[CTC] TPP deal ignites trade enforcement debate

[Arthur Stamoulis]

TPP deal ignites trade enforcement debate
 
Politico
By Doug Palmer
November 6, 2015
 
The Obama administration on Thursday rolled out the long-awaited text of the Trans-Pacific Partnership free trade agreement, setting up a clash next year with labor and environmental groups, who said it will cause job losses and degrade the environment.

The U.S. Chamber of Commerce and many other business groups reserved judgment on the pact, which the White House says will tear down barriers to trade in the fast-growing Asia-Pacific region while raising labor and environmental standards.

But groups on the left panned the agreement, questioning the strength of the labor and environmental commitments and zeroing in on measures they said would make it easier for companies to move jobs overseas and challenge regulations they don’t like.

“The investment rules still provide expansive new legal rights and powers to foreign businesses to challenge legitimate government actions,” AFL-CIO President Richard Trumka said. “The labor enforcement provisions are still inadequate to address the enormous challenges posed by this deal and the lack of enforceable currency rules subject to trade sanctions mean the promised new export markets may never materialize.”

After more than five years of work to negotiate the landmark 12-nation pact, the Obama administration’s most difficult task may still lay ahead: persuading Congress it contains meaningful commitments that will be enforced.

“The history of U.S. trade agreement enforcement — or lack thereof — shows that any minimal gains from new commitments on the environment under TPP pale in comparison to the negative human and environmental effects of its commercial and [investment] provisions,” said Melissa Blue Sky, an attorney with the Center for International Environmental Law.

Critics point to the relatively few trade cases filed by the United States under free-trade agreements as proof that administrations are eager to sign trade deals but less enthusiastic about dragging other countries into court. When cases are filed, they often can take years to resolve and then provide little relief to the aggrieved party.

The huge U.S. trade deficit, which is on track to exceed $500 billion again this year, also feeds the idea that trade pacts create more winners than losers and the White House turns a blind eye when countries break the rules.

"The problem has been the [lack of] political will in the United States to bring a case," a Ways and Means Committee staffer said. "What we need to get in a trade agreement are enforceable commitments. Whether or not they are enforced is really more of a unilateral issue and we have to find ways domestically to ensure we are going to enforce our own agreements."

Administrations do have a great deal of discretion in the number of trade cases they file, although that’s also influenced by how many disputes arise during their term.

“The question of enforcement is a question of the administration and who will be the president,” Rep. Charles Rangel (D-N.Y.) said. “Whether we talk about the environment, human rights, civil rights, it’s always been a major problem.”

As if underscoring his commitment to strong enforcement, Obama announced Thursday he was suspending trade benefits for South Africa because of its failure to drop longstanding barriers to U.S. poultry and other agricultural exports.

Obama administration officials defend their enforcement record and reject the suggestion that TPP’s labor and environment provisions are weak.

But recognizing enforcement concerns will color the upcoming debate over TPP, the administration is “developing a comprehensive implementation and enforcement plan for TPP that will upgrade the system for monitoring, investigating and acting on labor, environmental and intellectual property concerns,” an administration official told POLITICO.

The TPP pact already would require countries to fully implement commitments across the 30 chapters of the agreement, including closely watched areas like labor and the environment, in order to receive U.S. market-opening benefits of the agreement, the U.S. trade representative's office said.

Much of the “enforcement” of trade agreements happens during the implementation phase, when countries are required to change laws and regulations to come into compliance, so focusing on the number of cases filed afterwards is misleading, supporters argue. It’s also usually quicker to try to resolve disputes through negotiation, rather than costly and lengthy litigation, said Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics.

"The whole purpose is to do it more expeditiously. If you have a concern, you raise it immediately and if the other country says, 'No, you're wrong,' then you file a dispute," Schott said. "But if the other country says, 'Oh, I understand this. Let's try to work it out,' then you do that."

Trade agreements also have evolved in the 20 years since NAFTA went into force. Labor and environmental issues were relegated to a side agreement outside of the NAFTA pact and not subject to binding dispute settlement.

The United States began incorporating labor and environmental provisions in the text of its free-trade agreements in the 2000s, but only required countries to enforce their own laws in those areas. The penalty was a monetary fine, rather than suspension of tariffs.

Beginning in 2007, Washington started requiring free-trade partners to abide by core International Labor Organization principles, including freedom of association, the right to collective bargaining and elimination of all forms of forced and compulsory laws. Those obligations were included in text of new agreements, but still couldn’t be enforced with trade sanctions.

The TPP takes an additional step by making both the environmental and labor chapters subject to the same dispute-settlement provisions as the rest of the pact. That means the United States could hike duties on imports from the TPP partners if the countries fail to honor the commitments.

The Obama administration also negotiated detailed labor action plans with Vietnam, Malaysia and Brunei to bring their labor regimes into compliance with the ILO obligations. The three countries will have to implement those action plans before they receive any of the U.S. market-opening benefits under the pacts.

The AFL-CIO and other labor groups say they are skeptical the United States will actually bring labor cases against Vietnam and other TPP members if they backtrack on their ILO obligations. They note the United States has filed only one labor case, against Guatemala, and that took years to get to the dispute settlement phase.

Still, there’s a reasonable explanation for the paltry record, a Senate Democratic aide said. “Real labor obligations are a new thing, so of course there has been no course of action. … Same thing with environment, we didn’t have real environmental obligations until recent trade agreements,” the aide said.

Beginning with the Peru free-trade agreement in 2007, the United States began requiring free-trade partners to abide by seven multilateral environmental agreements, including the Convention on International Trade in Endangered Species in Wild Fauna and Flora, commonly known by its acronym, CITES.

The TPP agreement also requires member countries to abide by CITES and makes that enforceable with trade sanctions. However, not all TPP countries had signed onto the other multilateral environmental agreements, requiring creative wordsmithing in that area of the negotiations.

"Almost every other TPP country didn't want binding dispute settlement for the environment chapter," Schott said. "The U.S. insisted on it and prevailed, but in recalibrating the way the obligations were drafted, some countries wanted to put a little more flexibility into the obligations. ... In most of the cases, the obligations are still very hard."

In one specific area, environmentalists urged that countries be required to "prohibit" illegal wildlife trade, but that verb was too difficult for many TPP members to accept. The final language requires countries to "combat" illegal wildlife trade. But Schott downplayed the significance of the compromise. "Sometimes you don't get the exact word that you want, but you get something that is the functional equivalent," he said.

Meanwhile, many critics are worried by investor-state dispute settlement provision of the pact, which allows private corporations to sue over government regulations that have damaged the value of their investment. Environmental groups fear companies will use the provision to challenge measures to fight climate change and other environmental objectives.

The Obama administration says it has addressed that concern with reforms that underscore the rights of governments to regulate in the public interest. But critics say it would have been better to completely remove the ISDS mechanism from the pact.

Adam Behsudi and Victoria Guida contributed to this report.


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