THE BLOG
06/24/2015 05:07 pm ET Updated Jun 24, 2016

TPP Is Not the Answer

SAUL LOEB via Getty Images

The road to the Trans-Pacific Partnership (TPP), a "megaregional" economic agreement at the center of the White House's current trade strategy, is paved with good intentions. Yet the TPP will likely not provide lasting solutions to this country's economic predicament, and it may only complicate existing domestic and international challenges.

Domestically, the TPP won't resolve the problems of economic inequality and stagnating wages. The TPP will provide some opportunities, and will undermine others: there are always winners and losers from trade deals. The Congressional Research Service has found that, twenty years after the adoption of the North American Free Trade Agreement, its net aggregate impact on the U.S. economy has neither been disastrous nor miraculous, though some industries such as the auto sector bore concentrated losses.

The real causes of this country's economic ills lie elsewhere, in entrenched problems such as the decline of national infrastructure and the disintegration of the tax base. Even if the TPP grows the national economic pie, those problems cannot be resolved without a concerted change in course.

Internationally, the TPP plows over serious concerns about what global economic institutions should look like. The World Trade Organization, which was established with American leadership, continues to face entrenched obstacles in its beleaguered negotiations, related to stubborn differences of opinion on issues like how much trade protection should be granted to farmers, and whether poor countries should benefit from more lenient rules than rich countries. Ignoring these problems doesn't make them go away, and diverts vital time and attention from crafting the necessary compromises to address them.

At its beginnings in the mid-1940s, the modern trading system faced fundamental disagreements that helped to sunder the global community into the First, Second and Third Worlds. Decades later, those distinctions have faded, but the rise of megaregionals risks carving the globe back up again. In particular, the TPP seeks trade alliances to isolate China, identifying China as a rival economic superpower. Perhaps a trade race is preferable to the Cold War-era arms race, but it may yield similar results in terms of escalating economic and political rivalries in ways that may prove difficult to control. Moreover, very poor developing countries are shut out of these new trade deals.

The TPP also alters the framework for global trade by adding rules that potentially antagonize, rather than supplement, agreements negotiated in the World Trade Organization. For example, the TPP's rules on data exclusivity (at least reportedly, since the text is confidential) could undercut past efforts within the World Trade Organization to increase access to patented medicines. The pharmaceutical industry disapproved of those efforts, even though they were more representative of global views. Creating new international bodies to circumvent them amounts to bad faith.

The most salient "add-on" feature of the TPP is its investor-state dispute settlement mechanism, which, unlike the World Trade Organization, gives investors private rights of action against governments outside the court system. The problem with investor-state dispute settlement is not so much that it violates rule of law and sovereignty, but that it shrinks the actual and potential role of the public.

When an increasing proportion of the economy is subject to privatized dispute settlement, and courts and judges are cut out of the process, there is no institutional actor with the responsibility for protecting the public interests that may be affected. The potential for correction through democratic debate and political participation may be limited once this system is established.

Misgivings about investor-state dispute settlement have increased as its usage has skyrocketed through other trade and investment deals that are similar to, but smaller than, the TPP. To pitch headlong into another expansion of investor-state dispute settlement, without subjecting these institutional questions to a real and searching analysis, is to ensure debilitating controversy the first time a sensitive issue comes into the system.

And yes, the TPP will include labor and environment standards, but enforcement of those standards may be much less effective than the system accorded to investor complaints. The support for labor and the environment that the TPP offers is offset by this kind of double-standardization.

In short, the TPP may provide some economic benefits to some constituencies (though others will lose out), but they're probably not worth all the other baggage.

True, paving the way for the TPP allows President Obama to notch a legislative victory in a congressional environment that has often otherwise been toxic. One can certainly sympathize on that front. But this, too, amounts to reaching for a shortsighted solution.

In the short term, we should focus on existing domestic and international challenges rather than potentially adding new ones. In the longer term, we should help chart a course towards an international environment that is not only pro-globalization, but also pro-democracy and pro-justice.