. </p>
<p>Besides Japan, farmers in the US and Mexico opposed to the lifting of tariffs and the potential impact on their livelihoods remain stumbling blocks. Japan’s Liberal Democratic Party (LDP) wanted to fast-track passage of the deal, but it’s doubtful given the legislative schedule of Parliament and the US Congress. The LDP is <a href="http://www.japantimes.co.jp/news/2015/10/07/business/early-diet-approval-tpp-doubt-political-calendar-booked/#.VhVtlUWeeKJ">unlikely to act</a> until President Barack Obama signs the deal, which won’t happen until Congress passes it (and opposition to it is brewing among the presidential candidates). </p>
<p>If there’s a significant delay, the debate could spill into next summer, when Japan’s upper house holds elections. The opposition will likely try to delay TPP passage and make it a campaign issue in the elections. The LDP may try to alter the lower house’s schedule and convene a special session in advance of budget meetings that begin in April in order to ratify it. </p>
<p>But this is unlikely; at the earliest, Japan’s legislature won’t ratify the TPP until next summer or autumn. And that gives Japan’s disgruntled farmers of sacred rice, beef and pork plenty of time to mobilize to try to stop it.</p><img src="https://counter.theconversation.com/content/48796/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nicole L Freiner does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Japan’s decision to lower or eliminate tariffs on rice, pork and beef may end up giving the prime minister a headache as he tries to get the trade accord through Parliament.Nicole L Freiner, Associate Professor, Political Science, Bryant UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/483612015-10-07T10:09:42Z2015-10-07T10:09:42ZWe may have cinched TPP, but is US trade a lost cause?<figure><img src="https://images.theconversation.com/files/97493/original/image-20151006-7335-15t4kr9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">About 98% of US exporters are small businesses. </span> <span class="attribution"><span class="source">Cargo ship via www.shutterstock.com</span></span></figcaption></figure><p>President Barack Obama, with <a href="http://thehill.com/homenews/administration/246418-obama-to-sign-fast-track-trade-legislation">fast-track negotiating powers</a> in his back pocket, managed to seal the biggest trade agreement of the World Trade Organization era this month. </p>
<p>The passage of fast-track, agreed by Congress in June to allow a straight up-or-down vote on trade deals, means the <a href="https://theconversation.com/explainer-negotiators-reach-landmark-pacific-trade-deal-so-whats-next-48641">Trans-Pacific Partnership (TPP) agreement</a> involving the US and 11 other countries stands a strong chance of passage, at least in the US. </p>
<p>The TPP encompasses 40% of global trade, links the US with mostly Pacific countries including Singapore, Japan and Australia, and is the biggest US trade deal since at least 1995. </p>
<p>But large, much-trumpeted trade agreements like the <a href="https://theconversation.com/five-things-you-need-to-know-about-the-trans-pacific-partnership-48653">TPP</a> and the Transatlantic Trade and Investment Partnership with Europe belie a troubling trend: US trade with the world, and the Pacific in particular, has been declining. Is it too late to turn the tide? </p>
<h2>A steady decline in trade</h2>
<p>The US share of the Asia-Pacific region’s imports declined about <a href="http://www.rollcall.com/issues/58_4/Asia-Pacific-Exporting-Will-Expand-Economy-216054-1.html">43%</a> from 2000 to 2010. Clawing that back would mean the need to export an additional <a href="http://www.thirdway.org/report/boatloads-of-growth-recapturing-americas-share-of-asia-pacific-trade">US$600 billion</a> annually by 2020. </p>
<p>Meanwhile other countries have filled the gap. Part of the problem is that the US has a history of being reluctant to enter into regional trade agreements. </p>
<p>The US’ oldest trade agreement is with Israel, an <a href="https://www.uschamber.com/sites/default/files/open_door_trade_report.pdf">accord</a> that celebrated its 30th anniversary last month. Since then, the US <a href="http://www.state.gov/e/eb/tpp/bta/fta/c26474.htm">has signed</a> just 14 regional trade agreements involving about 20 countries (18 more are currently being deliberated).</p>
<p>But during the same 30-year period, the world has seen <a href="http://rtais.wto.org/UI/PublicPreDefRepByEIF.aspx">256</a> new trade agreements, as registered with the World Trade Organization (see chart), with 132 of them being implemented just in the last decade.</p>
<iframe src="https://datawrapper.dwcdn.net/fcdav/3/" frameborder="0" allowtransparency="true" allowfullscreen="allowfullscreen" webkitallowfullscreen="webkitallowfullscreen" mozallowfullscreen="mozallowfullscreen" oallowfullscreen="oallowfullscreen" msallowfullscreen="msallowfullscreen" width="100%" height="400"></iframe>
<p>These regional trade agreements, when the US is not involved, create barriers and constraints that have an effect on market opportunities and <a href="http://fortune.com/2014/09/08/us-economic-competitiveness/">profits</a> of US companies. It is common to see tariffs that are five times higher in foreign markets than the US average. </p>
<p>Another way to look at it is that the US ranked 130 of 138 nations in terms of the amount of “<a href="https://www.uschamber.com/sites/default/files/open_door_trade_report.pdf">tariffs faced</a>” by the country’s exports – that is, US companies face higher tariffs than nearly all our trading partners.</p>
<h2>Trade’s familiar battle lines</h2>
<p>The battle lines on TPP – which still stands a chance of being blocked by Congress – seem to be the same as for most trade agreements. Special interest groups don’t like the potential undermining of US regulations. Labor unions argue that jobs will be lost to low-salaried countries. And many argue that these agreements help only large corporations.</p>
<p>Is this really true? Not really. Barriers to exporting significantly hurt small and medium-sized US enterprises as well. Such SMEs, with fewer than 500 employees, sales of less than $33.5 million and a small geographic footprint, represent <a href="http://blog.trade.gov/2015/04/08/profile-of-u-s-exporters-highlights-contributions-of-small-and-medium-sized-businesses/">98%</a> of US exporters. Exporting is their best bet for growth.</p>
<p>Unfortunately, indications are that SMEs are slowly <a href="http://fortune.com/2014/09/08/us-economic-competitiveness/">decaying</a>, and the lack of trade is partly to blame. In a global competitiveness <a href="http://www.hbs.edu/competitiveness/research/Pages/research-details.aspx?rid=18">survey</a>, small businesses were found to be declining as a job creation vehicle, were more pessimistic about the business environment than large firms and were the businesses most affected by the decline in US global competitiveness.</p>
<h2>A not-so-rosy picture</h2>
<p>Why doesn’t the US government do more? Perhaps it is hubris. </p>
<p>The US is still the world’s <a href="https://www.uschamber.com/international/international-policy/benefits-international-trade-0">largest</a> exporter, with $2.35 trillion sent annually around the world. Some 38 million Americans have jobs because of trade. So even with the decline in overall manufacturing output since 1979, the US is doing well globally. And some of the decline has been offset by service exports ($710 billion). </p>
<p>Sound rosy? Not really.</p>
<p>While the US is consistently <a href="http://reports.weforum.org/global-competitiveness-report-2014-2015/report-highlights/#rankings">ranked</a> as one of the most competitive of the world’s 200 <a href="http://globaledge.msu.edu/global-insights/by/country">countries</a> and, by most accounts, is also perceived as the leader in foreign <a href="https://www.foreignaffairs.com/articles/united-states/2015-06-09/measuring">policy</a> and world affairs, the country has not proactively engaged in worldwide trade agreements at the pace of other nations. This hurts large corporations and small businesses alike.</p>
<p>In looking at the chart, covering 1960 to 2015, it’s pretty easy to see that the proliferation of trade agreements follows the same rate as the increase in cross-border trade. Meanwhile, world production has not increased as much. We trade more across borders than we make relative to the past.</p>
<h2>Are we in or out?</h2>
<p>Based on my research, this “global supply chain effect” will continue. Just to stay competitive, companies’ global supply chains will have to become <a href="http://www.mhprofessional.com/product.php?isbn=0071827420">43%</a> more global by 2023. A primary reason is to keep up with the in- and out-flows from the Asia-Pacific region.</p>
<p>Can the US keep up? With the US engaging in fewer regional trade agreements than much of the rest of the world, it stands to reason that US companies will continue to lose out. Research that I have done backs this up. A lack of trade agreements adds to the negative “country effect” – that is, how much residing in a specific locale affects business performance. Results show that about 6% of the performance of companies depends on such <a href="http://onlinelibrary.wiley.com/doi/10.1002/smj.2422/abstract">country effects</a>.</p>
<p>Either the US is in the “in group” or it has to face the “out group” consequences. Naturally, trade among countries in a trade agreement increases, while trade with countries outside it stays flat or may even decline.</p>
<p>These country effects have serious consequences, particularly for <a href="http://www.tradingeconomics.com/united-states/balance-of-trade">consumer products</a>, which are often sold like generic commodities with low profit margins. Regional trade agreements, if negotiated properly and timely signed, can help bring down <a href="http://economistsview.typepad.com/economistsview/international_trade/">costs</a> and increase profit margins, especially for SMEs. The net gain is an increased positive country effects vis-à-vis competitors.</p>
<p>So let’s hope Congress doesn’t delay in approving TPP. But let’s also hope that the next president takes advantage of the six-year renewal of fast-track and picks up the pace of negotiating new trade deals so America’s workers and small businesses don’t get left behind.</p><img src="https://counter.theconversation.com/content/48361/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tomas Hult receives funding from U.S. Department of Education, National Science Foundation, and Michigan Economic Development Corporation. He is also Executive Director of the Academy of International Business, President of the Sheth Foundation, and serves on the US District Export Council.</span></em></p>The signing of the Trans-Pacific Partnership belies the fact that the US’s share of trade in the region has been declining for some time.Tomas Hult, Byington Endowed Chair and Professor of International Business, Michigan State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/465922015-09-03T10:07:10Z2015-09-03T10:07:10ZWhy US may be ready to resolve Feta dispute to clinch trade deal with EU<p>Next month, the European Union and the United States will likely resume their negotiation of the Transatlantic Trade and Investment Partnership (TTIP). This ambitious and far-reaching <a href="https://ustr.gov/ttip">agreement</a> will affect not only two of the world’s largest trading powers, but also other members of the international community.</p>
<p>One area that has <a href="http://uk.reuters.com/article/2015/07/24/us-eu-usa-trade-cheese-idUKKCN0PY14B20150724">tripped up</a> these high-stakes trade talks concerns the labeling of cheese and other foodstuffs. In many countries, specific laws exist to protect what is generally referred to as “geographical indications.”</p>
<p>These indicators identify the geographical source from which a product derives its essential quality, reputation or other characteristics. Examples include Champagne sparkling wine, Scotch whisky, Feta cheese, prosciutto di Parma, Café de Colombia, Idaho potatoes and Darjeeling tea.</p>
<p>Thus far, the EU and the US <a href="http://www.nytimes.com/2015/06/25/business/energy-environment/bridging-the-cheese-gap-food-trade-united-states-european-union-ttip.html">disagree</a> over how these indicators are to be protected. Greater protection will affect not only product labeling but also exports and jobs. </p>
<p>Although these two trading powers are unlikely to resolve their disagreement soon, the US may be more willing to increase protection of geographical indications than many expect.</p>
<h2>The fight between Old and New Worlds</h2>
<p>Historically, the protection of geographical indications has been the subject of heated debates and controversy among members of the international community.</p>
<p>Countries in the “Old World” – primarily those in Europe – advocate for strong protection of geographical indications. They remain concerned about their consumers being confused as to the origin and unique qualities of the products identified by these indicators. They also argue that unauthorized use will tarnish the indicators’ established reputations while diluting the products’ authenticity on the international market.</p>
<p>By contrast, countries in the “New World” – such as Australia, Canada, Chile and the US – oppose strong protection of geographical indications. They contend that most products can be replicated almost anywhere today, thanks to modern agricultural and manufacturing techniques.</p>
<p>They also claim that several geographical indications – such as Champagne, Feta and Gouda – have long become generic terms on their soil. In some cases, names similar or identical to these indicators have already been registered as trademarks. A prohibition on the commercial use of geographical indications – such as using Champagne for sparkling wine not made in that region of France – would therefore <a href="https://www.specialtyfood.com/news/article/cheese-industry-embattled-over-eu-naming-proposal/">damage businesses</a> while creating consumer confusion.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/93698/original/image-20150902-14061-upbb2d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/93698/original/image-20150902-14061-upbb2d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/93698/original/image-20150902-14061-upbb2d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/93698/original/image-20150902-14061-upbb2d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/93698/original/image-20150902-14061-upbb2d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/93698/original/image-20150902-14061-upbb2d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/93698/original/image-20150902-14061-upbb2d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Cognac is one of the relatively few foods offered some geographical indication protection.</span>
<span class="attribution"><span class="source">Cognac glass via www.shutterstock.com</span></span>
</figcaption>
</figure>
<h2>Growing international protection</h2>
<p>Since 1994, the so-called <a href="https://www.wto.org/english/tratop_e/trips_e/intel2_e.htm">TRIPS Agreement</a> of the World Trade Organization (WTO) has introduced international minimum standards for the protection of geographical indications. The WTO also offers expanded protection to wines and spirits.</p>
<p>In addition, other multilateral and regional efforts have been undertaken to protect geographical indications. A case in point is the <a href="http://www.wipo.int/treaties/en/registration/lisbon/">Lisbon Agreement for the Protection of Appellations of Origin and Geographical Indications</a>. Despite the continuous differences between the Old and New Worlds, the scope of this agreement was recently <a href="http://www.wipo.int/pressroom/en/articles/2015/article_0009.html">expanded</a> at the World Intellectual Property Organization in Geneva.</p>
<p>Thus far, the US has not offered independent protection to geographical indications. Instead, it allows these indicators to be protected as trademarks, certification marks or collective marks.</p>
<p>For instance, Brunello di Montalcino, Cognac, Darjeeling and Jamaica Blue Mountain coffee are all currently <a href="http://www.uspto.gov/learning-and-resources/ip-policy/geographical-indications/geographical-indications-faqs">protected</a> as certification marks in the US. Federal and state laws also offer <a href="http://www.ttb.gov/wine/ava.shtml">additional protection</a> to appellations of origin for wines. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/93696/original/image-20150902-14045-1ll8213.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/93696/original/image-20150902-14045-1ll8213.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=409&fit=crop&dpr=1 600w, https://images.theconversation.com/files/93696/original/image-20150902-14045-1ll8213.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=409&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/93696/original/image-20150902-14045-1ll8213.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=409&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/93696/original/image-20150902-14045-1ll8213.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=514&fit=crop&dpr=1 754w, https://images.theconversation.com/files/93696/original/image-20150902-14045-1ll8213.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=514&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/93696/original/image-20150902-14045-1ll8213.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=514&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Vintners in Napa Valley have been among those arguing the US should adopt geographical indications.</span>
<span class="attribution"><span class="source">Napa Valley via www.shutterstock.com</span></span>
</figcaption>
</figure>
<h2>The slowly evolving US position</h2>
<p>Although the US has a longstanding skepticism toward protecting geographical indications, at least five reasons exist to suggest the country’s increasing willingness to strengthen protection in this area.</p>
<p>First, the protection of geographical indications has already received growing support from US industries. Napa Valley Vintners, for example, has strongly advocated for such protection on behalf of its member wineries. In 2007, this trade group successfully <a href="http://www.reuters.com/article/2012/05/02/idUS28885+02-May-2012+BW20120502">secured</a> protection for “Napa Valley” as a US geographical indication in the EU.</p>
<p>A 2013 <a href="http://www.origin-gi.com/images/stories/PDFs/English/papers/Geographical_Indications_in_the_United_States_-_Supporting_Memo_FINAL_WEB.pdf">industry study</a> also provided a long list of potential US geographical indications. This list included not only well-known wine-producing regions, but also lesser-known regions such as Alexandria Lakes in Minnesota, the Bell Mountain in Texas, the Kanawha River Valley in West Virginia and the Old Mission Peninsula in Michigan.</p>
<p>Second, in addition to the TTIP, the US continues to negotiate bilateral and regional trade agreements with countries that have offered strong protection of geographical indications. During these negotiations, <a href="http://www.dairyreporter.com/Markets/US-EU-can-reach-compromise-on-geographical-indications-EDA">compromises</a> on how to protect these indicators will inevitably be reached. Indeed, many US free trade agreements already include provisions addressing the potential conflict between the trademark system and the protection of geographical indications.</p>
<p>Third, stronger protection of these indicators would offer significant trade benefits to US exporters. Such protection would harmonize labeling standards while reducing marketing costs. If US products are of recognized qualities or reputations, enabling foreign consumers to quickly select these products would also enhance sales.</p>
<p>After all, the US, like Europe, has its own geographical indications. These indicators include Idaho potatoes, Florida oranges, Vidalia onions, Napa Valley wines and Washington State apples.</p>
<p>Fourth, greater protection of geographical indications would benefit US consumers by enabling them to purchase authentic products locally. Many Americans now travel abroad and have a better understanding of foreign cuisines and cultures. After tasting Parmigiano-Reggiano in Italy or sipping Darjeeling tea in India, they would certainly appreciate finding the same products in home grocery stores. </p>
<p>Finally, European countries and industries continue to shame the US into offering stronger protection of geographical indications. In January 2013, for instance, the champagne lobby strongly <a href="http://www.wine-searcher.com/m/2013/01/obama-inauguration-irks-champagne-producers">protested</a> the listing of “Korbel Natural Russian River Valley Champagne” on the menu of the inauguration dinner for the second term of the Obama administration. As the lobby’s spokesperson emphatically <a href="http://www.huffingtonpost.com/2013/01/10/obama-inauguration-champagne-french_n_2448408.html">declared</a>, “Champagne only comes from Champagne, France,” not Sonoma County in California.</p>
<p>In sum, although the US is unlikely to volunteer to strengthen protection of geographical indications, it may be willing to do so if the EU offers the right concessions in other areas of trade or investment. Thus, the TTIP negotiations – despite the ongoing challenges – can serve as an important platform for the two trading powers to narrow their differences.</p><img src="https://counter.theconversation.com/content/46592/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The US may be closer than people think to a deal over geographical indications, laws that protect products based on their location such as Champagne, Darjeeling tea and prosciutto di Parma.Peter K. Yu, Professor of Law and Co-Director of the Center for Law and Intellectual Property , Texas A&M UniversityIrene Calboli, Professor of Law, Texas A&M UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/452792015-08-07T15:05:24Z2015-08-07T15:05:24ZWhy Europe and the US are locked in a food fight over TTIP<figure><img src="https://images.theconversation.com/files/91035/original/image-20150806-5266-u0ci1m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">shutterstock.com</span></span></figcaption></figure><p>Black Forest ham, Asiago, Gorgonzola, Gouda, and many other European geographical indications for foodstuffs are at the centre of a TTIP food fight. They are all protected from imitation by other companies in many countries of the world. Not in the US though. And as the details of the Transatlantic Trade and Investment Partnership are negotiated, the EU wants to stop American manufacturers from being able to falsely label their products with their protected names. </p>
<p>Part of the EU’s <a href="http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32012R1151">legal framework</a> for protecting regional food products is that they have acquired a strong reputation among consumers the world over. Favourable climates and centuries-old manufacturing techniques rooted in their protected areas have contributed to build up this renown. They are intellectual property rights that identify “products with a story”.</p>
<p>The US plays by different rules, however. There are numerous American companies that use European geographical and traditional names (including Parmesan, Asiago and feta for cheese) to identify products that have not been produced in the relevant European locations – and often do not have the same quality as the originals. This lack of protection – European negotiators stress – allows an unacceptable exploitation of Europe’s cultural heritage, as well as costing EU manufacturers large amounts of revenue.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/91037/original/image-20150806-5260-1w9kjfr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/91037/original/image-20150806-5260-1w9kjfr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/91037/original/image-20150806-5260-1w9kjfr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/91037/original/image-20150806-5260-1w9kjfr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/91037/original/image-20150806-5260-1w9kjfr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/91037/original/image-20150806-5260-1w9kjfr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/91037/original/image-20150806-5260-1w9kjfr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Feta: accept no non-Greek imitations.</span>
<span class="attribution"><span class="source">shutterstock.com</span></span>
</figcaption>
</figure>
<p>The US is, however, resisting these claims. Its negotiators maintain that their food producers have been using and trademarking European geographical names for many decades, and it would now be unfair to ask them to stop.</p>
<p>The US also claims that many of the geographical terms, such as Parmesan, Fontina, feta, Gouda and Edam, have become the generic names of the relevant products, and cannot be monopolised by anyone, including the European producers located in those areas. Indeed, most US consumers <a href="http://www.commonfoodnames.com/the-issue/our-mission/">don’t even know</a> that these terms are actually geographical names. To them they just describe the characteristics of a product.</p>
<p>EU-style legal protection – the US argument goes – would give European food producers unfair advantage in the marketplace. It would amount to a trade barrier, which would force many US producers to go through an expensive re-brand, and would increase final prices for consumers. It would take a heavy toll on the US cheese market in light of the US$21 billion in US cheese production that <a href="http://www.foodmanufacturing.com/news/2015/02/us-dairy-industry-concerned-geographical-indications-and-common-food-name-issues">uses European-origin names</a>.</p>
<h2>Finding a solution</h2>
<p>A similar situation arose between the EU and Canada in negotiations over their trade deal, the <a href="http://ec.europa.eu/trade/policy/in-focus/ceta/">Comprehensive Economic Trade Agreement (CETA)</a>. Though not yet ratified, they reached a compromise last year after more than four years of negotiations that could offer hope to TTIP negotiators.</p>
<p>CETA does not give European food producers strong exclusive rights over all their geographical indications. Rather, it leaves Canadian competitors a certain degree of freedom to use European geographical names. For example, while this treaty strongly protects certain European wines and spirits such as Champagne, Bordeaux and Cognac, several other names have been offered only limited protection. Canadian food producers are left free to use the English and French translated version of some European terms, such as St George cheese, Black Forest ham, Tiroler bacon, as well as Munich and Bavarian beer.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/91053/original/image-20150806-5245-1ehr5vs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/91053/original/image-20150806-5245-1ehr5vs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=258&fit=crop&dpr=1 600w, https://images.theconversation.com/files/91053/original/image-20150806-5245-1ehr5vs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=258&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/91053/original/image-20150806-5245-1ehr5vs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=258&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/91053/original/image-20150806-5245-1ehr5vs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=324&fit=crop&dpr=1 754w, https://images.theconversation.com/files/91053/original/image-20150806-5245-1ehr5vs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=324&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/91053/original/image-20150806-5245-1ehr5vs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=324&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Gouda: protected, kind of.</span>
<span class="attribution"><span class="source">Megan Clement</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>CETA also allows Canadian cheese manufacturers that were established after 2013 to lawfully use some European geographical indications, such as Fontina, Asiago, feta, Gorgonzola and Münster, accompanied by terms like “style”, “type” or “kind”. Plus, CETA protects several EU geographical names in Canada as compound names (which is also what happens in Europe). So, Edam Holland and Gouda Holland are protected (not just Edam and Gouda), as is Mortadella Bologna and Brie de Meaux (not just mortadella or brie).</p>
<p>So, even though CETA does not give European producers the same level of protection over their geographical names as they have in the EU, it has been welcomed. Limited protection is better than none at all. And, the treaty will also eliminate customs duties for the European farming and food sector, with nearly 92% of EU agriculture and food products <a href="http://europa.eu/rapid/press-release_MEMO-14-542_en.htm">to be exported to Canada duty-free</a>.</p>
<p>While Europeans negotiators hope to reach a similar result in negotiations over TTIP, it is not certain whether their US counterparts will relent and grant European food products even the limited protection they have under CETA. American resistance to the EU’s geographical indicators seems very strong. Last year 55 US senators <a href="http://www.commonfoodnames.com/senators-urge-negotiators-to-defend-common-names/">sent a letter</a> to the US Trade Representative (the government agency tasked with conducting trade negotiations) urging that it be made clear to the EU that the US will reject any TTIP proposal that would restrict in any way the ability of US producers to use their existing names. This includes those that use European geographical terms, which are perceived by US consumers as the common names of food products, especially cheeses.</p>
<p>Thus, the row between Europe and the US over geographical name protection does not seem close to an end.</p><img src="https://counter.theconversation.com/content/45279/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Enrico Bonadio does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>An important sticking point in TTIP negotiations has US and European representatives fighting over food labels.Enrico Bonadio, Senior Lecturer in Law, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/456482015-08-05T20:17:14Z2015-08-05T20:17:14ZHow the battle over biologics helped stall the Trans Pacific Partnership<p>Talks that were meant to finalise the Trans Pacific Partnership wound up in Hawaii late last week <a href="http://www.abc.net.au/news/2015-08-01/trans-pacific-partnership-delegates-fail-to-reach-final-deal/6665204">without reaching</a> a final deal. Over the last five years, 12 countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam – have been involved in negotiating the final text of the deal.</p>
<p>Despite the setback, there will be a strong push to sort out the remaining issues in August. After that the Canadian and US election cycles will make further progress in negotiating the trade deal next to impossible. And one of the most highly charged matters negotiators will be trying to resolve is intellectual property protections for medicines.</p>
<p>Over the next few weeks, Australia’s trade minister, <a href="http://www.andrewrobb.com.au">Andrew Robb</a>, will be under intense pressure to renege on the government’s oft-repeated commitment to <a href="http://trademinister.gov.au/releases/2013/ar_mr_131211.html">reject anything in the deal</a> that could undermine the <a href="http://www.pbs.gov.au/pbs/home">Pharmaceutical Benefits Scheme</a> (PBS) or increase the cost of medicines for Australians.</p>
<h2>Data exclusivity</h2>
<p>A key issue affecting drugs is the length of the data-exclusivity period for a class of medicines called biologics, which are produced from living organisms. Biologics include many new and very expensive cancer medicines, such as Keytruda, a melanoma drug <a href="http://www.pm.gov.au/media/2015-06-28/new-drug-listing-keytruda-treat-melanoma">recently listed on the PBS</a>. Without the PBS subsidy, it would cost over A$150,000 to treat a patient for a year.</p>
<p>Data exclusivity refers to the protection of clinical trial data submitted to regulatory agencies from use by competitors. It’s a different type of monopoly protection to patents. While a product is covered by data exclusivity, manufacturers of cheaper follow-on versions of the product can’t rely on the clinical trial data produced by the originator of the drug to support the marketing approval of their product. </p>
<p>Section 25a of Australia’s <a href="https://www.comlaw.gov.au/Details/C2015C00086">Therapeutic Goods Act</a> provides for five years of data exclusivity for all medicines. It makes no distinction between biologics and other drugs. Data exclusivity provides an absolute monopoly that, unlike a patent, can’t be revoked or challenged in court. </p>
<p>The powerful biopharmaceutical industry lobby in the United States has been seeking <a href="http://phrma.org/note-media-elected-officials-support-12-years-data-protection-tpp">12 years of market exclusivity for biologics</a>. </p>
<p>Facing intense opposition from all other countries, the US trade representative fell back this week to eight years. While this was heralded as a new level of “flexibility” in the US position, in reality it remains <a href="http://www.ip-watch.org/2015/07/27/decision-time-on-biologics-exclusivity-eight-years-is-no-compromise/">a significant extension of intellectual property rights</a> in most of the TPP countries.</p>
<p>Thus far, the Australian delegation has apparently maintained the position that it will not go beyond existing domestic law. Days before the talks broke up, the trade minister indicated in <a href="http://www.abc.net.au/radionational/programs/breakfast/andrew-robb-on-the-trans-pacific-partnership/6655730">an interview on ABC Radio National</a> that he didn’t see the sense in accepting a longer monopoly for biologics.</p>
<h2>Good reasons to not budge</h2>
<p>Three factors are likely to be contributing to this resolve. The first is the costs of extending monopolies. These are likely to be <a href="http://dfat.gov.au/trade/agreements/tpp/submissions/Documents/tpp_sub_gleeson_lopert_moir.pdf">hundreds of millions of dollars a year</a> in the short term and could rise exponentially in the longer term as patents gradually expire on biologics already listed on the PBS.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/90718/original/image-20150804-15146-gcmhrq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/90718/original/image-20150804-15146-gcmhrq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/90718/original/image-20150804-15146-gcmhrq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/90718/original/image-20150804-15146-gcmhrq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/90718/original/image-20150804-15146-gcmhrq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/90718/original/image-20150804-15146-gcmhrq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/90718/original/image-20150804-15146-gcmhrq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Without a PBS subsidy, some new medications could cost patients thousands of dollars for a course of treatment.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/the_smileyfish/4018251978/in/photolist-785Ajw-aZeeWr-aYKsUT-aYJjWz-ppcfho-rmg8NM-2Fpbw2-JcsvK-Jcmvo-Jcm7y-8bmupc-9iavuh-44Nbp-4cQ2kF-nLnHsk-nrTkA1-9wYiDe-9x2iEQ-PcucF-dNUoaq-4jyVng-8EGNH-5Xe6m-89nPNh-5ybjn2-Jcsd2-JcmoY-9kZQPN-a2No9t-4EG4Jr-rS6tuE-8BVyEV-Jcmem-oDJSem-3cqncc-4MEcz-7LdwMs-3qiSoa-4HcEMQ-3cuGyW-apMGH2-8i6Wky-6Hmb7b-5WHQvU-bcMb2t-6C7jw-8XQ8a1-8XQ82C-8XQ7rh-781G7c">Toni Fish/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>Another pressing consideration is the degree of political opposition to longer medicine monopolies in Australia. Extending the period of data exclusivity would require an amendment to the <a href="https://www.comlaw.gov.au/Details/C2015C00086">Therapeutic Goods Act</a> – a move Labor, the Greens and many independents would strongly oppose. And the failure to get implementing legislation through the Senate could compromise the whole deal.</p>
<p>The third factor is the lack of progress in bargaining for access to US markets; the US reportedly <a href="http://www.afr.com/business/agriculture/us-sugar-paying-millions-to-shut-out-australia-from-tpp-20150803-giqrog">made only a token offer on sugar</a> and <a href="http://www.smh.com.au/federal-politics/political-news/transpacific-partnership-deal-in-doubt-20150731-gioyho.html">withdrew an earlier offer on dairy</a> products.</p>
<p>Eight years of data exclusivity won’t be an appealing option for any of the other TPP countries, with the exception of Japan and Canada, which already allow for eight years. New Zealand’s trade minister recently faced outrage at home over <a href="http://www.radionz.co.nz/news/political/279879/tpp-key-admits-medicine-costs-will-rise">admissions that the cost of medicines may be expected to increase</a> after the agreement. The country’s opposition, also Labor, has declared it won’t support a deal that raises the costs of medicines.</p>
<p>The US stance itself is contradictory as the Obama administration has been <a href="http://www.canberratimes.com.au/comment/tpp-could-force-australia-to-americanstyle-health-system-20150625-ghxdes.html">trying to reduce the exclusivity period for biologics</a> to seven years, to speed up the availability of cheaper alternatives and save an estimated US$16 billion in the next decade.</p>
<p>It seems clear to everyone except US negotiators – and biopharmaceutical industry lobbyists – that the demand for extending data exclusivity for biologics needs to be dropped if the TPP is to be finalised.</p><img src="https://counter.theconversation.com/content/45648/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Deborah Gleeson receives funding from the Australian Research Council. She has received funding from various national and international non-government organisations to attend speaking engagements related to trade agreements and health, including the TPP. She has represented the Public Health Association of Australia on matters related to the TPP, including at the recent TPP negotiations in Maui.</span></em></p><p class="fine-print"><em><span>Ruth Lopert does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Over the next few weeks, the trade minister will be under intense pressure to renege on the government’s commitment to reject anything in the Trans Pacific Partnership that could undermine the PBS.Deborah Gleeson, Lecturer in Public Health, La Trobe UniversityRuth Lopert, Adjunct professor, Department of Health Policy & Management, George Washington UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/433932015-06-18T15:36:29Z2015-06-18T15:36:29ZUS trade fight underscores long road ahead for Pacific pact in foreign capitals<figure><img src="https://images.theconversation.com/files/85585/original/image-20150618-23232-11ac41w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Even if President Obama gets his fast-track trading authority, his Pacific trade legacy faces a long slog.</span> <span class="attribution"><span class="source">Dark road via www.shutterstock.com</span></span></figcaption></figure><p>Republican leaders and President Obama <a href="http://www.wsj.com/articles/house-gives-itself-until-july-30-to-reconsider-trade-legislation-1434478467">appear</a> to have aborted a plan to put off a “final” vote on a fast-track trade bill until the end of July and may bring it before the House as soon as today. </p>
<p>The latest plan would be to separate Trade Promotion Authority (TPA) – which allows the president to put a trade deal before Congress for a straight up-or-down vote – from the workers’ assistance program that tripped up the bill last week. Lawmakers would then pass the two pieces of legislation separately. So it seems the Trans Pacific Partnership (TPP) that TPA is essential for still has a chance of being successfully negotiated and implemented. </p>
<p>Yet the problems experienced by the Obama Administration of getting TPA through Congress only serve to underscore the fact that many of the other 11 member governments involved in the negotiations face similar highly motivated opposition to the TPP.</p>
<p>Indeed, a number of government leaders in TPP capitals will be secretly pleased by the deadlock in Congress. It gives them every excuse to delay negotiations further and put off making the really tough decisions that inevitably come toward the end of lengthy trade negotiations. </p>
<h2>TPP’s troubles</h2>
<p>In places like Australia and New Zealand, the kind of broad coalition that challenged the Obama Administration is likely to band together to oppose the TPP being ratified by their governments. Just as in the US, organized labor, environmentalists, “netizens,” health care workers and consumer groups all have reasons to oppose the TPP.</p>
<p>In Japan, Prime Minister Shinzo Abe, under pressure because of his national security reforms, will not want to make <a href="http://www.ft.com/intl/cms/s/0/67689c7c-131d-11e5-bd3c-00144feabdc0.html#axzz3dQaJTBBf">tough decisions</a> about key agricultural policies were TPP negotiations to start up again in the early fall. </p>
<p>Similarly, Canadian Prime Minister Steven Harper, who must go to the polls in October and is facing a tough three-way fight, <a href="http://www.theglobeandmail.com/report-on-business/economy/defensive-posture-leaves-canada-on-fringes-of-trans-pacific-trade-talks/article24470333/">would not relish</a> having to admit to ceding ground on supply management in the poultry and dairy sectors and the attendant possibility of losing crucial rural seats.</p>
<p>Among the Asian members, the Obama Administration’s <a href="http://www.nytimes.com/2015/06/17/world/asia/obama-trans-pacific-partnership-asia.html?_r=0">talk</a> of the TPP ensuring that US rules, rather than China’s, would govern trade and investment in the Asian region does not sit comfortably. China has become the largest trading partner of nearly all East and Southeast Asian economies, and such explicit talk of working to limit China’s influence puts them in a difficult position.</p>
<p>In addition, the transparency provision in the TPA authored by Senator Ron Wyden means that should the TPA eventually pass, then the full text of the TPP, once signed, would be <a href="http://www.cato.org/blog/whats-really-new-trade-promotion-authority-bill">made public</a>. This could well help to galvanize opposition in the member countries as the TPP agreement goes through the ratification process. </p>
<h2>Transparency, IP and aging</h2>
<p>One issue that will be influenced by the new transparency will be the <a href="https://www.whitehouse.gov/blog/2015/02/26/investor-state-dispute-settlement-isds-questions-and-answers">Investor State Dispute Settlement</a> (ISDS) mechanism, which makes it <a href="https://wikileaks.org/tpp-investment/press.html">easier</a> for an investor to challenge a foreign government. In recent years, sentiment has moved against the ISDS, especially in developing countries. This may be one of the reasons that a recently leaked version of the investment chapter states that the details would be made public only four years after the TPP came into force.</p>
<p>The ISDS, as well as <a href="http://www.washingtonpost.com/blogs/monkey-cage/wp/2015/03/26/people-are-freaking-out-about-the-trans-pacific-partnerships-investor-dispute-settlement-system-why-should-you-care/">concerns</a> about the extent to which the TPP’s intellectual property rights provisions will raise the price of pharmaceuticals, has mobilized health care professionals and consumer groups in a number of countries. </p>
<p>In addition, politicians in countries with aging populations will also no doubt want to analyze the impact the TPP will have on their ability to keep health care costs in check.</p>
<h2>Long, hard slog</h2>
<p>Of course as time goes by, political calculations and governments change. In Malaysia, the government, which got a major scare at the last election, finds <a href="http://www.themalaysianinsider.com/malaysia/article/activists-getting-dr-m-anwar-to-share-stage-to-protest-tppa#sthash.fZmaAuwP.dpbs">significant</a> portions of their political base in the Malay community <a href="http://thediplomat.com/2014/09/the-tpps-biggest-obstacles/">implacably opposed</a> to the TPP. </p>
<p>They fear it may take away their hard-won economic privileges. And, in Chile, the Bachelet government, which came into power just over a year ago, has <a href="http://fpif.org/can-chile-curb-tpp/">never been as convinced</a> as its predecessor of the value of the TPP for the Chilean economy.</p>
<p>With such a diverse set of participants, the road to a ratified TPP was always going to be a long, hard slog. Still, it is important to note that the TPP has considerable support within the participating countries. </p>
<p>But, as we’ve seen over the last month in the US, opposition around the Pacific Rim to the TPP is mobilizing. Even if the current Congressionally induced detour does not eventually force it off the track, the Obama Administration has plenty more obstacles to overcome.</p>
<p>The principle of single undertaking – or “nothing is agreed until everyone and everything is agreed” – means that there is still a great deal of negotiating both among the 12 TPP participants and by each government with its constituents at home before the pact can be successfully ratified and implemented.</p><img src="https://counter.theconversation.com/content/43393/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Stubbs does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The fierce debate in the US Congress that almost derailed the president’s trade agenda is likely to replay itself in many of the 11 other capitals that are party to the deal.Richard Stubbs, Professor of Politics, McMaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/431952015-06-12T15:24:40Z2015-06-12T15:24:40ZCan the European Parliament save us from TTIP?<p>The European Parliament descended into chaos on June 9 when President Martin Schulz <a href="http://www.independent.co.uk/news/uk/politics/watch-ttip-vote-in-european-parliament-descends-into-chaos-after-ukip-meps-spark-protest-10310457.html">told members</a> he was postponing a vote and debate on the Transatlantic Trade and Investment Partnership (<a href="https://theconversation.com/explainer-what-is-the-transatlantic-trade-and-investment-partnership-37258">TTIP</a>).</p>
<p>Schulz said he had taken the decision due to the overwhelming number of amendments – some 200 in total – submitted by MEPs to the package of recommendations they were due to put forward on the deal. Those recommendations are intended to inform the European Commission’s TTIP negotiations with the US. </p>
<p>European politicians from both right and left attacked the parliamentary leadership for denying them the opportunity to air their views on the increasingly controversial treaty.</p>
<p>But the good news for them – and others who are concerned about the implications of this controversial, wide-reaching trade deal – is that Schulz’s ruling shows the tide is turning in Europe when it comes to TTIP.</p>
<h2>Scrutiny changes everything</h2>
<p>TTIP is not the first trade deal to be negotiated by the EU. But it is the first that has been subject to public scrutiny. Trade negotiations mostly happen in secret. Negotiators claim this is necessary, <a href="http://www.infoworld.com/article/2932216/government/trade-treaty-negotiations-can-remain-secret-eu-court-rules.html">arguing</a> that revealing their positions publicly also means revealing them to the other side. In most cases the public hears very little about trade treaties until they are finalised.</p>
<p>That means discussion about these deals tends to focus purely on their economic impacts. Initially this was the case with TTIP. But a Europe-wide campaign by NGOs and civil society organisations, highlighting the social and political impacts of TTIP, has changed the discourse.</p>
<p>TTIP’s supporters promised Europeans economic growth. But its opponents have argued that this potentially comes at the price of compromises on <a href="http://www.theguardian.com/environment/2014/sep/05/eu-gm-food-imports-us-canada">food standards</a>, <a href="https://fullfact.org/law/does_ttip_mean_privatisation_nhs-38681">healthcare</a>, intellectual property and <a href="https://theconversation.com/ttip-and-ceta-the-trade-deals-threatening-british-democracy-42056">democratic governance</a>. For the first time, elected representatives are being held accountable for their stance on a trade agreement and, for the first time, a significant number are reluctant to offer unconditional support.</p>
<h2>An unlikely alliance</h2>
<p>As opposition to TTIP has mounted in the European Parliament, it has become clear that the challenge emanates from beyond the usual quarters.</p>
<p>Concern about trade treaties tends to be concentrated at the more progressive end of the European political spectrum. TTIP was initially no different, with Green MEPs relatively isolated in their criticism. Opposition to TTIP only became a genuine political threat in the parliament when the Greens were joined by other groups. TTIP has become an issue that unites left, right and centre.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/-Wjzyp1IUi8?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Rumble in Strasbourg.</span></figcaption>
</figure>
<p>Dissent has developed amongst members of the (centre left) Alliance of Socialists and Democrats (which includes the French Socialist Party, German Social Democratic Party and British Labour Party) and the Eurosceptic Europe of Freedom and Direct Democracy (EFDD) group. Indeed, MEPs from the UK Independence Party, the largest domestic party in the EFDD were the <a href="http://www.mirror.co.uk/news/uk-news/ttip-ukip-lead-dramatic-eu-5858981">most vocal</a> in their protests at being denied a debate on TTIP.</p>
<p>Opposition from the European right is surprising and telling. As recently as October 2014, UKIP’s William Dartmouth was <a href="http://www.ibtimes.co.uk/ttip-exclusive-ukip-wants-include-nhs-controversial-eu-us-trade-deal-1470790">pushing</a> for the opening up of the UK’s National Health Service to international competition as part of TTIP. In the past, UKIP leader Nigel Farage, <a href="http://www.ibtimes.co.uk/rochester-by-election-whats-ukips-policy-ttip-1475884">refused</a> to state any open opposition to the treaty. This week he described it as a plot to create a “marketplace in which the giant corporates can dominate”. </p>
<p>It is possible that the Europe of Freedom and Direct Democracy group – which includes UKIP – simply views the TTIP debate as an opportunity to highlight a lack of transparency in the EU. The European side of negotiations is being led by the European Commission and, with <a href="http://www.independent.co.uk/voices/comment/ttip-heres-why-meps-have-been-protesting-it-and-why-you-should-too-10313239.html">92% of all consultations</a> on the treaty dominated by corporate lobbyists, MEPs are under increasing pressure (Farage alone claiming to have received <a href="http://www.breitbart.com/london/2015/06/09/exclusive-eu-chiefs-attempt-to-stop-ttip-debate-crack-in-corporatist-stitch-up-proclaims-farage/">“over 10,000 emails”</a>) from their constituents not to get shut out. </p>
<p>As such, although they might not oppose a <a href="http://www.independent.co.uk/incoming/article10313206.ece/alternates/w620/TTIP.png">similar</a> treaty in principle, while it comes in the packaging of TTIP, the EFDD finds itself in an unlikely coalition with the left and centre left.</p>
<h2>Can they stop it?</h2>
<p>Despite opposition from both left and right, TTIP will probably pass through the European Parliament. The postponed vote is to approve the EU’s negotiating position, not the treaty itself. Whether or not the EP eventually passes the negotiating position the final treaty is likely to look different because it will inevitably represent a compromise between the EU’s position and that of the US. </p>
<p>What’s more TTIP retains the support of the European People’s Party, the largest group in the European Parliament. It is also likely to receive support from the majority of MEPs in the Conservatives and Reformists group and the Alliance of Liberals and Democrats group. It is likely that the EP will be asked to vote again on the final text of the treaty but, if TTIP retains the support of these groups, it is likely to pass, if only with a small majority. </p>
<p>But this doesn’t make parliamentary opposition insignificant. Agreements such as TTIP have to be ratified by each of the member states individually as well as by the European Parliament. This represents a significant hurdle for supporters of TTIP and a strong opposition in the European Parliament is a political boost for domestic campaigners.</p>
<p>This would explain Schulz’s decision to avoid a vote that he would probably have won. Supporters of TTIP needed a comprehensive endorsement from the European Parliament in order to keep up pressure on domestic governments to ratify the treaty once it is completed. With scepticism towards TTIP amongst the governing parties in <a href="http://sputniknews.com/business/20150611/1023213839.html?utm_source=t.co%252FKHGETOyLy7&utm_medium=short_url&utm_content=sTs&utm_campaign=URL_shortening">France</a> and <a href="http://www.theguardian.com/business/2014/dec/08/transatlantic-trade-partnership-ttip-dividing-europe-cecilia-malmstroem-washington-debut">Germany</a> and the (pro-TTIP) Conservative party governing with a slim (and increasingly eurosceptic) majority in the UK, the ratification process is unlikely to be smooth. If any of Europe’s three largest economies fail to ratify TTIP, it is difficult to see how the treaty would survive.</p>
<p>Although unlikely to prevent the European Parliament’s eventual approval of TTIP, the events that surrounded this vote mark a change in the political tide. Despite starting as a preoccupation of the fringes, the anti-TTIP movement has become a serious force in European politics. It has united MEPs from both the left and right and, for the first time ever, subjected a trade treaty to something approaching democratic scrutiny. Most significantly, it may yet lead to an ultimate rejection of TTIP by the EU’s member states.</p><img src="https://counter.theconversation.com/content/43195/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sam Fowles received the 2015 Mishcon Academy Grant to conduct his initial research on TTIP.</span></em></p>MEPs are fuming that they were denied a debate on the controversial trade deal.Sam Fowles, Researcher in International Law and Politics, Queen Mary University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/428852015-06-07T23:24:18Z2015-06-07T23:24:18ZRCEP: the trade agreement you’ve never heard of but should be concerned about<figure><img src="https://images.theconversation.com/files/84076/original/image-20150605-14111-1ynw3iv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">If the proposals are agreed, they could delay the market entry of generic medicines in the region – and the impact will be felt around the world. </span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-197380862/stock-photo-pills-and-bottle.html?src=VByEnkSCYAlyfaEGurXX1A-1-4">Jeng_Niamwhan</a></span></figcaption></figure><p>You’ve probably heard of the controversial and secret <a href="https://theconversation.com/au/topics/trans-pacific-partnership">Trans Pacific Partnership Agreement</a> (TPP) negotiations, which have generated concerns in many quarters. </p>
<p>Nobel Prize-winning economist Joseph Stiglitz has <a href="http://www.nytimes.com/2015/01/31/opinion/dont-trade-away-our-health.html?_r=1">highlighted</a> serious risks the agreement may reduce access to medicines and health care. United States Senator Elizabeth Warren <a href="http://www.washingtonpost.com/opinions/kill-the-dispute-settlement-language-in-the-trans-pacific-partnership/2015/02/25/ec7705a2-bd1e-11e4-b274-e5209a3bc9a9_story.html">has rebuked</a> the inclusion of dispute clauses that would enable corporations to sue governments if their policies negatively affected profits. And <a href="http://www.theguardian.com/australia-news/2015/may/22/labor-greens-and-crossbenchers-concerned-at-trans-pacific-partnership">several Australian parliamentarians</a> have raised concerns at the lack of transparency surrounding the negotiations. </p>
<p>Meanwhile, negotiations for another trade agreement, equally shrouded in secrecy, are raising alarm among <a href="http://dfat.gov.au/trade/agreements/rcep/Documents/public-health-association-of-australia-rcep.pdf">health</a> and <a href="http://msfaccess.org/sites/default/files/MSF%20RCEP%20letter%20India%2022Aug2014.pdf">humanitarian</a> organisations.</p>
<p>Obscurely named the <a href="http://dfat.gov.au/trade/agreements/rcep/Pages/regional-comprehensive-economic-partnership.aspx">Regional Comprehensive Economic Partnership (RCEP)</a>, this agreement encompasses ASEAN (Association of Southeast Asian Nations) members and their trading partners: Australia, Brunei, Cambodia, China, India, Indonesia, Laos, Malaysia, Myanmar, New Zealand, Japan, the Philippines, Singapore, South Korea, Thailand, and Vietnam. The United States is notably absent.</p>
<p>Seven rounds of negotiations have already taken place with virtually no public debate. The next round of negotiations begins today in Kyoto, Japan.</p>
<p>The RCEP emerged in the context of China’s exclusion from the TPP. RCEP recognises “<a href="http://www.asean.org/images/2012/documents/Guiding%20Principles%20and%20Objectives%20for%20Negotiating%20the%20Regional%20Comprehensive%20Economic%20Partnership.pdf">ASEAN centrality</a>” in the region and aims to strengthen economic cooperation among participating countries. </p>
<p>Like other recent bilateral and regional trade agreements, the RCEP’s scope is broad, going beyond trade in goods and services to investment, economic and technical cooperation, intellectual property (IP), competition, dispute settlement and other issues related to government regulation.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/84078/original/image-20150605-14141-c2jm1h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/84078/original/image-20150605-14141-c2jm1h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/84078/original/image-20150605-14141-c2jm1h.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/84078/original/image-20150605-14141-c2jm1h.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/84078/original/image-20150605-14141-c2jm1h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/84078/original/image-20150605-14141-c2jm1h.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/84078/original/image-20150605-14141-c2jm1h.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">RCEP recognises ‘ASEAN centrality’ in the region.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-203738356/stock-photo-perspective-view-of-national-flags-of-southeast-asia-countries-aec-asean-economic-community.html?src=voJ_HmZtSPLXMkD_Jpw5eQ-1-13">OPgrapher/Shutterstock</a></span>
</figcaption>
</figure>
<p>In contrast to the TPP, RCEP was expected to be <a href="http://www.aspistrategist.org.au/trade-partnership-competition-tpp-vs-rcep/">more favourable</a> to low and middle-income countries in the region – with fewer demands for regulatory harmonisation and slower reductions in trade barriers, particularly for least developed countries. </p>
<p>But recent leaks of negotiating texts proposed by Japan and South Korea for an IP chapter raise serious concerns for access to medicines across the globe. </p>
<p>In February, a leaked <a href="http://keionline.org/sites/default/files/RCEP_WGIP_JP_Revised_Draft_Text_3Oct2014.pdf">Japanese text</a> (dated October 2014) proposed monopoly protections beyond both the obligations of <a href="https://www.wto.org/english/tratop_e/trips_e/intel2_e.htm">existing IP agreements</a> and IP laws of many RCEP countries. Particularly controversial are provisions that:</p>
<ul>
<li>broaden and lengthen patent monopolies</li>
<li>extend restrictions on the use of clinical trial data to support the marketing approval of generic medicines</li>
<li>enable the seizure of generic medicines in transit, even those only suspected of infringing IP laws in the transit country. </li>
</ul>
<p>On June 3, a leaked <a href="http://keionline.org/node/2239">South Korean IP proposal</a> revealed several provisions that would award additional privileges to the pharmaceutical industry. These include patent term extensions, the seizure of suspected IP infringing medicines in “trans-shipment” and, equally worrying, damages for patent infringements determined according to the value asserted by the patent owner.</p>
<p>If these proposals are agreed, they could delay the market entry of generic medicines in the region – and the impact will be felt around the world. </p>
<p>India and China are <a href="http://www.unicef.org/supply/files/UNICEF_Supply_Annual_Report_2013.pdf">major suppliers of generic medicines</a> for the world’s poor. The role of Indian generic firms in substantively lowering the price of HIV medicines is well known. Indian firms continue to supply the <a href="http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2944814/">majority of these</a> for low and middle-income countries. This has been possible because India’s intellectual property laws balance private rights with the public interest. </p>
<p>India, for example, does not grant patents for new forms or new uses of a known substance. This has prevented unnecessary extensions of patent monopolies on some cancer drugs – a move praised by health advocacy groups such as <a href="http://www.msfaccess.org/content/about-novartis-drop-case-campaign">Médecins Sans Frontières </a> as a major victory for access to affordable medicines. These safeguards would be lost if India and RCEP countries agree to Japan’s proposal. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/84080/original/image-20150605-14135-rw1ig9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/84080/original/image-20150605-14135-rw1ig9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/84080/original/image-20150605-14135-rw1ig9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/84080/original/image-20150605-14135-rw1ig9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/84080/original/image-20150605-14135-rw1ig9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/84080/original/image-20150605-14135-rw1ig9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/84080/original/image-20150605-14135-rw1ig9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">India IP laws safeguard access to affordable medicines.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/trinitycarefoundation/15649288739/in/photolist-pQSGk6-pEQm5A-bogzjZ-fNkhZN-4zaV5Q-cgpG9W-7eDnkC-4z6Dzv-8Docg2-7WuTeK-chx6K-4zaUY5-2WheR9-8wEzkb-8wEzhS-iurgRw-gmvnsf-h8JSb-dDBFZ6-7DwoSE-cCWGom-dvghnb-dvaGpH-dvgibb-dvaHBz-dvghdo-dvghYQ-dvaGnv-dvaK3R-dvgjW9-dvghvf-dvaGVV-dvgiLE-dvaJva-cN8aVU-bVtkFe-ccQAe9-ccPCrb-4stzX1-8wBz6a-ibamw-jwn6jX-jworaK-jworbB-bfv332-bomHeX-7vqzX1-7vmLfx-jwornP-B1d7z">Trinity Care Foundation/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>It’s also crucial that other low and middle-income countries such as Thailand and the Philippines do not agree to these types of provisions. Despite their key roles as generics suppliers, the <a href="http://unctad.org/en/Docs/diaepcb2011d5_en.pdf">UN Conference on Trade and Development</a> has suggested that large Indian generic firms are looking to wealthier markets, which could ultimately put at risk supplies of cheap generics to poorer countries such as these.</p>
<p>While Australia introduced several of the proposed measures some years ago, a 2013 <a href="http://www.ipaustralia.gov.au/pdfs/2013-05-27_PPR_Final_Report.pdf">independent Pharmaceutical Patents Review</a> concluded that Australia should reduce the length of patent term extensions. Clearly it would be wise for Australia to reject any measures that could preclude much-needed IP reform in future. </p>
<p>It’s not in Australia’s interest to support the inclusion of these IP measures in the RCEP, but we <a href="http://media.wix.com/ugd/b629ee_dc2d50d5c60843078d84763cda867f35.pdf">don’t have a good track record</a> in protecting the public interest amidst pressure from corporate actors and powerful states. It’s therefore important the treaty text be released before being endorsed by Cabinet, to give sufficient time for independent assessment before it’s ratified. </p>
<p>Last week, a <a href="http://www.ohchr.org/FR/NewsEvents/Pages/DisplayNews.aspx?NewsID=16031&LangID=E">group of UN experts</a> raised serious concerns over the detrimental impact trade agreements can have on human rights, recommending that trade and investment agreement negotiations be conducted transparently, with active consultation with labour unions, consumer organisations, environmental protection groups and health professionals. This is vitally important in the context of the RCEP negotiations if we are to preserve access to affordable medicines across the globe.</p><img src="https://counter.theconversation.com/content/42885/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Belinda Townsend is a member of the People's Health Movement and the Public Health Association of Australia. She has been involved in the Public Health Association of Australia's advocacy on matters relating to trade agreements. </span></em></p><p class="fine-print"><em><span>Deborah Gleeson receives funding from the Australian Research Council. She has received funding from various national and international non-government organisations to attend speaking engagements related to trade agreements and health. She has represented the Public Health Association of Australia on matters related to trade agreements.</span></em></p><p class="fine-print"><em><span>Ruth Lopert does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Seven rounds of negotiations for the Regional Comprehensive Economic Partnership have already taken place with virtually no public debate. The next round of negotiations begins today in Kyoto, Japan.Belinda Townsend, Sessional Academic, Deakin UniversityDeborah Gleeson, Lecturer in Public Health, La Trobe UniversityRuth Lopert, Adjunct Professor, Department of Health Policy & Management, George Washington UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/420052015-05-28T10:07:30Z2015-05-28T10:07:30ZAnnals of free trade: will TPP learn from our NAFTA past, or are we condemned to repeat it?<p>The Trans-Pacific Partnership (TPP) – a mega deal between the United States and 11 trading partners – has provoked the fiercest trade debate since the North American Free Trade Agreement (NAFTA) more than two decades ago. Like NAFTA, a Democratic president is leading the charge and relying on mostly Republican votes to muscle it through Congress.</p>
<p>Let’s clear something up from the start: the increasingly heated debate over TPP is not about free trade versus protectionism or even about more trade versus less trade. All trade in so-called “free trade agreements” is heavily managed. The real issue concerns the rules of the game. The key question is: who wins and who loses as a result?</p>
<p>Proponents of TPP have tended to sing the praises of free trade in the abstract and point glowingly to theoretical gains trade makes possible – as if the alternative were no trade. </p>
<p>Not true. Of course trade can produce real gains, but rules of the game that give better protection to workers, consumers and the environment are vital to boosting trade by expanding purchasing power. And these gains can minimize the economic devastation in US communities that has sparked such a strong backlash against “free trade.” These protesters aren’t necessarily opposed to trade but are desperate to stop the reality of trade that is coming at their expense.</p>
<p>Here we can learn something from the experience over the last 20 years of NAFTA, a pact that included Mexico, Canada and the US, all of whom will now become part of the proposed TPP. That deal got a boost last week when the Senate <a href="http://www.nytimes.com/2015/05/22/business/senate-obama-trade-pact-export-import-bank-patriot-act.html">passed</a> a measure that would limit lawmakers from amending the final deal. They would only be able to vote it up or down. If the House also passes so-called fast-track trade authority, TPP will more likely – but not automatically – get <a href="https://theconversation.com/fast-track-overcomes-key-hurdle-but-obstacles-remain-as-trade-deals-hang-in-balance-42221">Congress’s nod</a> as well, perhaps as soon as later this year. </p>
<p>My <a href="http://www.scholarsstrategynetwork.org/sites/default/files/ssn_key_findings_shaiken_on_nafta_after_twenty_years.pdf">research</a> into the impact of NAFTA paints a dark picture of what we can expect from TPP unless lawmakers ensure stronger labor protections than are currently included in the deal. </p>
<h2>Lessons from NAFTA</h2>
<p>In 1993, when NAFTA was being debated, Mexico <a href="http://clas.berkeley.edu/research/trade-nafta-paradox">faced</a> a disturbing reality: manufacturing productivity was rising at the same time real wages for Mexican workers were declining. Autos and color televisions were moving along assembly lines in state-of-the-art factories whose productivity and quality rivaled that of the US or Japan, while workers were often living in communities without running water. </p>
<p>Economists tell us low wages reflect low productivity, but here we were seeing high productivity and rock-bottom wages. The result was high-productivity poverty. Why? A key factor was a lack of critical labor rights: the virtual impossibility in the export sector for Mexican workers to form independent unions and bargain collectively for better wages and conditions.</p>
<p>US unions forged the link between rising productivity and wages from 1945 to the mid-1970s. As a result, highly competitive companies and strong unions produced a robust middle class and a growing economy. Today, declining union strength has contributed to a similar wage-productivity disconnect. US productivity <a href="http://clas.berkeley.edu/research/trade-nafta-paradox">has outstripped</a> wages by 40% since the mid-1970s. Robust is hardly the word you’d use to describe today’s middle class.</p>
<p>NAFTA contained strong language to harmonize upwards the standards covering investment and intellectual property rights so that building a plant or opening a business in Nuevo Leon would be as secure as doing it in Ohio. And Mexico instituted extensive reforms on its own to ensure a “business-friendly” climate even before NAFTA was passed.</p>
<p>When it came to labor and the environment, however, the details were <a href="http://www.warren.senate.gov/files/documents/BrokenPromises.pdf">relegated</a> to side-agreements that were nonetheless hailed as the strongest and most progressive to date, <a href="http://www.historycentral.com/documents/Clinton/SigningNaFTA.html">including</a> by then-President Clinton. But the accord excluded the core issue of the right of workers to form independent unions and has had weak to nonexistent enforcement for what it did cover. </p>
<h2>Effusive praise, meager results</h2>
<p>In fact, all free trade agreements the US has signed since NAFTA have followed the same pattern: effusive praise for labor protections followed by meager results. Senator Elizabeth Warren <a href="http://www.warren.senate.gov/files/documents/BrokenPromises.pdf">released</a> a review of this experience in May, titled “Broken Promises,” documenting the anemic enforcement of these protections.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/xzfxv2XQoPg?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Senator Warren on TPP.</span></figcaption>
</figure>
<p>The report points out that the US Department of Labor “has accepted only five claims against countries for violating their labor commitments, and it only agreed to restart the first ever labor enforcement case under any free trade agreement in 2014, six years after the initial claim was filed.”</p>
<p>As my research has shown, by strengthening investment protection and largely ignoring worker protections, real wages in Mexican manufacturing continued to slide in the wake of NAFTA, declining almost 20% from 1994 to 2011 while productivity <a href="http://clas.berkeley.edu/research/trade-nafta-paradox">grew</a> almost 80%. This loss for Mexican workers also contributed to a sharp downward pressure on manufacturing wages in the US. The combination of high productivity and depressed wages not surprisingly can serve as a beacon for investment.</p>
<h2>Tales from the auto industry</h2>
<p>Consider the automobile industry, the most important manufacturing industry in both Mexico and the US. </p>
<p>Manufacturing does not have to be a zero-sum game, and rising wages could create new demand in both countries benefiting workers and their families as well as fueling demand. Just the opposite happens if low wages become the source of competitive advantage.</p>
<p>Mexico has achieved striking success under NAFTA in the auto sector. The country has <a href="http://circanews.com/news/mexican-car-and-steel-industries-ramp-up">become</a> the seventh-largest car maker in the world and the fourth-largest exporter, trailing only Germany, Japan and South Korea. Mexico now exports more light vehicles to the US than Japan. </p>
<p>Despite a slow-growing economy and traumatic drug-related violence, international automakers <a href="http://www.wsj.com/articles/goodyear-to-invest-550-million-in-new-plant-in-central-mexico-1429812017">have committed</a> US$21 billion in new auto investment in Mexico in the last two years, according to the Wall Street Journal, “lured by Mexico’s low wages and more than 40 free-trade deals.” The country is headed toward producing 5 million vehicles annually by 2020, compared with 3.2 million last year. US assembly lines produced 11.6 million in 2014. </p>
<p>The growth of an advanced auto industry could be a great benefit to Mexico and to workers and companies in the US. When the draw is low wages, however, Mexican consumer demand is diminished and US workers share the pain. Mexican auto wages are 10% to 20% of comparable US wages, in part, <a href="http://www.autonews.com/article/20150206/OEM01/302069972/mexico-auto-exports-forecast-to-hit-record-in-2015">depressed</a> by a lack of labor rights. </p>
<p>Seventy percent of light vehicles made in Mexico are exported to the US. Mexico is the production site, but the US is the market. This <a href="http://www.census.gov/foreign-trade/Press-Release/2014pr/12/ft900.pdf">imbalance</a> has seen the bilateral trade relationship tilt from a $4 billion US merchandise trade surplus in 1992 to a $100 billion deficit in 2014, $63 billion of which comes from the auto sector alone. </p>
<p>Auto supplier jobs in Mexico <a href="http://www.wsj.com/articles/goodyear-to-invest-550-million-in-new-plant-in-central-mexico-1429812017">are expected</a> to climb from 700,000 currently to 1 million over the next several years. In many cases, production that used to take place in the US has moved South. A new Mazda plant that will employ 5,000 by early 2016 replaced assembly in Flat Rock, Michigan. Toyota is breaking ground on a new plant to assemble Corollas in central Mexico, formerly built in a Fremont, California, plant employing 4,000. These workers won’t be singing the praises of free trade anytime soon. </p>
<p>Well, you might be thinking, isn’t all this <a href="http://www.wsj.com/articles/why-obamas-free-trade-push-makes-sense-1430324511?KEYWORDS=Obama%27s+Uphill+Push+for+Free+Trade">talk about trade</a> and manufacturing so 20th century? After all, manufacturing in the US now <a href="http://www.epi.org/publication/the-manufacturing-footprint-and-the-importance-of-u-s-manufacturing-jobs/">accounts</a> for only about 10% of employment, and what’s the difference if more of these jobs migrate to low-wage areas? </p>
<p>The difference is critical because this sector plays an outsized role in research and development, and each manufacturing job creates many more in the broader economy. Germany’s economic success has shown the value of a high-wage, globally competitive manufacturing sector to an advanced economy.</p>
<h2>Reform begins long before ink dries</h2>
<p>The countries participating in TPP <a href="https://www.whitehouse.gov/sites/default/files/docs/cea_trade_report_final_non-embargoed_v2.pdf">represent</a> almost 40% of global gross domestic product (GDP). Strong labor and environmental protections are vital to ensure global competitiveness is based on innovation, productivity and quality, not who can press down hardest on wages or have the weakest environmental standards. It is an argument for expanding trade in a way that results in inclusive societies. </p>
<p>The NAFTA experience indicates that for this to happen, serious reform must begin before any agreement is signed – the moment when leverage for change is the greatest – and enforcement needs to be taken seriously. Instead, TPP is in danger of locking in a flawed status quo for labor and the environment. </p>
<p>And there’s a lot more at stake with TPP. The dispute settlement process, at least according to a leaked draft, makes the agreement appear more like a “Trans-Corporate Partnership” with quasi-privatized panels that ignore conflicts of interest. And these bodies would have the power to <a href="https://theconversation.com/sen-warren-is-right-fast-track-could-help-roll-back-dodd-frank-41941">undermine domestic legislation</a> that protects consumers enacted by elected bodies. </p>
<p>As Joseph Stiglitz <a href="http://www.project-syndicate.org/commentary/us-secret-corporate-takeover-by-joseph-e--stiglitz-2015-05">noted</a>, “the real intent of these provisions is to impede health, environmental, safety, and, yes, even financial regulations meant to protect America’s own economy and citizens.”</p>
<p>When it comes to healthcare, TPP provisions could prove catastrophic to millions. We need to take seriously the concerns of Deane Marchbein, president of Doctors Without Borders USA, who <a href="http://healthaffairs.org/blog/2015/05/08/the-trans-pacific-partnership-a-threat-to-global-health/">writes</a>, “TPP, in its current form, will lock-in high, unsustainable drug prices, blocking availability of affordable generic medicines, and price millions of people out of much-needed care.”</p>
<p>Trade promotion authority, also known as fast-track, passed the Senate in late May after a bruising fight and is now on the way to the House where the vote could prove much closer. Approving this bill would ensure one more round of grand promises and nonexistent results for workers and consumers as well as compromising the rights of citizens.</p>
<p>To paraphrase philosopher George Santayana’s famous words: “Those who cannot remember the past are condemned to repeat it, only with TPP on a far larger and more damaging scale.”</p><img src="https://counter.theconversation.com/content/42005/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Harley Shaiken receives funding from the University of California. He has previously received research grants from a wide variety of foundations, the U.S. government and the University of California. He's also currently on the advisory boards of the Center for American Progress and Jobs With Justice. </span></em></p>NAFTA promised strong labor protections but failed to deliver. The Trans-Pacific Partnership is headed in the same direction.Harley Shaiken, Director of the Center for Latin American Studies and Professor of Letters and Science, University of California, BerkeleyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/422962015-05-23T01:32:50Z2015-05-23T01:32:50ZIs TPP about jobs – or China?<p>Washington is in the midst of a heated debate over President Obama’s proposed Trans Pacific Partnership (TPP) Agreement. </p>
<p>It certainly has created some unorthodox political bedfellows. </p>
<p>The president is widely supported in this initiative by Republicans. He is opposed by large swathes of his own party. Senator Elizabeth Warren symbolizes this <a href="https://theconversation.com/sen-warren-is-right-fast-track-could-help-roll-back-dodd-frank-41941">opposition</a>, although she is hardly alone among Democrats in voicing her discontent. Still, focusing on her gives credence to the claim it is the “liberal” wing in the party that is causing this almighty row.</p>
<p>Yet focusing exclusively on the debate about the possible domestic economic effects of the proposed TPP Agreement misses a key dimension – the TPP’s foreign policy implications and the future role of the US in Asia. </p>
<p>The really hard choice may be between the economic security of many Americans and what many regard as the country’s future national security – which has a lot to do with China. </p>
<p>But before we look forward, let’s first look back. </p>
<h2>Globalization from an American perspective</h2>
<p>The foundation of the domestic disagreement is familiar to those who have debated the virtues and vices of free trade for at least the last four decades. </p>
<p>As the Cold War drew to a close, America was the world’s largest and most vocal proponent of globalization. </p>
<p>Globalization meant different things to different people. But the heart of the economic process included free trade in both goods and services. </p>
<p>This made sense to most Americans, accustomed as they were to the enormous power and prosperity that America’s largest firms had always generated. They still believed in the adage that “what’s good for General Motors is good for America.” America’s industrial prowess, they thought, was the envy of the world.</p>
<p>But this image proved an illusion. Many who lived in the country that had been globalization’s most vocal proponent became its primary victims as American industry <a href="http://www.investopedia.com/terms/h/hollowing-out.asp">“hollowed out.”</a> Industrial jobs – from cars to shoes – began to go abroad.</p>
<p>Things had in fact begun to fall apart in the early 1980s, as Japanese producers invaded America’s shores – closing factories in steel, autos and machine tools. </p>
<p>But most Americans regarded this as a temporary setback, even as American firms began to offshore their production to save on labor costs. Free trade was good, they argued, but it had to come with “fair trade” – an even playing field for American firms exporting abroad. Still, the belief in free trade as sacrosanct had begun to be chipped away. </p>
<h2>The shadow of NAFTA</h2>
<p>In the 1992 presidential election, <a href="http://en.wikipedia.org/wiki/Ross_Perot_presidential_campaign,_1992">Ross Perot</a> ran against George H Bush and Bill Clinton as a third party candidate. The primary issue of his platform was that the proposed NAFTA treaty with Mexico and Canada would be ruinous for American workers. </p>
<p>His most memorable adage, expressed during the second presidential debate, was that there was a “giant sucking sound” caused by the rush of manufacturing jobs to Mexico if NAFTA was enacted. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/Rkgx1C_S6ls?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
</figure>
<p>Perot garnered <a href="http://uselectionatlas.org/RESULTS/national.php?year=1992">19%</a> of the popular vote in that election.</p>
<p>In many ways Perot’s comment was prescient, although NAFTA just sustained the pattern of the loss of industrial jobs rather than initiating it. </p>
<p>One recent <a href="http://www.huffingtonpost.com/lori-wallach/nafta-at-20-one-million-u_b_4550207.html">report</a>, nonetheless, concluded that NAFTA cost the US economy a million jobs. </p>
<p>I lived in Cortland, NY in the years leading up to the <a href="http://www.nytimes.com/1992/07/22/business/smith-corona-plant-mexico-bound.html">closure</a> of the Smith Corona typewriter plant and its relocation to Mexico in anticipation of NAFTA. The economic effect on that small town was devastating. </p>
<p>Later I moved to Pittsburgh, whose industrial base was destroyed in the decade before NAFTA. The city that was once the world’s “steel capital” had <a href="http://www.pittsburghquarterly.com/index.php/Region/a-very-brief-history-of-pittsburgh.html">no working large-scale plants </a>by the time NAFTA arrived. </p>
<p>This image of the debilitating effects of NAFTA on America’s industrial heartland is the one that dominates the current debate. </p>
<p>The proposed twelve-member pact of the TPP consists of countries from as far apart as North and South East Asia, Oceana and North and Latin America. But some, like Vietnam, are low cost producers. And Congressional Democrats fear that the major effects of this new free trade zone will be <a href="http://www.washingtonpost.com/opinions/kill-the-dispute-settlement-language-in-the-trans-pacific-partnership/2015/02/25/ec7705a2-bd1e-11e4-b274-e5209a3bc9a9_story.html">job losses</a> and multinational corporations even freer of any limits imposed by domestic regulators. </p>
<p>The focus on free trade and open markets, of course, accounts for the Republicans support, although they remain ambivalent about any legislation that may give this president a victory or worse, a legacy.</p>
<p>Understandably, this debate has received a lot of coverage in the press. After all, it has all the key elements of a great story. It has Shakespearean irony as the president’s party turns against him and his customary allies <a href="http://www.huffingtonpost.com/2015/04/21/obama-elizabeth-warren-tpp_n_7111524.html">line up</a> to disparage him (and he them) rather publically. It has a whiff of intrigue, as the terms of the negotiated agreement remains secretive at this point. </p>
<h2>‘It’s National Security, stupid’</h2>
<p>It was in the heat of that 1992 presidential campaign, that Bill Clinton’s strategist James Carville <a href="http://www.nytimes.com/1992/10/31/us/1992-campaign-democrats-clinton-bush-compete-be-champion-change-democrat-fights.html">coined the phrase</a> “it’s the economy stupid.” </p>
<p>Democrats have held that as an article of faith ever since. But is that what the TPP is really about? </p>
<p>Much of the media coverage has understated a key point: that a major purpose of the pact is concerned with national security, not simply economic gains. </p>
<p>Journalist Kevin Granville was exceptional when he <a href="http://www.nytimes.com/2015/05/12/business/unpacking-the-trans-pacific-partnership-trade-deal.html?action=click&contentCollection=Business%20Day&module=RelatedCoverage&region=Marginalia&pgtype=article">pointed out</a> in the New York Times recently that, </p>
<blockquote>
<p>“The pact is a major component of President Obama’s ‘pivot’ to Asia. It is seen as a way to bind Pacific trading partners closer to the United States while raising a challenge to Asia’s rising power, China, which has pointedly been excluded from the deal, at least for now.” </p>
</blockquote>
<p>Granville’s comment must be put in some context. The effects of China’s meteoric rise as a global economic powerhouse has been magnified in Asia. </p>
<p>Most of America’s consumer goods come from China because it is the place where many final products from across Asia are assembled and dispatched to the US. So our biggest <a href="https://www.census.gov/foreign-trade/balance/c5700.html">trade deficit</a> is with China. But that is in part because it has displaced our trade gap with other countries – like Japan and South Korea. In effect, we have swapped one deficit for another. </p>
<p>Why’s that so important? Well, China has become highly integrated into Asia’s economy. It <a href="http://wits.worldbank.org/CountryProfile/Country/CHN/StartYear/2009/EndYear/2013/TradeFlow/Import/Indicator/MPRT-TRD-VL/Partner/ALL/Product/UNCTAD-SoP2">now</a> takes in much of Asia’s semi-finished products, assembles them, and sends them on to the US. </p>
<p>As a result, other Asian countries are now dependent on low cost Chinese labor as well as the richer Chinese consumers who buy their products. Couple this with China’s checkbook diplomacy in aid, trade and finance, and it has become even more influential as a result. </p>
<p>The Chinese have leveraged this influence in Asia in many ways. One has been to <a href="http://www.bbc.com/news/world-asia-pacific-11341139">confront</a> many of its neighbors about sovereignty over numerous islands stretching across the East and South China Seas. </p>
<p>Another has been its endorsement of <a href="http://www.theguardian.com/world/2014/nov/11/apec-summit-beijing-roadmap-asia-pacific-free-trade-area">The Free Trade Area of the Asian Pacific</a>, implicitly an alternative to the TPP. But this one includes China. </p>
<p>The Obama administration has been vigorous in <a href="http://www.wsj.com/articles/u-s-blocks-china-efforts-to-promote-asia-trade-pact-1414965150">blocking</a> that initiative because it would allow China to get preferential access to some of its largest trading partners. </p>
<p>America’s military presence has grown as part of its re-balancing, with agreements to open, sustain or enlarge military bases stretching across the Pacific from Australia to <a href="http://www.bloomberg.com/news/articles/2015-01-15/okinawans-angry-at-restart-of-u-s-base-expansion-work">Japan.</a> </p>
<p>But America’s prominence as an economic power in Asia has clearly been slipping. </p>
<p>This decline is symbolized most recently by the formation of the new Asian Infrastructure Investment Bank, backed by Chinese money, over American objections. The decision by so many of America’s closest allies essentially to “defect” was a stinging rebuke that I wrote about in a <a href="https://theconversation.com/chinas-new-investment-bank-challenges-us-influence-on-global-economics-39978">prior column</a>. </p>
<p><a href="http://www.npr.org/templates/transcript/transcript.php?storyId=408158012">Many</a> now think of China as a competitor or challenger rather than an economic partner. </p>
<p>So for the Obama administration, the TPP is an opportunity to tie a variety of traditional allies economically closer to the US while keeping the Chinese out. </p>
<p>More broadly, it is <a href="http://time.com/3841461/how-the-u-s-can-counter-china-in-asia/">a way</a> of ensuring that China does not become economically dominant over all of the Pacific, if not of Asia. </p>
<p>Administration officials are understandably quiet on this point. Rattling sabers by making national security the focal point of the TPP is not the kind of language the president likes to employ. </p>
<p>But whether the critics of China are right or wrong, it might, ultimately, be just the kind of language that would push this controversial legislation through in the face of a growing domestic battle.</p>
<hr>
<p><em>For more Conversation coverage of the debate over trade policy in the US:</em></p>
<p><a href="https://theconversation.com/fast-track-overcomes-key-hurdle-but-obstacles-remain-as-trade-deals-hang-in-balance-42221"><em>Fast Track overcomes key hurdle but obstacles remain as trade deal hangs in balance</em></a></p>
<p><a href="https://theconversation.com/sen-warren-is-right-fast-track-could-help-roll-back-dodd-frank-41941"><em>Sen Warren is right: fast-track could help roll back Dodd-Frank</em></a></p><img src="https://counter.theconversation.com/content/42296/count.gif" alt="The Conversation" width="1" height="1" />
Washington is in the midst of a heated debate over President Obama’s proposed Trans Pacific Partnership (TPP) Agreement. It certainly has created some unorthodox political bedfellows. The president is…Simon Reich, Professor in The Division of Global Affairs and The Department of Political Science, Rutgers University - NewarkLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/422212015-05-22T19:54:14Z2015-05-22T19:54:14ZFast-track overcomes key hurdle, but obstacles remain as trade deals hang in balance<p>After the Senate’s refusal to pass <a href="https://ustr.gov/trade-topics/trade-promotion-authority">trade promotion authority</a> (TPA) on May 12, some trade advocates feared that President Obama’s ongoing commercial negotiations with Asia and Europe would die a slow death. </p>
<p>Yesterday’s <a href="http://www.washingtonpost.com/politics/senate-votes-to-give-obama-fast-track-authority-on-pacific-rim-trade-deal/2015/05/21/e54c539a-ffbd-11e4-8b6c-0dcce21e223d_story.html">narrow vote</a> in the Senate to close debate on TPA – a key hurdle to final passage – promises to lift their spirits considerably, as it likely guarantees passage of the bill within the next few days, ahead of the Memorial Day recess.</p>
<p>The vote was interesting because it didn’t follow the expected pattern of hyper-partisanship in Congress. Rather, it pitted a Democratic president and most Republican lawmakers against the bulk of the president’s own party. </p>
<p>Supporters of TPA needed a relatively small number of pro-trade Democrats to tip the scales toward Obama’s trade agenda, and they achieved that through a <a href="http://www.dailykos.com/story/2015/05/21/1386694/-Trade-Promotion-Authority-vote-secured-on-Export-Import-Bank-nbsp-promise#">last-minute bargain</a> over the future of the controversial Export-Import Bank. </p>
<p>While the vote signaled an important victory for TPA’s proponents, more challenges remain before the president can pop open the champagne, both in the Senate and next month in the House. If ultimately passed, TPA would <a href="https://theconversation.com/bipartisan-fast-track-bill-offers-best-chance-to-cinch-trade-pacts-40733">guarantee</a> that international trade agreements negotiated by the president would receive an up-or-down vote by Congress with no amendments. </p>
<p>Without TPA, America’s high-stakes negotiations with 11 other countries including Australia and Japan to create the <a href="https://ustr.gov/tpp">Trans-Pacific Partnership</a> (TPP) and with the European Union to create the <a href="https://ustr.gov/ttip">Transatlantic Trade and Investment Partnership</a> (TTIP) would probably be unachievable. </p>
<p>That’s because foreign trade ministers are skittish about Congressional amendments that could upset the delicate balance of international bargains that they consider already settled. </p>
<h2>More hurdles remain</h2>
<p>Of course, there is still a long way to go before the final passage of TPA, including from lawmakers in other TPP participant countries such as Australia. So what hurdles still confront the president and trade supporters in Congress? </p>
<p>First, the Senate must vote on several controversial amendments to TPA. One of these, which is adamantly opposed by President Obama and pro-trade lawmakers, would seek to curb protectionist currency manipulation by America’s trading partners. </p>
<p>Supporters of TPP fear that a Congressional requirement to negotiate penalties for currency manipulation could cause the other 11 countries to balk at a final agreement. Whether or not such dire predictions are true, there is no question that adding currency manipulation to the TPP agenda could slow down the talks considerably.</p>
<p>In any case, once TPA passes the Senate, it must still be approved by the House. This could prove tricky, because Democratic opposition in that body is firmly entrenched. Interestingly, Democratic skeptics are also joined by some Tea Party Republicans who say that TPA would give the president too much power.</p>
<p>At the same time, as Georgia State University’s Jeffrey Lazarus points out, the more centralized procedures in the House make the ultimate outcome there more dependent on the Republican leadership than it is in the Senate. With a firm commitment of support from Speaker John Boehner, the bill has a reasonable chance of approval.</p>
<h2>What’s next for TPP?</h2>
<p>As for TPP itself, negotiations seem to be <a href="http://www.dailymail.co.uk/wires/reuters/article-3090782/Australia-hopeful-wrapping-TPP-negotiations-June.html">drawing to a close</a>, and President Obama, if armed with TPA, could set the agreement before Congress quite soon. It seems likely that, if TPA garners enough votes from Congress to pass, the Trans-Pacific Partnership also stands a good chance of getting its stamp of approval later this year. </p>
<p>While US agreement is of course critical for the ultimate implementation of TPP, the other 11 signatories have their own processes for domestic ratification. In some countries, centralized institutions or one-party dominance make rapid approval likely, while in others, political hurdles remain. The <a href="http://www.theguardian.com/australia-news/2015/may/22/labor-greens-and-crossbenchers-concerned-at-trans-pacific-partnership">skepticism</a> of Australia’s opposition Labor Party and other members of Parliament, for example, may slow its ratification.</p>
<p>In the final analysis, today’s vote on TPA is significant only insofar as it increases the chances that Congress will eventually back TPP and TTIP. Together, these agreements would build much deeper economic links between the United States and economies in Europe and Asia that represent a considerable proportion of global output and trade. </p>
<p>If implemented, they could have a profound effect on all of the economies involved. For that reason, citizens of all signatory countries should keep a close eye on how this issue evolves.</p><img src="https://counter.theconversation.com/content/42221/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Hankla does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Passage of trade promotion authority is still far from certain, but yesterday’s Senate vote may signal good news for the trade deals it’s meant to help.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/405022015-05-01T09:16:49Z2015-05-01T09:16:49ZWhy a ‘Brexit’ won’t be as easy as UKIP makes out<p>The UK Independence Party’s policy on the European Union covers trade, defence, foreign affairs, and what they call “Brexit” – a British exit from the EU. The success of the first three depend on the latter: if there is no Brexit, UKIP’s policies are more or less redundant. Unfortunately for UKIP, coordinating a Brexit would be no easy matter. </p>
<p>On trade, UKIP simply assumes that the UK will be able to negotiate a free trade agreement, make its own trade deals on its own terms, and retake its seat in the World Trade Organisation. Some of this may be possible. But it could take a long time, and be contingent on securing the agreement of all the other EU states – some of which may not be amenable. </p>
<p>We know from past experience that trade negotiations between EU states can take a long time. For example, it took years to negotiate the entry of Spain and Portugal to the European Economic Community. In 1974, Portugal’s dictatorship ended – the same happened in Spain’s in 1975. Both applied to join the EEC shortly after, but neither were acceded until 1986. This was not because the EEC was hostile, but because it had other issues in play, as well as niggles over special interests such as wine. </p>
<p>There is another issue: Britain does not have a strong track record of cooperation with the EU. For example, the Common Assembly – a forerunner to the European Parliament – was initially formed to circumvent British objections to the the Monnet/Schuman suggestion for a European Coal and Steel Community. Britain has also tried to “re-negotiate” its terms on several occasions; either formally as in 1974 to 1975, or as part of <a href="http://europa.eu/eu-law/decision-making/treaties/index_en.htm">treaty negotiations</a> for the Single European Act, the Treaty on European Union and more recently the Lisbon Treaty. On top of this, Margaret Thatcher was trying to win back “our money” in the protracted negotiations over <a href="http://news.bbc.co.uk/1/hi/world/europe/4721307.stm">the EU rebate</a> in the 1980’s. </p>
<h2>Defence dependence</h2>
<p>It’s a similar case with defence. The British armed forces are not what they were: the number of people in the armed forces <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/402633/quarterly_personnel_report_jan15.pdf">is down</a> from 221,330 in 2012 to 194,570 in 2015. Even France had to <a href="http://www.theguardian.com/world/2013/jan/27/us-military-tankers-french-mali">borrow planes and helicopters</a> from the United States of America to carry out specifically French tasks, in areas of the world that were <a href="http://www.aljazeera.com/indepth/opinion/2014/09/mali-forgotten-war-20149691511333443.html">always of special interest</a> to France. No medium-sized state can act independently outside its immediate sphere of influence.</p>
<p>Given the population size of the UK, it has to be accepted that our defence interest, our procurement of equipment, and increasing specialisation of the armed forces means that we need to be in league with our neighbours. This is also true because there is increasing doubt about the enduring nature of the US commitment to Europe, given its increasing emphasis on other areas of the world. </p>
<p>The US is already worried about what role the UK can play. But perhaps most important is the increasing cost of military equipment and the fact that there is a blurring of the lines between research and development in civilian and military areas. And if the EU focuses more and more peacekeeping, we would presumably want to be involved in our own neighbourhoods.</p>
<p>In both trade and defence there is really no such thing as independence. A state can be independent by name, but not by nature. World trade is interdependent. Decisions about jobs in Scotland are increasingly made in the China, or India or the United States. A small to medium state like the UK (population <a href="http://www.ons.gov.uk/ons/guide-method/compendiums/compendium-of-uk-statistics/population-and-migration/index.html">64.1 million</a>) will find it increasingly difficult to carry out significant negotiations with larger states like the United States (population <a href="http://www.census.gov/">320 million</a>), India and China (population of <a href="http://www.internetworldstats.com/stats8.htm">more than one billion each</a>) on its own, since these states will much prefer to deal with the European Union (population of <a href="http://ec.europa.eu/eurostat/statistics-explained/index.php/Population_and_population_change_statistics">over 500 million</a>).</p>
<p>There is, of course, another argument: YouGov polling from February this year showed a <a href="https://yougov.co.uk/news/2015/02/24/eu-referendum-record-lead/">record lead for the In vote</a>. So a “Brexit” is not necessarily the vote winner that UKIP claims.</p><img src="https://counter.theconversation.com/content/40502/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Trevor Salmon does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>UKIP’s whole manifesto rests on the premise that the UK will leave the EU.Trevor Salmon, Emeritus Professor of Politics and International Relations, University of AberdeenLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/407332015-04-27T10:19:48Z2015-04-27T10:19:48ZBipartisan fast-track bill offers best chance to cinch trade pacts<figure><img src="https://images.theconversation.com/files/79302/original/image-20150424-14562-i5i5m4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">President Obama wants to get on the fast track. Will Congress give it to him?</span> <span class="attribution"><span class="source">Train track via www.shuttertstock.com</span></span></figcaption></figure><p>The Senate Finance Committee is currently considering a trade bill that would extend “fast-track” negotiating authority to the president while also demanding a larger role for Congress than it has taken in the past. </p>
<p>The <a href="http://www.finance.senate.gov/newsroom/chairman/release/?id=7701eb50-a0ef-4257-bfc1-b06efe725b8c">bill</a>, the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, represents President Barack Obama’s best chance at winning the trade promotion authority he needs to conclude ongoing negotiations with Asia (the <a href="https://ustr.gov/tpp">Transpacific Partnership</a> or TPP) and Europe (the <a href="https://ustr.gov/ttip">Transatlantic Trade and Investment Partnership</a> or TTIP). </p>
<p>These negotiations, when combined with the <a href="http://ec.europa.eu/trade/policy/in-focus/tisa/">Trade in Services Agreement</a> (TISA), could revolutionize US trade by linking our economy to blocs that together comprise a large majority of global GDP. The deals would remove tariffs and streamline and synchronize disparate rules and regulations. </p>
<p>Fast track is essential to cinching all three because otherwise these agreements could be amended and revised at the whim of any member of Congress – akin to trying to negotiate with 535 lawmakers. </p>
<p>The bipartisan bill represents a healthy compromise that gives the president room to negotiate the best deal possible while ensuring he adhere to certain environmental and labor standards. </p>
<p>It would also boost transparency and remove the shroud of secrecy that has thus far surrounded the talks. </p>
<h2>Kept out of the loop</h2>
<p>The president’s trade projects have attracted their share of criticism, something I discussed in detail in a <a href="https://theconversation.com/updating-fast-track-is-key-to-getting-a-trade-deal-in-2015-35138">previous article</a>. </p>
<p>One consistent and understandable complaint is that the negotiations for these agreements have been done in secret, and that citizens, interest groups, and indeed members of Congress have been kept out of the loop. </p>
<p>This lack of transparency has attracted particular criticism because all of the pacts address sensitive issues that go well beyond traditional talk of tariffs and quotas. These include provisions that touch on intellectual property, labor and the environment, and food and product safety, among other things. </p>
<p>It seems undemocratic and even scandalous that the executive branch is negotiating agreements that will affect the lives of millions of Americans in such secrecy.</p>
<h2>History of fast track</h2>
<p>So why is the White House taking the lead? The Constitution gives Congress nearly all of the power in the trade arena. For most of US history, Congress used this power to set tariffs unilaterally through votes on the full range of commodities. But since the 1930s, lawmakers have chosen to <a href="http://www.jstor.org/stable/2601306?seq=1#page_scan_tab_contents">delegate</a> much of this power to the president. The primary reason is that during that decade trade policy came to be based on bilateral and then multilateral negotiations characterized by tit-for-tat concessions, and only the executive branch was in a position to make these deals. </p>
<p>The fast-track approach was first introduced in the <a href="http://www.gpo.gov/fdsys/pkg/STATUTE-88/pdf/STATUTE-88-Pg1978-2.pdf">Trade Act of 1974</a>. It allows the president to negotiate trade agreements during a fixed period of time and binds Congress to take an up-or-down vote on them with no amendments. Fast track has the benefit of recognizing the negotiated nature of modern trade policy while also avoiding Congressional logrolling over district-specific protectionist measures.<br>
But ever since the introduction of fast track – and especially since the negotiating authority lapsed in 2007 – there have been concerns that Congress was giving up its prerogatives too easily.</p>
<h2>Compromises and a tighter leash</h2>
<p>This is the context in which Congress is considering the new bill. Essentially, the bill represents an attempt at a compromise between making it easier for the president to negotiate and get approval for the TPP, TTIP and TISA and keeping the executive on a tighter leash than it has in the past.</p>
<p>First, the bill provides the president with negotiating guidance on a number of controversial issues. For example, the bill requires that trade agreements include labor and environmental standards (something desired by Democrats), and it also calls for tough enforcement and intellectual property protection (emphasized by Republicans). The bill also addresses such hot topics as e-commerce, agriculture, and currency manipulation.</p>
<p>Second, through a new “consultation and compliance” provision, the bill puts the White House on notice that if Congress is not satisfied that this guidance has been followed, fast track can be revoked at any time. </p>
<p>Finally, the bill introduces stricter transparency guidelines for the negotiating process and affirms that any changes to US law must be approved by Congress. This addition might be a response to the controversial inclusion of <a href="https://www.whitehouse.gov/blog/2015/02/26/investor-state-dispute-settlement-isds-questions-and-answers">investor state dispute settlement</a> in trade negotiations, a provision that allows investors to seek international arbitration if they believe that signatory states have mistreated them in violation of the agreement. Senator Elizabeth Warren <a href="http://www.warren.senate.gov/files/documents/TPP.pdf">has expressed concern</a> that this provision would weaken labor and environmental standards by allowing foreign companies to bypass US courts. </p>
<p>Overall, while the bill covers a lot of ground, there remains a fair bit of room for interpretation in its guidance. That would give the president leeway in deciding how to abide by Congressional directives in his negotiations. </p>
<p>On the flip side, however, the bill would easily allow Congress to make the case that the president has ignored its wishes and proceed to suspend fast track. In that sense, the bill kicks some of the more controversial issues down the road. How much authority Congress actually takes will depend on how willing it is to sanction the president and to interpret the guidance strictly.</p>
<h2>More bargaining power</h2>
<p>Since many of the negotiations for the TPP, TTIP and TISA have already been accomplished, this raises the question of whether the president will have to renegotiate certain provisions given the fast-track bill’s demands. </p>
<p>Much of what has been negotiated is <a href="http://www.cfr.org/trade/future-us-trade-policy/p36422">fairly secret</a>, and figuring out what might conflict would take some analysis. But it is at least conceivable that the bill could reopen some issues that had seemed closed. </p>
<p>On this point, <a href="http://www.ucpress.edu/book.php?isbn=9780520076822">research</a> <a href="http://www.hup.harvard.edu/catalog.php?isbn=9780674840317">has</a> indicated that a strong legislature with veto power over an international agreement can strengthen the bargaining hand of an executive. </p>
<p>For example, Princeton University scholar Sophie Meunier has <a href="http://press.princeton.edu/titles/8084.html">shown</a> that the European Union is better able to preserve its status quo interests in trade negotiations when the member states give the European Commission less negotiating freedom. The same is likely true about the relationship between Congress and the US president.</p>
<p>So while more Congressional involvement might lessen the chances of a deal on some issues, it might also improve the odds of getting one that’s more favorable to the US. That’s because the president can credibly draw a line with his negotiating partners and argue that the US can’t concede on some issues if it wants Congress to approve the deal.</p>
<h2>A more transparent process</h2>
<p>Finally, the transparency rules would promote a more open trade negotiating process. </p>
<p>Some secrecy in negotiation details is probably necessary so that the US can keep its actual positions (and what it might be willing to concede) under wraps to get the best bargain. But transparently drawing a line on some issues, and backing that up with public statements and Congressional demands, can make it harder for negotiating partners to push the US farther than it wants to go. </p>
<p>Also, of course, transparency in negotiating agreements that will affect the lives of millions of people is more compatible with our democratic ideals than doing this all in secret. The bill would ensure that Congress is kept informed, that a representative of Congress can attend the negotiations, and that the full text is published in advance of the Congressional vote. </p>
<p>All of that seems right, and indeed the least that we should be doing to keep Congress and the public informed.</p>
<h2>Can it pass?</h2>
<p>Will the bill have enough support to be passed into law? Today’s Washington politics can make divisions over trade policy seem particularly inflamed. </p>
<p>While President Obama (like most of his predecessors at the White House) is a big proponent of trade agreements, many of his fellow Democrats in Congress are <a href="https://foreignpolicy.com/2015/04/24/democrats-skeptical-of-kerrys-pitch-for-global-trade/">highly skeptical</a>. And though many Republicans are inclined to be more supportive of trade, the politics of the moment may make some of them reluctant to hand the president a legislative victory. </p>
<p>That said, if fast track is to be extended and the ongoing trade negotiations are to be concluded, a compromise bill like this one is the most likely avenue and stands the best chance of success.</p><img src="https://counter.theconversation.com/content/40733/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Hankla does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The bill in Congress represents a healthy compromise that gives the president negotiating room while offering lawmakers more say on key trade issues.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/406142015-04-22T17:05:43Z2015-04-22T17:05:43ZWill US-EU trade talks devolve into game of chicken over regulatory ruffles?<figure><img src="https://images.theconversation.com/files/78946/original/image-20150422-1885-1sxj6ks.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Will negotiators play a game of chicken or be able to clink champagne glasses over a nice chicken dinner? </span> <span class="attribution"><span class="source">Roast chicken via www.shutterstock.com</span></span></figcaption></figure><p>This week, in the shadow of the Pacific trade talks and the introduction of fast-track trade promotion authority, negotiators from the European Union and the United States are convening in New York City for what may be some animated chicken dinners. </p>
<p>A main topic of the <a href="https://ustr.gov/ttip/ttip-round-information">9th round</a> of talks on the Transatlantic Trade and Investment Partnership (TTIP) will be “<a href="http://trade.ec.europa.eu/doclib/html/151622.htm">regulatory coherence</a>.” </p>
<p>Though the subject of how the US and EU align their disparate regulations might make most people’s eyes glaze over, it will likely generate heated discussion both in the private talks between negotiators and the public meetings that follow.</p>
<p>How could something as seemingly dry as regulation have the potential to ruffle so many feathers? </p>
<p>There are several reasons. Regulations have the force of law and can have significant influence on investment, hiring, purchasing, trade and other decisions.</p>
<h2>What’s at stake</h2>
<p>On the <a href="http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2005/06/06/000012009_20050606113300/Rendered/PDF/wps36230rev.pdf">one hand</a>, excessive or poorly targeted regulatory policies slow economic growth, hinder innovation and reduce living standards. Smarter regulatory approaches, and fewer heavy-handed regulations, especially those that hinder trade, could improve the quality of life in both Europe and the US.</p>
<p>On the other hand, regulations often end up protecting vested interests from <a href="http://www.amazon.com/Bootleggers-Baptists-Economic-Persuasion-Regulatory/dp/1939709369">competition</a>, especially international competition, so once they’re in place, there’s strong resistance to removing them. Thus negotiators have a tough task in streamlining and aligning existing regulations.</p>
<p>Among the contentious topics on the table will likely be whether the US will allow <a href="https://www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=FEDERAL_REGISTER&p_id=21866">electrical products</a> that meet European testing standards into US workplaces, and whether the EU will allow US-raised <a href="http://www.npr.org/blogs/thesalt/2014/09/30/351774240/european-activists-say-they-dont-want-any-u-s-chlorine-chicken">poultry</a> to be sold in Europe. (I would not be surprised if the menus during the negotiations featured a lot of chicken, to chide European negotiators for refusing to allow imports of US poultry.)</p>
<p>You might expect it would be easier to agree on procedures for developing new regulations. That’s partly true, but a <a href="http://regulatorystudies.columbian.gwu.edu/achieving-regulatory-policy-objectives-overview-and-comparison-us-and-eu-procedures">new paper</a> I co-authored with German professor <a href="http://www.hertie-school.org/wegrich/">Kai Wegrich</a> with support from the European Union suggests that negotiators may face challenges on that front, as well.</p>
<h2>Sticking points</h2>
<p>A particular sticking point may be the appropriate role for public consultation as regulations are developed. </p>
<p>While regulators in the US and EU both seek input from stakeholders before issuing new regulations, the mode, timing and role of consultation differ. </p>
<p>The US has a long tradition of “<a href="https://www.federalregister.gov/uploads/2011/01/the_rulemaking_process.pdf">notice-and-comment</a>” rulemaking, in which any interested party is invited to comment on proposed regulatory text and supporting analysis. Because final regulatory decisions must be based on a public record, regulators have to take public comment into account or risk the rule being overturned by a judge.</p>
<p>In the EU, stakeholder input is solicited earlier in the rulemaking process to help policymakers identify options, but is generally not invited on the regulatory text itself.</p>
<p>Each jurisdiction feels strongly that its practice is superior, and a case can be made for both approaches. </p>
<p>Early consultation gathers different perspectives and information before regulators get too attached to a particular approach. George Washington University Regulatory Studies Center scholars <a href="http://regulatorystudies.columbian.gwu.edu/christopher-carrigan">Chris Carrigan</a> and <a href="http://regulatorystudies.columbian.gwu.edu/stuart-shapiro">Stuart Shapiro</a>, for example, have argued that earlier, simpler, <a href="http://regulatorystudies.columbian.gwu.edu/whats-wrong-back-envelope-call-simple-and-timely-benefit-cost-analysis">back-of-the-envelope</a> analysis of more varied options could greatly improve regulatory outcomes in the US.</p>
<p>But, as the saying goes, the devil is in the details, and it is often difficult for public commenters to react intelligently without seeing actual regulatory text. The point being that regulatory decisions also benefit from public scrutiny of draft regulatory language, when concrete alternatives and supporting analysis are available.</p>
<p>Furthermore, broad public consultation that welcomes anyone’s input is better than selective canvassing of particular stakeholders. Regulators may not know who might have valuable insights on a particular topic, and only asking “affected” stakeholders runs the risk that regulations will cater to special interests.</p>
<h2>Bad regulation hinders growth</h2>
<p>If the negotiators can remain open to the advantages of each other’s approaches and work to adapt best practices from each jurisdiction, “regulatory coherence,” could be this week’s success story – rather than the negotiations devolving into a <a href="http://en.wikipedia.org/wiki/Chicken_%28game%29">game of chicken</a>. </p>
<p><a href="https://www.whitehouse.gov/sites/default/files/omb/assets/information_and_regulatory_affairs/2008_cb_final.pdf">Studies</a> repeatedly find that excessive, poorly designed regulation hinders economic growth and well-being. </p>
<p>As the World Bank notes, “intentionally or not, <a href="http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2005/06/06/000012009_20050606113300/Rendered/PDF/wps36230rev.pdf">regulation</a> can impose rigidities and distort the incentives” for growth, competition and innovation.</p>
<p>Regulations that respect property rights and address public needs (rather than cater to particular interests) while encouraging competition, entrepreneurship and innovation not only lead to economic growth within countries, but can open doors to international trade and investment. </p>
<p>That result would have citizens on both sides of the Atlantic raising a glass of French champagne with their Georgia chicken dinners.</p><img src="https://counter.theconversation.com/content/40614/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Susan E Dudley directs the George Washington University Regulatory Studies Center, which received a grant from the European Union to compare regulatory practices in the US and EU. While her draft paper with Professor Kai Wegrich was produced with the assistance of the EU, neither the paper nor this article should be taken to reflect its views.</span></em></p>Much is at stake as negotiators meet in New York this week in hopes of aligning disparate transatlantic regulations.Susan E Dudley, Distinguished Professor of Practice, Trachtenberg School of Public Policy & Public Administration, and Director of the Regulatory Studies Center, George Washington UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/344822014-12-23T20:07:15Z2014-12-23T20:07:15ZOn the road to Asia: why Germany and the Eurozone want a trade deal with Australia<p>Shortly after the G20 summit in Brisbane, German Chancellor Angela Merkel and Australian Prime Minister Tony Abbott <a href="http://www.abc.net.au/news/2014-11-17/australia-germany-announce-joint-working-group-to-boost-trade/5895560">announced initiatives</a> to increase trade and investment relations between Germany and Australia. Both parties agreed to set up a joint working group to identify future initiatives. What can we reasonably expect from it?</p>
<p>First <a href="https://www.dfat.gov.au/trade/">some facts</a>:</p>
<p>• Bilateral trade in goods between Australia and Germany is grossly unbalanced, with Germany’s exports in 2013 standing at A$11.4 billion while imports from Australia were just A$1.9 billion.</p>
<p>• Germany’s exports are concentrated on machinery (35%) and transportation equipment (30%) while Australia’s exports are heavily biased toward minerals.</p>
<p>• Germany’s exports of services count for only 13% of total German exports to Australia, while Australia is relatively strong in exporting services to Germany, though at a low level of A$1.1 billion. By contrast, the UK service exports dominate their total export to Australia.</p>
<p>• With respect to Foreign Direct Investment (FDI), Australia has investments worth US$56.6 billion in Germany, constituting 3.5% of its total outward stock. Conversely, Germany’s investments amount to US$24.2 billion in Australia, making a much smaller share of its total outward investments (1.4%).</p>
<p>• The EU is a more important source for goods and services for Australia (17.4%) than the USA (11.9 %). </p>
<p>What is at stake for Germany and Europe? Three major points are worth highlighting:</p>
<h2>Strengthening Germany’s strengths</h2>
<p>A first and simple argument recognises that Germany is a very successful exporter of manufactures, which follows an export-led growth model. As such, it is self-evident that Germany has an interest in boosting its exports. </p>
<p>But the current bilateral trade and investment pattern show that Germany’s success depends largely on arm’s length trade in a few industries, reflecting these particular strengths of the German economy. Additionally and related, FDI are underdeveloped, partly because FDI in manufacturing requires high up-front investment costs, which may not be fast and easily recovered in the relatively small Australian market. </p>
<p>Given the important role of human capital experience in these industries, the German “Mittelstand” sees its locational advantages still at home and chose exports as the preferred entry mode into the Australian market. But partly this pattern is also the consequence of a weakness of the German service industry – at least relative to its manufacturing sector. For the tertiary sector FDI is the major way of market entry, hence Australia’s relative strength in FDI in Germany and Europe. </p>
<h2>Not to be left outside in Asia</h2>
<p>Second, the initiative reacts to the proliferation of bilateral and “mega-regional” initiatives. Australia has signed numerous bilateral trade agreements, most importantly from the German perspective, one with China. But there are also the negotiations on the <a href="http://www.dfat.gov.au/fta/tpp/">Trans-Pacific Partnership (TPP)</a>, which involves the USA and Asia-Pacific minus China and the <a href="https://www.dfat.gov.au/fta/rcep/">Regional Comprehensive Economic Partnership (RCEP)</a>, which includes China but not the USA. </p>
<p>Europe has no involvement in any mega-regional agreement with Asia yet, but <a href="http://ec.europa.eu/trade/policy/in-focus/ttip/index_en.htm">Transatlantic Trade and Investment Partnership (TTIP) </a>negotiations with the United States and a pending ratification of the <a href="http://ec.europa.eu/trade/policy/in-focus/ceta/">CETA </a>with Canada. However, both agreements receive strong criticism in Europe, particularly in Germany, eventually stalling the agreement. Angela Merkel has explicitly mentioned this in the press conference in Australia.</p>
<p>These new mega-regional agreements typically aim at regulatory convergence across countries and are seen as <a href="http://www.voxeu.org/article/multilateralising-21st-century-regionalism">enablers for global and regional production networks</a>. They also aim at dealing with different health, social and environment standards. Thus, they interfere more deeply into domestic affairs than any previous trade agreements. </p>
<p>Not surprisingly, trade negotiators have found it difficult to establish such rules in a global agreement at the WTO level and have opted for the easier bilateral or regional route. In this sense these agreements are substitutes for a substantially new WTO agreement. While they can be stepping stones for reaching this objective, in the meantime those who are left out are afraid of trade and investment diversion. The only trade negotiations that are geographically more diversified are those on the <a href="http://www.dfat.gov.au/trade/negotiations/services/trade-in-services-agreement.html">Trade In Services Agreement (TISA)</a>, which is currently negotiated mainly between the EU, Australia and the USA, but also involves (including the 28 EU countries) 50 WTO member countries.</p>
<p>In sum, the initiative could serve as a precursor for negotiations on a European-Pacific trade and investment agreement.</p>
<h2>Exporting oneself out of the dooming Eurozone recession</h2>
<p>Finally, the Eurozone and especially Germany are in dire need of a fast growing Asian market and cannot afford to lose market shares in the region as their growth model now almost entirely depends on export success. </p>
<p>Germany is obsessed with a “black zero”, a balanced government budget. Most other Eurozone countries follow the same route, either for ideological reasons or because they have to bring down high government debts. Moreover, in many countries of the Eurozone, the private sector is saving much more than investing. Even the corporate sector, instead of borrowing to invest has become a net saver. </p>
<p>In Germany (2013) savings exceed investments so excessively that the economy depends on net exports of about 7% of GDP. Given the depressed state of many other Eurozone economies, these net exports must be generated elsewhere. Failing to do so could hamper the already weak growth of the region further and would make de-leveraging even more difficult.</p>
<h2>The first and the second best</h2>
<p>In sum, Germany and the Eurozone need growing net exports to the rest of the world. Next to a depreciating Euro, trade and investment agreement are means to this objective. While expanding trade and investment relations with Australia are always welcome, the deeper motivation is to secure and expand relations with Asia-Pacific in a world of an increasing bilateralism and a still unresolved Euro crisis. Needles to say, that many economists, including myself, would prefer non-discriminatory multilateral trade and investment agreements and an internally stabilised Eurozone, especially by means of a <a href="http://blogs.lse.ac.uk/europpblog/2014/10/28/the-case-for-using-public-investment-to-boost-growth-in-the-eurozone-is-overwhelming/">drastic boost of public investment</a>, which would also contribute to more balanced global trade and investment pattern.</p><img src="https://counter.theconversation.com/content/34482/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Harald Sander does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Shortly after the G20 summit in Brisbane, German Chancellor Angela Merkel and Australian Prime Minister Tony Abbott announced initiatives to increase trade and investment relations between Germany and…Harald Sander, Professor of Economics at Maastricht School of Management and Professor of Economics and International Economics, Cologne University of Applied Sciences (CUAS)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/346242014-12-09T11:07:58Z2014-12-09T11:07:58ZWhy the WTO still matters<p>Despite sluggishness in the world economy, global trade <a href="http://wto.org/english/res_e/booksp_e/world_trade_report14_e.pdf">reached</a> an astonishing US$23 trillion last year. The World Trade Organization has been the primary guarantor of this extraordinary growth in global interdependence since its founding as the General Agreement on Tariffs and Trade, or GATT, in 1947.</p>
<p>But this new era of globalization is under threat by a breakdown in the current WTO negotiations, the Doha Round, which began in 2001 but have since become bogged down by disagreements between developed countries and the fast-emerging economies. </p>
<p>Reacting to this failure, some <a href="http://www.ft.com/intl/cms/s/0/b3a7075a-6c32-11e4-990f-00144feabdc0.html?siteedition=intl#axzz3L3bfDkCd">commentators</a> have suggested the WTO has become unworkable or even superfluous, destined to be replaced by the bilateral and regional trade deals that have proliferated in the past two decades. </p>
<p>I disagree. The multilateral trading system embodied by the WTO remains critical to maintaining global interdependence, something that is vital to the economic and security interests of the United States and the rest of the world. The organization’s 160 member states must continue to push the Doha negotiations forward, perhaps by tackling more tractable issues first and only moving to more complex problems once momentum has been restored.</p>
<h2>Reciprocity and non-discrimination</h2>
<p>The GATT <a href="http://www.wto.org/english/thewto_e/cwr_e/cwr_history_e.htm">began its life</a> as a forum for multilateral trade negotiations. These involved a series of multiyear “rounds,” each focusing on a different set of goals and followed by breaks to allow for implementation. The GATT has always been a very state-centered organization, and its negotiations are based on two key norms: reciprocity in liberalization and non-discrimination in trade protection (that is, offering other members “most-favored-nation” status). </p>
<p>The most important negotiation in GATT history was the <a href="http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact5_e.htm">Uruguay Round</a>, held from 1986 to 1994. It incorporated the GATT into the more institutionalized WTO and produced landmark agreements on everything from intellectual property and agriculture to environmental and health regulation. Members were given several years to implement the accords. </p>
<p>The WTO began a new round of negotiations in Doha in 2001. Unfortunately for the multilateral trading system, this round quickly foundered on a number of controversial topics, key among them the opposition of many developing countries to US and European agricultural subsidies. A Uruguay Round agreement that tightened global rules on intellectual property also remained unpopular with developing countries, which saw it as a threat to their ability to import new technologies and distribute needed medicines. </p>
<h2>US, Europe losing clout</h2>
<p>In the past, the US and the Europeans (who negotiate jointly) have controlled the multilateral trade agenda. But the rise of emerging market economies, along with the accession to the WTO of China in 2001 and Russia in 2012, has meant that other powerful players are demanding accommodations. More to the point, WTO negotiations have moved from relatively straightforward debates about tariffs and quotas to much more controversial and “political” questions involving the environment, health, development and a host of other issues. </p>
<p>These emerging challenges have stalemated Doha and have led trading countries to turn instead to bilateral and regional accords, often called preferential trade agreements. There are now several hundred of these agreements in force, producing a complex web of differing trade rules across the globe. </p>
<p>In the meantime, efforts to restart Doha have mostly come to naught. India and the US remained deadlocked on the issue of stockpiling food. Just last month, however, the <a href="http://www.reuters.com/article/2014/11/13/us-india-trade-idUSKCN0IX08P20141113">impasse was broken</a> by a deal that at least temporarily resolves the dispute. Nevertheless, serious challenges remain to a more complete reboot of the Doha Round. </p>
<h2>Why should we care?</h2>
<p>All of this, of course, begs the question whether we should even care if the multilateral trading system fails. After all, can’t bilateral and regional trade agreements accomplish many of the same goals more easily? Before we give up on the WTO, however, we should consider two important reasons why it should be salvaged.</p>
<p>First, the WTO system continues to operate very successfully in overseeing the implementation of past agreements. The institution is not only a forum for negotiating but is a place where countries can resolve their disputes peacefully and rationally without the tit-for-tat of trade wars. More than that, the WTO, through its <a href="http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm11_e.htm">trade policy review procedures</a>, is among the most important sources of information on global trade and trade protection in the world. It is largely due to the WTO that the world trading system has been resilient during the Great Recession, something that was most definitely not true during the Great Depression.</p>
<p>Second, the consequences of abandoning this multilateral trading system could be dire. From a purely economic standpoint, there is a risk that bilateral and regional agreements are “trade diverting,” meaning that their primary effect is not to create trade but rather to shift it in less rational directions. This might happen because differences in trade protection generated politically may incentivize goods and services to flow in directions that are not efficient from a market perspective. Perhaps more seriously, a global trading system made up of hundreds of overlapping bilateral and regional agreements would create a very serious information burden for firms. They would have to master a much more complex legal environment than they do under the WTO’s single undertakings. </p>
<h2>Trade as a cudgel</h2>
<p>From a more political perspective, a world without the WTO could lead to trading blocs, either of a regional character or around a major power. In other words, it might be a world where trade is increasingly used as a political weapon by great powers to reward friends and punish enemies. Small or poor countries, whose interests are at least somewhat protected by their status as WTO members, should be particularly concerned about the weakening of the multilateral trading system. </p>
<p>How, then, can the United States and other WTO members jumpstart Doha? The approach of slicing off more tractable portions of the agenda is a promising one. The Obama Administration’s recent deal with India is a step in this direction, and more should be done in the future.</p>
<p>Making progress on these less controversial issues could restore momentum to the overall process. We may also need to be ready to address smaller issues in a more incremental way in the future rather than trying to negotiate the grand and sweeping trade deals of the past.</p><img src="https://counter.theconversation.com/content/34624/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Hankla does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Despite sluggishness in the world economy, global trade reached an astonishing US$23 trillion last year. The World Trade Organization has been the primary guarantor of this extraordinary growth in global…Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/340322014-11-11T13:42:44Z2014-11-11T13:42:44ZTies that bind: the British jobs data that really shows the value of the EU<figure><img src="https://images.theconversation.com/files/64136/original/pdtbtjv8-1415627631.jpg?ixlib=rb-1.1.0&rect=177%2C231%2C669%2C409&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">In harmony. The link between the EU and UK jobs.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/kalyan3/8232961/in/photolist-berhsV-M6kU-akn3eq-bApezw-8mcX1t-8mcXr8-8mghqf-8mghY3-8md88H-9QtaZi-bYjQdh-JcnB">Kalyan Neelamraju</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Whichever way you look at it, the UK is going through a stormy period in its relationship with the European Union. David Cameron has promised to renegotiate the UK’s relations with the EU and to <a href="http://www.bbc.co.uk/news/uk-politics-29985949">hold a referendum should he get re-elected</a> and there are commentators and politicians who clearly favour the withdrawal of the UK. But for those of us working in the millions of jobs linked to our near neighbours on the continent, the thought should be a deeply worrying one.</p>
<p>Those in favour of withdrawal typically cite the overbearing control Brussels has on UK policy matters. They take an optimistic view on the feasibility of the UK re-negotiating its relationship with the EU as well as the complex web of trade agreements that the EU, and hence the UK, currently has with trading partners around the world. </p>
<p>Those against point to the economic interdependence between the UK and the EU, manifested in part by the extent of bilateral trade, and are much less optimistic about re-negotiation. They express concern about the UK’s consequent absence from EU decision making, and point to the net benefits arising from EU-UK free movement of labour. A <a href="http://www.eef.org.uk/resources-and-knowledge/research-and-intelligence/industry-reports/manufacturing-our-future-in-europe-report">large chunk of British business</a> is sympathetic to these ideas – <a href="http://businessforbritain.org/wp-content/uploads/sites/2/2013/10/Britain-and-the-EU-What-business-thinks-EMBARGOED-00.01-01.11.13.pdf">with some crucial caveats</a> – and it is to their concerns that Labour leader <a href="http://www.theguardian.com/politics/blog/live/2014/nov/10/cameron-and-miliband-speak-at-the-cbi-annual-conference-politics-live-blog">Ed Miliband has sought to appeal</a> this week. Positions on this are clearly as much (if not more) political as they are economic.</p>
<h2>Measuring interdependence</h2>
<p>It is important to understand how the UK is linked not just to the EU but also the rest of the world. If we just look at the trade numbers then we see that the share of the EU in the UK’s trade is close to 50%. This is true whether you look at import or exports, and is also true if you take just trade in goods, or trade in goods and services. </p>
<p>The bottom line is that the EU is an important destination for UK exports and an important supplier of imports. This is already well known, does little to persuade the naysayers, and is self-evidently important to those with a more positive view of the EU. But there is more to the tale.</p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/64148/original/6pwdvqvp-1415636871.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/64148/original/6pwdvqvp-1415636871.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/64148/original/6pwdvqvp-1415636871.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/64148/original/6pwdvqvp-1415636871.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/64148/original/6pwdvqvp-1415636871.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/64148/original/6pwdvqvp-1415636871.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/64148/original/6pwdvqvp-1415636871.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/64148/original/6pwdvqvp-1415636871.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Adding value. China’s iPhone exports.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/qiaomeng/5730033606/in/photolist-9JkVmS-d1Q1AC-d1Q1kU-crZ9p9-d1Q1H5-9KiArP-jzNyBU-bvvLeZ-dkMM8e-mbCCgR-95Cz9M-8Qa6Dm-fEyg7c-4Bdzxg-7w8XcK-m97fG9-fVKbUy-8KXDZp-bvvgb4-bvvc6Z-bvvDYa-bvvJTM-bvvGQH-bvvyuP-bvveu4-bvvxBV-bvvb2X-bvvE8R-bvvoi8-bvvJ5V-bvvREp-bvvkxR-bvvKDa-bvvvcg-bvvCCM-bvvLUD-bvvMw6-bvvhL8-bvvBA4-bvvwqc-bvvPjz-bvvs5H-bvvpnX-bvvQte-bvvtAP-bvvHti-bvvzLV-bvvAW2-bvvqP6-bvvNkM">SimonQ</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>That 50% number is based on gross trade figures. Gross trade exports capture the value of all that is exported by the UK, but it will include items and services which comprise some input from abroad – say French onions in a Gloucester-made, tinned onion soup. There might be £30 worth of these in every £100 of UK exports, and in turn there may be some UK input to the intermediates from abroad – say British fertiliser to grow the French onions. That might equate to £5 and would mean the value of all UK economic activity embodied in its exports, often referred to as “value-added exports”, would be £75 in every £100. <a href="http://online.wsj.com/articles/SB10001424052748704828104576021142902413796">A classic example, frequently cited</a>, relates to Chinese exports of the iPhone. China is a major iPhone exporter, yet Chinese value added (economic activity) embodied in the iPhone has been calculated to be no more than around 4%.</p>
<p><a href="http://tradesift.com/Reports/UK%20employment%20and%20the%20EU_7%20Nov_final.pdf">Recent data improvements allow us to capture such flows</a>. When you look at the value-added trade figures for 2011, once again the share of the EU in the UK’s exports remains around 50%. The top five destination countries for the UK are, in order of importance: </p>
<ul>
<li>The USA</li>
<li>Germany</li>
<li>The Netherlands</li>
<li>Ireland</li>
<li>France </li>
</ul>
<p>Between them these countries account for nearly 40% of the UK’s exports. However, some of these exports are UK intermediates which are then used by the destination countries in turn in their exports. The top five countries that use the UK’s goods in their exports are, again in order of importance, and with their shares in brackets: </p>
<ul>
<li>Germany (12%)</li>
<li>Ireland (11.9%)</li>
<li>Netherlands (10.2%)</li>
<li>Luxembourg (9.1%)</li>
<li>Belgium (5.6%). </li>
</ul>
<p>In the top ten countries there are only two non-EU countries – the US (4.8%) and China (3.3%). This suggests very strongly that the UK is integrated with EU countries quite differently to how it is integrated with non-EU countries.</p>
<h2>Just the job(s)</h2>
<p>This can be seen by looking at the employment predicated on the UK’s exports to different destinations; and then also UK employment embodied in our partner’s exports. So, instead of looking at the trade flows, we are looking at the jobs directly and indirectly involved in the UK’s trade with its partner countries.</p>
<p>The table below provides a snapshot of the UK’s export jobs. The first two columns show that of all these export jobs, just over 45%, or 3.78 million jobs, arose from UK exports to the EU and 54.5% from exports to non-EU countries. </p>
<p>The table also show the most important EU and non-EU destinations when considering the UK’s export jobs. It is worth noting that the share of the EU in the UK’s export jobs has declined from 50% in 1995, largely due to the rapid growth in emerging economies like China and India.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/64133/original/wfvdy5w6-1415624634.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/64133/original/wfvdy5w6-1415624634.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/64133/original/wfvdy5w6-1415624634.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=441&fit=crop&dpr=1 600w, https://images.theconversation.com/files/64133/original/wfvdy5w6-1415624634.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=441&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/64133/original/wfvdy5w6-1415624634.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=441&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/64133/original/wfvdy5w6-1415624634.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=555&fit=crop&dpr=1 754w, https://images.theconversation.com/files/64133/original/wfvdy5w6-1415624634.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=555&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/64133/original/wfvdy5w6-1415624634.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=555&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>As with the value-added trade numbers above, we can also calculate the number of UK jobs associated with the partner countries’ exporting activities. This can be seen in the third and fourth columns, where once again we can distinguish between the EU, and non-EU countries. </p>
<p>This reveals that in 2011 there were 1.46 million UK jobs arising from the exports of the EU countries, while only half that amount (0.7 million jobs) were associated with the exports of non-EU countries.</p>
<p>So there is a substantial structural difference between the nature of the economic integration of the UK with the EU and with the rest of the world, which can then be seen from the last two columns of the table. For each destination these give the share of the UK’s export jobs to that destination which derive from each partner country’s exports (we call these “UK-partner export jobs”). So, if you look at the EU total, we see that in 2011 of the 3.8 million jobs arising from the UK’s exports to the EU, 1.46 million, or 38.7%, derive in turn from the EU’s exports. </p>
<p>These are UK jobs providing EU countries with goods and services that they use to produce their own exports. This level of integration varies across the EU, but in each case is significantly higher than for non-EU countries.</p>
<p>What is then striking is the comparison between 1995 and 2011. This reveals that the UK’s engagement in EU supply chains has risen significantly over time. In 1995, 27.3% of the jobs in the exports of the UK to the EU, derived from the EU’s exports, and this had risen to 38.7% by 2011. Once again we see a rise in such integration with regard to each of the EU countries in the table.</p>
<h2>Service updates</h2>
<p>In the second table, below, we list the ten most important sectors (out of 35) in terms of the UK’s export jobs to the EU. The first two columns
give the number of jobs associated with the UK’s exports of these sectors to both the EU and non-EU countries. </p>
<p>So there were 826,300 jobs directly associated with the UK’s exports of business services to the EU. We see from the last row that UK export jobs are fairly highly concentrated – these ten sectors account for nearly 70% of the UK’s EU export jobs. We also seethe importance of service sector jobs – six of the ten sectors are service sectors. </p>
<p>And in the final two columns we again see the much greater integration of the UK with the EU than with non-EU countries. This much higher linkage between the UK and the EU, in comparison to the UK and non-EU countries is seen in all sectors. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/64134/original/gr2b9kff-1415624731.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/64134/original/gr2b9kff-1415624731.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/64134/original/gr2b9kff-1415624731.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=406&fit=crop&dpr=1 600w, https://images.theconversation.com/files/64134/original/gr2b9kff-1415624731.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=406&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/64134/original/gr2b9kff-1415624731.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=406&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/64134/original/gr2b9kff-1415624731.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=511&fit=crop&dpr=1 754w, https://images.theconversation.com/files/64134/original/gr2b9kff-1415624731.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=511&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/64134/original/gr2b9kff-1415624731.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=511&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<h2>Keep your friends close</h2>
<p>The past 15 years have seen a structural change in the UK’s exports and a growing importance of services. Non-EU countries are expanding as a destination for UK exports, and therefore also UK export jobs; and this is almost certainly driven by the faster growth of these countries. </p>
<p>But this data suggests that UK employment is very closely tied to EU partners via value-chains in a way that non-EU export jobs simply are not. This is no doubt in part driven by the simple fact that EU is so close, but it is also hard to believe that this is not driven by regulatory commonalities in the single market. These interwoven relationships along the value chain are in stark contrast to the kind of “ship and forget” trade that appears more characteristic of non-EU trade. </p>
<p>All this means that any policy which may negatively affect EU-related jobs needs serious justification, and that justification should not just be political. UK export jobs may be vulnerable to changes in the terms of the relationship, economic and institutional, between the UK and the EU. </p>
<p>Uncertainty around the UK’s position in the EU, as well as any subsequent policy changes, can easily damage value-chain trade and the jobs associated with that trade. Leaving the single market may threaten a substantial number of UK jobs and not just in the manufacturing heartlands vulnerable to the rise of Asia but also in the services sectors where growth in employment has been the greatest over the past two decades. The political rush to consider that stark choice of leaving the EU must not sidestep the connectedness that marks out our trading ties – and which helps to support close to 4 million jobs.</p>
<hr>
<p><em>This piece was co-authored with <a href="https://theconversation.com/profiles/bridget-azubuike-144560">Bridget Azubuike</a> from Interanalysis Ltd at the University of Sussex</em></p><img src="https://counter.theconversation.com/content/34032/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Gasiorek is Senior Lecturer at Sussex University and MD of InterAnalysis, a university spin out company.He has previously received funding from the European Commission to analyse value chain relationships between the EU and China.</span></em></p><p class="fine-print"><em><span>Maximiliano Mendez-Parra is a trade economist at InterAnalysis Ltd and Executive Director of Iteas Consulting Ltd. He has previously received funding from the European Commission to analyse value chain relationships between the EU and China</span></em></p>Whichever way you look at it, the UK is going through a stormy period in its relationship with the European Union. David Cameron has promised to renegotiate the UK’s relations with the EU and to hold a…Michael Gasiorek, Senior Lecturer in Economics, University of Sussex Business School, University of SussexMaximiliano Mendez-Parra, Researcher at the Centre for the Analysis of Regional Integration at Sussex (CARIS), University of SussexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/339642014-11-07T16:20:58Z2014-11-07T16:20:58ZEurope faces weapons of legal destruction in USA trade talks<figure><img src="https://images.theconversation.com/files/63979/original/sfh9p393-1415367776.jpg?ixlib=rb-1.1.0&rect=76%2C111%2C915%2C432&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The heart of the matter. The container port at Long Beach.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/msun523/3457213936/in/photolist-8LCJgS-8LCJ8Y-9a4Nhj-esVtg5-b25M6T-dGeKuD-dVMcr8-hxzP5f-6s6rjN-hxzNyW-nTNhrt-6oiWZo-6oeC6T-8LCHU1-8LCHCW-8LzE26-6oeLbX-gsVTd5-dsSiKc-6gv8fQ-mGCui-6ovtqu-6jhWcV-4PcFQn-36iPxd-dGkaKb-a5kehV-36iQjy-8dz6q5-8dz9Cj-8dvRLe-8dvHHz-8dzbPq-8dz1TS-8dvRo2-8dz3S1-8dz6LY-6oeC4D-36ecTi-adNYS-bvwpxo-hxyYzR-36ebzZ-av5Zra-a5o6Fj-36ecpM-36ec6Z-dVA9FH-36edpZ-w6Jx1">sunslate</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><p>Efforts to build a more effective trading regime between Europe and the USA can reasonably be called positive, both for growth and the ease of doing business. Currently, however, negotiations include proposals which threaten to distort the way governments regulate companies and which might cost the taxpayer dearly.</p>
<p>Back in <a href="http://www.acci.asn.au/getattachment/b9d3cfae-fc0c-4c2a-a3df-3f58228daf6d/Gillard-Government-Trade-Policy-Statement.aspx">2011, the Australian government announced</a>:</p>
<blockquote>
<p>The Government does not support provisions that would confer greater legal rights on foreign businesses than those available to domestic businesses. Nor will the Government support provisions that would constrain the ability of Australian governments to make laws on social, environmental and economic matters in circumstances where those laws do not discriminate between domestic and foreign businesses.</p>
</blockquote>
<p>Australia took this step as, under the provisions of her 1993 trade treaty with Hong Kong, she was <a href="http://www.ag.gov.au/internationalrelations/internationallaw/pages/tobaccoplainpackaging.aspx">effectively being sued for compensation</a> over the impact of an anti-smoking policy. Part of the treaty gave multi-national corporations the right to investment treaty arbitration, the right to seek compensation for the impact of government policy on profits. According to international lawyer <a href="http://www.thelawyer.com/george-kahale-iii/3000858.article">George Kahale, III</a>, under such provisions:</p>
<blockquote>
<p>Claimants are prone to bring exaggerated claims, encouraged by the availability of third-party funding, and are <a href="http://www.curtis.com/siteFiles/Publications/GAR.pdf">supported by a systemic bias against states</a>.</p>
</blockquote>
<p>Australia <a href="http://theconversation.com/when-trade-agreements-threaten-sovereignty-australia-beware-18419">may</a> have learned her lesson: Europe, <a href="http://www.huffingtonpost.com/larry-cohen/report-from-berlin-global_1_b_5588169.html">outside of Germany</a>, may not.</p>
<h2>TTIPing the balance</h2>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/63982/original/2gjxxk2w-1415368304.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/63982/original/2gjxxk2w-1415368304.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/63982/original/2gjxxk2w-1415368304.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=299&fit=crop&dpr=1 600w, https://images.theconversation.com/files/63982/original/2gjxxk2w-1415368304.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=299&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/63982/original/2gjxxk2w-1415368304.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=299&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/63982/original/2gjxxk2w-1415368304.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=376&fit=crop&dpr=1 754w, https://images.theconversation.com/files/63982/original/2gjxxk2w-1415368304.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=376&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/63982/original/2gjxxk2w-1415368304.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=376&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Flagging up the flaws.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/opendemocracy/1441901063/in/photolist-79WRUV-4md7Hk-79X52X-79WRUM-4mdeLV-4mdeWB-4mhgfQ-4mheZu-4mh9Co-7a1mnm-4mhfEd-4md86g-4mhfRm-4mhg1u-4mddAP-4mddLZ-79WRU8-4mdd8V-4mdcXK-4mdeqc-7a1mnb-79WDwM-79WJRa-7a1mmf-79WJR6-7a1mnj-79WRUF-79WDx8-7a1mnf-79X53n-79WJRg-79X52Z-7a244L-79WJRD-79WRUn-79X53k-7a1PTy-7a1PTC-7a1PTq-79WRUe-79WDwX-79WDx2-79WDwV-6NBsPh-7a1PTo-8yosRL-cyThiL-7ZEQ78-dS6Nk-3cq7Xa">openDemocracy</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>The EU and the USA are engaged at present in setting up a trade agreement, the <a href="http://ec.europa.eu/trade/policy/in-focus/ttip/about-ttip/">Transatlantic Trade and Investment Partnership (TTIP)</a> which, so it is said, will be of benefit to both parties. A major feature of TTIP is to do with the harmonisation of regulations between the EU and the USA. In one sense, this is all to the good – certainly nations must cooperate and most economists believe that free trade to some extent or another can lead to economic growth. However, <a href="http://www.kent.ac.uk/law/isds_treaty_consultation.html">the sticking point for many</a> is the inclusion in the TTIP negotiations of the contentious <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/311247/bis-14-695-investor-state-dispute-settlement-faqs.pdf">Investor to State Dispute Settlement (ISDS)</a> provision.</p>
<p><a href="http://www.ibtimes.co.uk/ttip-isds-obscure-trade-clause-threatening-tear-european-politics-apart-1470908">ISDS</a> gives international investors the right to bring a case for damages against the local government if they (the investors) feel government policy has harmed their interests. A supposed independent international tribunal hears such claims. In other words, under ISDS, multinational corporations have the right effectively to sue a sovereign state, demanding the state (that is, the taxpayer) compensates them for enacting domestic policy if it reduces profitability below that which was expected.</p>
<h2>What’s the problem?</h2>
<p>On one hand, it might seem fair enough to protect corporate foreign investment from the risk of changes in domestic policy – however, the way ISDS addresses this risk creates, at the least, the potential for distortions in the market.</p>
<p>The legitimate concerns of governments and corporations are such that there will occasionally be disagreements between them. According to the economist Milton Friedman (<a href="http://books.cat-v.org/economics/capitalism-and-freedom/intro">writing in <em>Capitalism and Freedom</em></a>), government should maintain law and order,:</p>
<blockquote>
<p>foster competitive markets … [and] government may enable us at times to accomplish jointly what we would find it more difficult or expensive to accomplish severally.</p>
</blockquote>
<p>On the other hand:</p>
<blockquote>
<p>There is one and only one social responsibility of business to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game</p>
</blockquote>
<p>Here there are clear potential conflicts of interest. The responsibility of the corporate sector is to maximise profits, while the responsibility of government is to promote competition which might reduce corporate profits; also governments must promote the public good – which is likely in some instances to affect corporate profits, for example in controlling pollution or enforcing health and safety legislation. Establishing a means by which disagreements might be resolved is, therefore, of some importance. However, to this end, the ISDS is not an efficient means – <a href="http://www.transnational-dispute-management.com/article.asp?key=1918">it is apparently skewed</a>.</p>
<h2>Inequality before the law</h2>
<p>Because of the way ISDS is formulated, the rule of law is arguably compromised. In the first place, foreign investors in a host nation have access to ISDS arbitration – domestic industry does not have such access. This asymmetry gives the multi-national investor a competitive advantage over purely domestic rivals.</p>
<p>And <a href="http://www.curtis.com/siteFiles/Publications/GAR.pdf">ISDS is arguably biased against the state</a>. If we subsume the state’s fostering of competitive markets into their promoting public good, we see disagreements between business and the state are likely to arise when:</p>
<ul>
<li>In order to prevent the compromise of public good, some activities of business must be constrained, or</li>
<li>The state, for one reason or another, might not be pursuing public good, but rather (corruptly) be penalising business.</li>
</ul>
<p>In the first instance: where the corporate pursuit of profits is reducing public good, it is by no means clear why multi-national corporations should be compensated for being required to cease or reduce this activity. We might argue rather that business should compensate the state for any damage they have committed – this is certainly what economic theory would suggest.</p>
<p>In the second instance: where government policy does not promote public good, there is certainly scope for compensation. However, there is no reason to limit access to redress. The citizens of the nation whose interest is being side-lined ought to be afforded the means to take their leaders to task. ISDS does not address issues of (potential) lack of democratic accountability – <a href="http://www.theguardian.com/commentisfree/2013/nov/04/us-trade-deal-full-frontal-assault-on-democracy">rather the opposite</a>.</p>
<p>When you pull together the evidence, it is perhaps little surprise that this is one of those rare beasts of policy where right-leaning organisations, such as <a href="http://www.cato.org/about">the Cato institute</a>, and left-leaning, such as <a href="http://www.aflcio.org/content/download/138571/3647761/AFL-CIO_ISDSReport_5.pdf">trades unions</a>, are united in opposition. </p>
<p>The <a href="http://www.cato.org/publications/free-trade-bulletin/compromise-advance-trade-agenda-purge-negotiations-investor-state">Cato institute</a> says:</p>
<blockquote>
<p>ISDS arguably weakens the rule of law, forces the public to subsidise the risk of multi-national investment abroad, and effectively encourages outsourcing.</p>
</blockquote>
<p>According to <a href="http://www.thelawyer.com/george-kahale-iii/3000858.article">George Kahale, III</a>, in practice such arrangements are no better than in theory. He warns darkly that current investment treaty arbitration systems are <a href="http://www.curtis.com/siteFiles/Publications/GAR.pdf">“seriously flawed … weapons of legal destruction”</a>.</p><img src="https://counter.theconversation.com/content/33964/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kevin Albertson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Efforts to build a more effective trading regime between Europe and the USA can reasonably be called positive, both for growth and the ease of doing business. Currently, however, negotiations include proposals…Kevin Albertson, Reader in Economics, Manchester Metropolitan UniversityLicensed as Creative Commons – attribution, no derivatives.