NAFTA renegotiations may see provisions from the Trans-Pacific Partnership revived, but it must rectify past failings – on income inequality, labour and environmental protection.
When Donald Trump pulled the United States out of the Trans-Pacific Partnership (TPP) agreement, the treaty appeared to die. Critics breathed a sigh of relief. In Canada, attention turned to Trump’s promise to renegotiate the 1994 North American Free Trade Agreement (NAFTA).
Did the TPP die? Or is it now a bloody zombie? Many of the 11 remaining member countries have ratified the agreement, or plan to. Chile and Canada have both hosted meetings to consider ways to resurrect it.
NAFTA’s renegotiation also signals that the US remains committed to new trade and investment treaties, so long as they are even more beneficial to American investors and export interests than they have been in the past. New US trade objectives are explicit on this point. The US may never rejoin the TPP but will almost certainly export the provisions it likes into new bilateral trade deals.
Lurking in the shadows is the geopolitics at stake: the rising power of China and its role in another (very much alive) Asia-Pacific trade and investment negotiation, the Regional Comprehensive Economic Partnership (RCEP). The Obama administration’s adamant support for the TPP was based on a wish for American interests to forge a new Asia-Pacific agreement, not Chinese. Promises of increased growth, labour rights and environmental protection were window dressing for a wary public.
As Canada Research Chair in Globalisation and Health Equity, and having spent four years studying the health impacts of the TPP, it’s worth recounting the zombie’s many weaknesses.
Low economic growth, rising income inequality
If, as claimed, the TPP really did boost economic growth that trickled down equitably, people’s health would likely benefit. But the most optimistic projections of the TPP’s impact on economic growth average only 0.5% by 2025. The Canadian government estimates that the TPP would boost Canada’s growth by just 0.127% (and not until 2040). The net dollar gains would be less than Canada’s losses on more expensive pharmaceuticals and adjustment subsidies to its dairy and auto sectors.
These projections all assume no changes to employment. They assume equal or rising incomes. In stark contrast, modelling that did not make these assumptions has estimated substantial employment losses. A US study further calculated that the TPP would raise incomes for the 1% but drop those of everyone else, an indication of who stands to gain with such treaties.
Weak labour protection, silence on climate
The labour chapter of the TPP only prevents countries from lowering existing standards if it affects trade or investment amongst member countries. It does not guarantee health, safety or adequate pay for workers whose share of economic product globally has plummeted since the 1980s.
The environment chapter similarly requires governments to uphold enforcement only if failure to do so affects trade or investment. It is silent on climate change and on greenhouse gas emissions from global trade driven by fossil fuels.
Trade treaty rules could work to reduce income inequalities and afford meaningful and enforceable protection of labour and environmental rights. The TPP zombie in present form does not.
Unhealthy regulatory regime
The TPP contains four especially troubling regulatory impacts:
– Tougher patent protection would affect the price of drugs, especially costly new “biologics” used in treating cancers and autoimmune disorders.
– Requirements to prove the necessity of, or scientific justification for, new health regulations would be more stringent than those under the World Trade Organization (WTO) system.
– New obligations allowing “persons” (including private corporations) from any member country to participate in developing new technical regulations could potentially lead to regulatory capture.
– Contentious investor-state dispute settlement (ISDS) rules would allow foreign investors to sue governments over new policies or regulations affecting the value of their investments.
The number and monetary value of ISDS disputes have exploded since the 1990s, with investors winning about 60% of the cases.
Time to reset the global trade agenda
In the rush to prevent trade wars becoming world wars, the initial intent of trade and investment liberalisation – to create full employment, raise living standards, and respect environmental sustainability – has been lost. The means have become the ends in themselves. It’s time to reset the global trade agenda.
To that end, may the TPP zombie rest in peace.
Ronald Labonte, Professor and Canada Research Chair, University of Ottawa