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'Trade' Deals on the Ropes

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The globalization agenda of American financial elites that has dominated both parties' trade policy for three decades is on the verge of crashing and burning. There is escalating, perhaps fatal, opposition to the proposed Pacific and Atlantic deals in both the U.S. Congress and among partner nations.

House Democratic Leader Nancy Pelosi is opposed to granting the required "fast track" trade negotiating authority. Harry Reid, the Senate Majority Leader, opposes fast track's up-or-down vote provisions as well. The new Senate Finance chair, Ron Wyden, is far more of a skeptic than his predecessor, Max Baucus. Last week's "Three Amigos" NAFTA 20 anniversary summit meeting in Mexico accomplished nothing other than photo ops.

Our last two Democratic Presidents, Obama and Clinton, with minor differences, have carried forward the grand plans of multinational corporations, with only trivial concerns for social and regulatory standards in trade. Contrary to the claims made at the time, 20 years of NAFTA has only widened the trade deficit between the U.S. and Mexico without raising Mexican living standards or reducing immigration flows. NAFTA was and is mainly about expanded rights of U.S. corporate investors.

In 1993, before NAFTA, our combined trade deficit with signatory countries Mexico and Canada was about $32 billion. In 2012 it was $181 billion.

The World Trade Organization, NAFTA, and a series of bilateral trade deals have been less about reducing barriers to trade (which are already very low in the U.S.) and more about dismantling the regulatory framework of managed capitalism both in the U.S. and abroad. These agreements have sought to achieve this longstanding goal of organized business by defining as illicit trade barriers and entirely legitimate forms of purely domestic health, safety, labor, financial, and environmental regulation.

The two proposed trade deals on the table, the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP), would double down on that strategy. Both would create new rights for corporations and investors to sue to block regulations in special tribunals that could do end-runs around courts. Both would freeze existing regulations in such areas as banking, where abuses of capitalism continue to evolve. Even the most extravagant claims by sponsors show trivial gains to GDP.

The proposed Trans-Pacific Partnership is particularly bizarre in conception as well as execution, because it tries to link several different policy goals in a complex bank shot. First, TPP was advertised as a "pivot to Asia," as if the U.S. had not been paying attention to China, Japan, and East Asia all along. The hope was to offer new trade benefits to nations in China's trading orbit, such as Vietnam, Malaysia and Japan, as a counterweight to China's regional economic muscle, and to send China a geo-political message. Second, TTIP hopes to pry open Asian markets long closed to American exporters due to the mercantilism of the East Asian economic model.

But the first goal is at odds with the second. Smaller Asian nations like the idea of the U.S. as a counterweight to China, but don't want to liberalize their markets. We do need a trade deal to open Asian markets to American exports in exchange for the openness of the U.S. consumer market, but the TPP isn't it.

In addition, the proposed TPP doesn't address the genuine (and immense) challenges posed by China directly. We desperately need a grand bargain with Beijing, one that includes currency imbalances, geo-political conflicts, Beijing's own mercantilist economic policies, and global climate change. The proposed TPP naively (or willfully) tries to get at these far more consequential issues by indirection. Mercifully, it is about to collapse of its own weight.

The TPP has been negotiated in secret. Its intellectual property provisions, for instance, don't address the genuine problems of piracy on the part of some Asian firms, but do impose needless restrictions promoted by the drug industry on dissemination of affordable medicines in developing countries.

Meanwhile, there is increasing skepticism among EU nations that the proposed Atlantic trade deal is really about trade. The Germans, prodded by Chancellor Angela Merkel's new coalition partners, the Social Democrats, have refused to accept a deal that includes special rights for investors and corporations that seek to block ordinary regulations in special arbitration tribunals. The fact that the U.S. has clumsily invaded European cyberspace only adds to the mistrust.

As an indication of the ideological hegemony of the "free trade" mantra, the U.S. mainstream press seems mindlessly programmed to tell only one story. Trade is good, "protectionism" is bad, and anyone who challenges the logic or national interest of these proposed deals is a flat-earth protectionist.

The trouble is, these deals are mostly not about trade at all. They are about dismantling the mixed economy. Yet, a sampling of recent news pieces by serious mainstream journalists covering these questions misstates these issues.

For instance, in a page-one New York Times piece February 14, "Trade Pact with Asia Faces Imposing Hurdle: Midterm Politics," writers Mark Landler and Jonathan Weisman misstated the Asia deal, saying it "aims to reduce tariffs on a vast array of goods and services and to harmonize regulations." In explaining the politics of the opposition, the writers contended:

Many Democrats typically oppose trade deals, along with their allies in unions and environmental and consumer groups, because they do not want to encourage free-trade agreements that they say would siphon off manufacturing jobs in the United States and create pollution.

But this characterization of both the deals and the opposition to them is at least two decades out of date. I have yet to find a news piece in the Times that points out that these supposed trade deals have engendered broad opposition on grounds that have little to do with trade.

The agenda of global finance, carried out via "trade" deals, has diverted attention from the real economic issues -- rising inequality and insecurity for ordinary people, the use of globalization as a battering ram to empower capital and weaken labor, and to prevent government interventions from averting financial speculation and collapse.

Amid these real crises of neo-liberalism, enhanced trade has been portrayed as a deux ex machina, which will solve our problems if only we get rid of what's left of the mixed economy. It won't. The proposed deals would only make matters worse.

The coming collapse of the quarter-century laissez-faire crusade that began with the 1986 Uruguay round, with its license for global financial speculation, is to be welcomed. If we can kill this diversion once and for all, maybe we can start paying more attention to the real economic issues.

Robert Kuttner's new book is "Debtors' Prison: The Politics of Austerity Versus Possibility." He is co-editor of The American Prospect and a senior Fellow at Demos, and teaches at Brandeis University's Heller School.

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