News Journal:World trade pacts must have real labor standards

One of the few areas where President Obama and the new Republican-controlled Congress are likely to find common ground this year is in international trade agreements, specifically in the upcoming votes on Trade Promotion Authority and then the Trans Pacific Partnership Treaty.
That doesn’t mean there won’t be a contentious debate about them, but in this case it will mainly be between a number of Democrats on one side and the President and most Republicans on the other.
Many blame the North Atlantic Free Trade Agreement and the World Trade Organization, both adopted during the Clinton administration in the 1990s, for stagnant wages, higher unemployment, and income inequality in the United States. There is a case to be made that they are partially right, but international trade treaties and their effects are incredibly complex, and the devil is always in the details.
The best, most lasting argument for free trade was made by the British economist David Ricardo in 1817, when he published his theory of comparative advantage. It would take this entire column to explain the theory, so if you aren’t familiar with it, look it up in Wikipedia and then rejoin us here.
Trade agreements have caused domestic setbacks and disruptions since the 1990s, but the tide is definitely turning in our favor. In a recent survey by the Boston Consulting Group of senior manufacturing executives of large corporations, the majority said they were shifting more production back to the U.S. from overseas. They also said the “U.S. had surpassed Mexico as the most likely destination for new manufacturing for the U.S. market” and predicted more business returning from China because of this country’s increasing ability to compete on cost, etc.
Back to the devil, the details and complexity. There will be two Congressional votes to decide the fate of the Trans Pacific Partnership Treaty, currently being negotiated with 11 other Pacific Rim countries. One on the treaty, the other is a vote on Trade Promotion Authority. The United States Trade Representative’s website explains: “Since 1974, Congress has enacted TPA legislation that defines U.S. negotiating objectives and priorities for trade agreements and establishes consultation and notification requirements for the President to follow throughout the negotiation process. At the end of the negotiation and consultation process, Congress gives the agreement an up or down vote, without amendment. TPA reaffirms Congress’s overall constitutional role in the development and oversight of U.S. trade policy.”
Note that “up or down vote, without amendment.” The Office of the United States Trade Representative can and does communicate with members of Congress about its negotiations, but if TPA passes, Congress must then vote on TPP as it is written, without amendments. This might seem undemocratic, but the reality is there could never be any trade agreement if members of Congress were able to insert clauses reflecting their local concerns.
So the vote on TPA is likely to turn into a real donnybrook. And as much as I believe in the concept of free trade, I share the concerns of many who are skeptical. I agree with them that TPP must have strong labor standards, worker safety requirements, environmental protections and that it ensures food safety. No country’s comparative advantage should be allowed to include child labor, unsafe sweatshops, rampant pollution, the export of contaminated food, and a host of other unfair labor practices.
Of special concern is financial regulation and intellectual property provisions. Given that by necessity such a trade agreement must be negotiated in secrecy, we must all have a great deal of trust that our lead negotiators have one, and only one, priority – the best deal that is fair to the United States. But reports have been leaked about the influence of powerful interest groups in the negotiating process.
Michael Froman, our trade representative, is faced with a clear conflict of interest. He came to the Obama administration from Citigroup. The Commerce Department’s Undersecretary of International Trade, Stephen Selig, an alumnus of Bank of America, joins him in the negotiations. The person acknowledged to be the financial go-to guy in the Obama administration, who is sure to be involved in the financial regulation provisions in the treaty, is Jacob Lew, the Secretary of the Treasury and another Citigroup alum.
One of the truisms I have never found a reason to dispute is that where you stand is where you sit. Froman, Selig and Lew are honorable men, but they cannot help but have a very specific point of view, shaped by their previous banking experience. Citigroup and Bank of America are international banks with international concerns. A number of very complex financial provisions will be included in TPP – investor-state dispute resolution, market access, patent extension proposals, capital controls, currency manipulation and others.
How these complicated issues are resolved will have a significant impact on all of us. And it has been a long time since Wall Street banks lost a vote in the Congress.
I have an open mind. I hope my concerns will be met with convincing counterarguments. In the meanwhile, we should all be concerned about signing up for Trade Promotion Authority before we get to see what is in Trans Pacific Partnership Treaty.
Ted Kaufman is a former U.S. Senator from Delaware.