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What Would a Good Trade Agreement Look Like?

06/12/2015 01:23 pm ET | Updated Jun 12, 2016

The TPP is clearly an agreement designed to advance the interests of big businesses. Looking at the members of the U.S. Business Coalition for TPP, or the companies and trade associations serving on the various USTR industry advisory boards makes it easy to understand why the TPP has so much support in Congress.

The criticisms of the TPP include concerns that the agreement will lead to higher drug prices, lower standards for the protection of consumers, workers or the environment, and more generally that the agreement is designed to advance corporate agenda, often to the disadvantage of the general public.

In my discussions with U.S. trade officials over the provisions on pharmaceutical drugs, people sometimes privately agree that the specific proposals in the TPP are designed to increase prices, and make it easier for drug companies to engage in ever-greening of monopolies and other anti-competitive practices, but they see this as a positive, because they perceive this is done on behalf of "our" industries. In this mindset, treating consumers unfairly is supposed to advance our national interest, as long as we assume enough of the consumers live in foreign countries.

There are plenty of problems with this worldview. When every country ask in a trade agreement is to exploit consumers or weaken the regulation of businesses, the exploitation of consumers and the weakening of the regulation of businesses becomes a global crusade. Making matters worse, this benefits from the uniquely powerful enforcement measures associated with trade agreements (and absent from other treaties and agreements, nearly all of which lack effective enforcement).

Since taking office, the Obama administration has spent much time and political capital seeking to advance a series of secret trade negotiations, including ACTA, the TPP, the TTIP and the TISA, to mention the most ambitious of the pro-corporate deals. At the same time, the Obama administration has spent seven years blocking efforts to begin negotiations on a World Health Organization (WHO) agreement to fund priority medical R&D, and negotiations to address climate change are going very slowly. But Obama's priorities aside, what might a good trade agreement look like, one that advances the public interest, and solves pressing problems, problems greater than the ability of Pfizer to charge high prices, or Citibank to enter foreign markets.

Here a few suggestions for areas that could be part of a good trade agreement, one that puts people first.

Tax Avoidance

With the US heading toward new trade deals involving 29 of the 34 OECD countries, it would seem possible to do something about taxing multinational corporations and super wealthy individuals. Today, there is competition among OECD countries to provide lower taxes on corporate profits. But a trade agreement with the right members could reverse this trend, and ensure that companies are not paying ridiculously low tax rates on billions of dollars in profits. One model for this could be the Multi-state Tax Compact, which has operated in the United States since 1967, and which seeks to allocate the basis for profits taxes among U.S. states, according to a three factor formula that includes plant, employees and sales.

Transparency

There are all sorts of areas where transparency is in the general public's interest, but it may be challenging or costly for a national government to create and enforce obligations. Examples of areas where transparency could be seen as a global good would include access to data from clinical trials on drugs and vaccines, as well as reporting of the economics of research development costs, prices, revenues and marketing costs. We could have better global cooperation on reporting information about a company's labor practices, including executive pay, and track records in health and safety regulation. These are just a few items where cross border cooperation would be useful.

Health Research and Development

Rather than focus on stronger and stronger intellectual property rights, and higher drug prices, the trade agreement could focus on other measures that fund R&D. For example, right now the United States and the United States alone provides a hefty tax credit to offset the cost of clinical trials for Orphan Drugs, including 9 of the 10 new cancer drugs approved in 2014. The tax credit is a subsidy equal to 50 percent of the cost of the qualifying trials. The NIH remains the most important funder of medical research, through grants and contracts. Some governments are experimenting with innovation inducement prizes to reward successful R&D efforts. We could recognized the value of these and other approaches to funding R&D, and consider new global agreements to expand R&D funding without raising drug prices. Ultimately, we should implement the full de-linkage of R&D costs from drug prices, expanding access, improving health outcomes, and saving costs.

Climate Change

Climate change is a huge challenge, and one element concerns R&D for clean energy technologies. Increasing funding for open source technologies for clean energies will be helpful, and broadening the funding base for this is essential, since everyone will benefit, but not everyone will pay. Cutting emissions is important. The GOP amendments to the Trade Promotion Authority make measures to address climate change a poison pill for trade agreement approvals. The White House barely objected.

Patent Buy-outs

France, Japan, China, Taiwan and Korea have created sovereign patent funds (SPFs), in order to provide access to patented inventions by domestic manufacturing companies. But one can imagine a different approach, a plurilateral patent buy-out fund, designed to overcome patent thickets, and expand access to patented technologies, not just for domestic firms, but for the whole world. One potential area for action is to buy patents in order to enable the development of cheap, open source point of care medical diagnostics. Clearing patent thickets for energy storage technologies, might be another area. Patent buyouts for patents on the new hepatitis C drugs, HCV vaccines or Ebola treatments make much sense from a public health perspective. The cross border cooperation on funding patent buy-outs is essential if the purpose is to place the technology into a global open access status.

Humanitarian Programs

Everyone everywhere could do more to contribute to the costs of responding to humanitarian emergencies, including those associated with earthquakes, famines, wars, and other natural and man made catastrophes.

Deforestation

We had a deforestation provision in the US Peru FTA, and there is certainly plenty of room to expand these type of efforts.

Piracy on the High Seas

It is important, but also expensive, to provide security to counter piracy on the high seas. Collectively, our trading partners could help share the resources, costs and burdens.

Labor Standards

We are not doing enough to protect workers and enhance their lives, and measures which do more should be a meaningful part of trade negotiations. Because the TPP is designed to favor big corporate interests, it is weak for even the weakest labor standards. We can do better. We can protect the right to form and join unions, and ensure that governments ensure that employers don't use violence against union workers, for example.

More time off

Workers around the world compete on wages and working conditions, but in the wrong way, leading to a race to the bottom. Imagine a provision in a trade agreement that required more and more annual paid vacations and time off from work with pay for maternity leave, as country average incomes increased. Who would not benefit from an agreement that did this? Time for yourself and your family is one thing the modern economy does not supply enough.

Cross Border Education Opportunities

France and the Canadian province of Quebec qualify students to study in either country at low tuition rates. We could have agreements that allow our students better opportunities to study abroad, and have more choices.

Better standards for airlines

I would love to see a trade agreement mandate more minimum space for passengers on airlines.

Government Procurement

Trade agreements could facilitate better cooperation in government procurement, not only to obtain better prices, but to change product standards in ways that benefit users. For example, software procurement could require open file formats, and even making the code open source, if not immediately, then within a reasonable amount of time. Printers and other devices should provide open-source drivers for broader operating system support, and permit the use of third party ink cartridges. Governments could collectively expand the market for electric automobiles and other clean energy devices. Data in databases could be eventually liberated if governments used their collective procurement power strategically. Purchases of biologic drugs could require a transfer of know-how, to facilitate faster introduction of competition.

Open Access

In some countries, government funded R&D includes an obligation to place published research into open Internet archives, as a global public good. Why not use trade agreements to expand this practice?

Copyright Limitations and Exceptions

Governments could agree to sign, ratify and implement the WIPO Marrakesh Treaty for Persons Who Are Blind or Otherwise Disabled, and expand access to works accessible to persons with disabilities. Governments could also address the need for robust cross-border copyright exceptions relating to uses involving social media, distance education, orphan works and the preservation and archiving of works, as well as the mandatory exceptions for quotations and news of the day, to mention a few areas where global norms are important.


These are just a few random proposals and there are certainly plenty of others that would change the purpose and impact of trade agreements, putting people first.

Trade policy is too important to be left to trade negotiators who only think about corporate agendas. R&D is not only about ever higher drug prices. Trade policy is not just about cheaper cotton shirts, or selling more consumer electronics. Trade policy is not only about creating massive concentration in the banking sector. It is about building a future where we will live and build communities, enhance development and achieve social justice.

In his June 14, 2015 essay in the Washington Post [link], Larry Summer makes the same point, reminding us that:

"Our challenge now is less to increase globalization than to make the globalization we have work for our citizens."

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