History’s largest trade agreements are being negotiated in secret

In August 2007, then–presidential candidate Barack Obama vowed that, if elected, he would “immediately” amend the North American Free Trade Agreement (NAFTA), which the U.S. signed with Mexico and Canada 13 years earlier.

“Our trade agreements should not just be good for Wall Street. It should also be good for Main Street,” he said, objecting to the influence of corporate lobbyists over labor unions and other groups in negotiating trade agreements.

Six years later, with NAFTA still untouched, Obama faced the decision to appoint the chief U.S. negotiators for the two largest trade agreements in history.

And he picked Wall Street bankers for the job.

Michael Froman, the current U.S. trade representative, received over $4 million in 2009 from his previous employer, CitiGroup, when he joined the government. Stefan Selig, the undersecretary of commerce for international trade and a former Bank of America banker, received more than $14.1 million in bonus pay when he left his old job.

For the past four years, Froman and Selig have headed the U.S. team of unelected representatives secretly negotiating history’s two biggest trade agreements. If both treaties — drafted on behalf of 1.6 billion people — are approved, they will regulate almost three-quarters of all trade and investment in the world. The deals would void national legislation on environmental policy, labor rights, financial regulation and intellectual property.

The Trans-Pacific Partnership (TPP) includes the U.S., Canada and 10 countries in South America and the Asia-Pacific region. Negotiators hope to reach a final pact by the end of this year, after 21 rounds of negotiations that began in 2009. The Transatlantic Trade and Investment Partnership (TTIP), in its seventh round of negotiations this week, would include the U.S. and the 28 member countries of the European Union. Both deals exclude the BRIC countries (Brazil, Russia, India and China).

The deals’ official outlines speak of reducing barriers to trade, directly generating economic growth and “creating new opportunities for workers and businesses.” Optimistic analysts forecast cumulative U.S. GDP gains of 0.13 percent by 2025 if the TPP is implemented.

Others go even further, arguing the deals will replace the current broken system of international trade with something that can better prevent protectionist trade policies.

“The piece we can't identify but could be very large is the implication of having a world of rules-based trade versus a world of protectionism,” said Peter Petri, an international finance professor at Brandeis University. Petri argues the agreements will replace the World Trade Organization (WTO), whose consensus-based decision-making method for institutionalizing trade has been deemed dysfunctional by many economists.

But with global tariffs already at an all-time low and hundreds of tons of merchandise traded across the Atlantic and Pacific every day, some argue that behind the negotiations is an agenda to deregulate crucial aspects of public policy to benefit global elites — at the expense of society as a whole.

“There’s $2 billion every day between Europe and the United States that's being traded,” said Susan George, author of “Whose Crisis? Whose Future?”

Rather than boosting trade, she said, the agreements push corporate interests. “I’m not against trade, that’s not the point of this treaty. But you have to understand, 60 percent of that trade is between subsidiaries of the same company. It’s not exactly trade. It’s Renault trading with Renault, IBM trading with IBM. It’s about the regulations.”

It is impossible know the details of the agreements, since the texts won’t become public until after negotiators have finalized them. But after TPP documents were leaked, activists, labor unions and civil society groups complained about the lack of commitment to job creation, trade deficit reduction and preventing currency manipulation.

Consumer and environmental advocates are worried that the trade deals could weaken consumer protections — particularly in light of recent scandals about the import of toxic pet food, poisonous toothpaste, the labeling of beef’s origin and dolphin-free tuna.

Much of the debate about ongoing negotiations focuses on the 566 members of the U.S. Trade Advisory Committee. Members of private industry and trade groups make up 85 percent of the committee, far outweighing labor and NGO representatives, academics, government officials and others who make up the rest of the committee.

“The handful of representatives that will represent labor and environmental organizations are basically ghettoized,” said Melinda St. Louis, the international campaigns director at the nonprofit Public Citizen’s Global Trade Watch. “They talk amongst themselves. It’s only common sense to think that those who are actually at the table would have undue influence over what the rules are.”

Proponents of the agreements dismiss such criticism. “All the controversial issues, whether it's intellectual property or investor-state — it’s all been leaked anyway,” said Claude Barfield, a resident scholar at the American Enterprise Institute. “Plus, to its credit, the Obama administration has held multiple meetings with NGOs, with members of Congress, with business groups, with any interested party. I mean, this is a left-wing administration.”

Still, all 18 members of the Industry Trade Advisory Committee on Intellectual Property Rights come from industry groups like the Recording Industry Association of America and Pharmaceutical Research and Manufacturers of America.

Industry lobbyists are present on the other side of the Atlantic too. Out of the 130 secret meetings the European Commission trade negotiators have had with stakeholders on the TTIP talks, at least 119 were with large corporations and their lobby groups.

The financial industry is not the only industry that makes use of the revolving door between government trade negotiators and those who stand to be affected by the regulations.

In March the Motion Picture Association hired Stan McCoy as a senior vice president and regional policy director for Europe, Middle East and Africa. McCoy, who had been an assistant U.S. trade representative and Obama’s highest-ranking negotiator on copyright issues, made a name for himself defending the pharmaceutical industry and Hollywood.

McCoy’s predecessor as the top U.S. copyright negotiator, Victoria Espinel, is now CEO of the Business Software Alliance (BSA), a trade group representing the world’s largest software developers. Robert Holleyman, Espinel’s predecessor at the BSA, was appointed by Obama as deputy U.S. trade representative in February.

Whereas the TPP promotional materials speak of promoting U.S. participation in “global value chains,” labor unions fear negotiators are referring to offshoring production to countries with lower working standards and wages.

“If capital is more mobile, then labor’s bargaining power is undermined,” said Thea Lee, deputy chief of staff at the AFL-CIO. “If you are a worker in an auto factory and your boss comes to you and says, ‘If you succeed in forming a union, we are going to close down and go to country X, where they don’t have a union and the government promised us they never will,’ you are in a very bad position.”

Labor leaders remain skeptical about the effect trade agreements will have on inequality. “If you look at wages, then no one can say the trading system has really assisted workers,” said Sharan Burrow, general secretary of the International Trade Union Confederation. “We have a global wages slump over the last 30 years, which coincide[s] with major growth of global trade.”

While labor organizations worry about losing leverage, the financial industry seems poised to entrench its influence. Leaked TPP negotiations documents show the Obama administration has been attempting to prevent foreign governments from issuing rules designed to prevent another financial crisis. U.S. negotiators are opposing limitations on the type of speculative capital flows that have left countries like Mexico, Korea and Greece vulnerable to banking panics in the past.

The TTIP could mean a rollback on other financial regulations, including the long-awaited Volcker Rule, which would bar banks from making a range of speculative investments for their own gain. U.S. negotiators are proposing rules that would cap bans on toxic derivatives and limits on the size of too-big-to-fail banks. On the other side of the Atlantic, European negotiators are calling for limits on banking, securities and insurance regulations. 

While experts say the TPP is nearly ready for approval, negotiations over the TTIP have been delayed by European civil society groups. This could lead to governments’ demanding the right of their national parliaments to vote on the deal, as opposed to allowing the unelected European Commission and the European Parliament to negotiate and decide.

To Brandeis’ Petri, the larger debate is simple. “The way this divide is playing out,” he said, “is people who feel that the American economy somehow would be better off if we went our own way, while others believe this can be a positive-sum game for countries working with each other.”

Others, such as the International Trade Union Confederation’s Burrow, reject that notion. “This is absolutely not about global trade or competition. It’s about corporate greed and the dominance of government by major corporations who are simply interested in their own profits.”