On Monday, October 5, a final draft of the TransPacific Partnership was agreed upon. The pending trade agreement would further liberalize tariffs and regulations which currently serve as barriers to trade between the United States and the Asia-Pacific community, notably Japan, Vietnam, the Philippines and Australia. The Brookings Institution identifies the combined GDP of all countries involved in TPP negotiations at $27.5 trillion, roughly 40 percent of the global economy.
As with NAFTA and CAFTA (the North America and Central American Free Trade Agreements, respectively), the TPP will inspire a polarizing political debate, culminating in a Congress vote by the spring, right in the midst of the 2016 primary election season.
Political moderates and classical liberals point to economist David Ricardo’s theory of comparative advantage. Comparative advantage supports the notion that unhindered trade promotes optimal economic outcomes for all parties because they specialize in producing certain goods and services more cheaply and trade them for lower prices. Each country can benefit from either producing its own goods most effectively or importing them cheaply.
However, historical analysis proves that the theoretical foundations of trade liberalization do not stand.
As it has been happening, free trade is not a simple removal of barriers to trade, but the continuing development of an international canopy of laws that mostly serves to enhance corporate profitability. It allows northern corporations to consolidate economic power and influence while simultaneously outsourcing different stages of the supply chain that minimize labor costs.
Free trade has contributed to social decay in America. NAFTA and CAFTA accelerated the decline of America’s industrial working class, because they allowed corporations to outsource labor to areas where they could pay workers less and provide less-safe conditions, while simultaneously, American-made products were no longer protected by tariffs. Corporate accumulation of wealth due to this supply chain rearrangement has contributed to inequality as well, both making it more challenging for poorer Americans to build wealth over generations and provide robust opportunity for their children. This is not to make the philosophical argument that American businesses should only help the American people, but the socioeconomic argument that prosperity requires a robust manufacturing employment apparatus.
Free trade is globally unequal. The United States, Canada and the European Union have only strengthened tariffs and subsidies to protect their agricultural sectors, but free trade has forced the removal of socialized and/or traditional agriculture in the developing world, from South America, to India, to the Pacific Rim. While populations in the developing world might benefit from more industrial opportunities, in terms of agriculture, the global south could not compete with the tariffs and subsidies protecting the global north’s farming. This was even a contributor to the 2007 world food crisis, as food prices were jacked up largely due to monopolized agribusiness in the north looking to increase profitability.
Yet there is an even deeper contradiction in the logic of the agreement: TPP is not the kind of free trade David Ricardo would likely advocate on behalf of. The secret details of the agreement, which WikiLeaks has slowly been releasing throughout the past week, contain exceptions for America and Canada, new laws empowering corporations to challenge environmental, health and safety government regulations, and unprecedented intellectual property restrictions. Very little about it resembles the philosophy of “free” markets. For example, American tobacco companies will have the power to sue countries like Malaysia and the Philippines if they pass anti-smoking laws.
Binghamton professor and former Philippines congressman Walden Bello refers to the arrangement as “free markets for the south, protectionism for the north.” US presidential candidates rising in popularity, Republican Donald Trump and Democrat Bernie Sanders, both oppose the TPP on these populist grounds.
The TPP can’t be found online, and all one can attempt is to agglomerate some of the WikiLeaks releases and the vague promises of the US Office of the Trade Representative’s website.
You can’t read the largest free trade agreement in the history of the world, warranting all the more skepticism.