In 2008, the Doha round of the World Trade Organization (WTO) talks broke down. The largely developed economies of the U.S. and the EU clashed with emerging economies such as China and India over a seemingly minor provision. The Special Safeguard Mechanism that allowed developing countries to temporarily raise tariffs to fight spikes in import volumes and falling prices was a technical quirk that concealed greater disparities between service economies and manufacturing economies. Ultimately, developing countries wanted protection against heavily-subsidized products from the wealthiest nations.
As the historic function of the WTO was to establish a robust global policy consensus for free trade, the schism revealed in the breakdown of the Doha WTO negotiations illustrates that a unified framework for trade is a distant memory. The break in the Doha talks also show that the ‘rules of trade’ are (and always were) an extension of the geopolitics of the winners–particularly those former colonial powers that formed the Bretton Woods institutions in the aftermath of World War II.
Despite the cleavages exposed during the Doha round, globalization has spread neoliberalism far across the iron curtain. Three land mark Free Trade Agreements (FTAs) demonstrate how far these rules can extend.
The Trade in Services Agreement (TiSA), the Trans-Pacific-Partnership (TPP), and the Trans-Atlantic Trade and Investment Partnership (TTIP) are each plurilateral trade agreements that together constitute the largest FTAs in modern history. Each of these agreements is poised to ‘rework’ the fundamental rules of trade on the world stage. TiSA includes at least 50 countries and encompasses 70% of global GDP. The TPP, between the U.S. and 11 other countries, aims to give American firms and corporations a more competitive edge in Asia, a development that many have stated also aims to contain China’s economic rise. The TTIP, between the U.S. and the EU, seeks to harmonize regulations and economic ties between the countries in favor of an American-led common denominator. Some commentators have also stated that the agreement is poised to isolate Russia by increasing economic integration between the U.S. and EU, possibly reducing EU reliance on Russian natural gas by lowering barriers to American exports of natural gas. Opponents of this theory have noted that lowering barriers to American crude oil exports would magnify negative environmental impacts. TPP accounts for 40% of global economic output, while TTIP would cover half of global GDP and a third of global economic output.
Despite claims that these deals will standardize all manner of policies affecting trade, the WTO baseline for international trade partnerships has already dissolved toward divergence and balkanization. Lines drawn in the sand between types of economies over the ‘rules of the road’ is uncharted territory. The Cold War was defined by ideological and geostrategic splits between superpowers, yet the splits these proposed plurilateral FTAs expose are of a different order entirely. The 21st century is the period of capital flows and trade liberalization; in effect, capitalism–as a trade philosophy–is unopposed. Yet disagreements over which version of free market trade is best and further disagreements over whom the winners in the free market system ought to unearth fault-lines that show no sign of mending.
The BRICS (Brazil, Russia, India, China, South Africa), which includes China–the world’s second largest economy–are all noticeably absent from these FTAs. Many of the BRICS countries favor state-led industrialization, as opposed to the neoclassical economic orthodoxy of private sector-led growth and selective austerity favored by the Organization of Economic Cooperation and Development (OECD) countries. The United States is the only country that appears in both the TPP and TTIP, a likely indicator that American private and public interests are driving these two agreements forward. The exclusion of the BRICS, according to a group of researchers from the University of California at Berkeley, is due to the policy of Competitive Liberalization. According to this theory, the U.S., seeking to set the rules of trade in the shadow of the WTO, will force the BRICS and similar countries excluded from these agreements to adopt the new ‘rules of trade’ or risk losing competitiveness in the global economy. Many countries, including China, utilize this policy in practice through bilateral and multilateral trade agreements, but the scale of TiSA, TPP, and TTIP is not comparable to any existing trade agreements or cooperative pacts.
How these agreements will impact trade and the economic growth that is presumed to follow is the subject of intense debate both globally and domestically within the countries involved. Although each agreement is different, there are notable similarities between all three. The publics of the proposed signatories have limited oversight, as all negotiations are closed, with elected representatives having only limited access to the texts of the agreements. The only publicly available manuscripts of the FTAs are on the Wikileaks website. The agreements standardize trade liberalization in areas of finance, transportation, intellectual property rights, e-commerce, transparency, and domestic regulation.
Many consumer advocacy groups and NGOs have stated that these agreements will facilitate the movement of wealth upward, particularly toward those with stock in service sectors, and send manufacturing jobs in countries such as the U.S. to developing countries with cheaper labor costs. Such groups also state that the FTAs, particularly the TTIP between the U.S. and the EU, will competitively reduce regulations, such as EU precautionary principle-based bans like those on hormone-treated beef and various pharmaceutical products. Another feature of each agreement is the controversial Investor State Dispute Settlement (ISDS) clause, which would subject countries to lawsuits filed by multinationals before tribunals of appointed judges if government regulations impact corporate profits. One such attachment to American TPP legislation would punish companies that support the Boycott Divestment Sanctions (BDS) movement against the state of Israel for its alleged war crimes. The Economic Policy Institute, an American think-tank, has compared TPP to the North American Free Trade Agreement (NAFTA) and maintains that TPP will likely cause a huge transfer of American manufacturing jobs and middle class wealth outward with no policy mechanism for containing these impacts.
Political tensions between the U.S. and EU on one side and between China and Russia on the other showcase chasms that define international relations in the 21st century. American and European actors from the public, private, and non-profit sectors appear to operate under the assumption that American and European military might and economic premiership is sustainable and beneficial to the generality of citizens within these countries. Such post-financial crisis protectionism embodies the same assumptions of privilege inherent in a global trade framework that favors American and European interests. The reality is that political and economic might is splintered and hegemonic permanency is gone. These FTAs utilize the power of the nation-state to implement a trade framework that gives a great deal of power to multinational corporations, and it appears that nation-states are prepared to bear the effects of these agreements.
As economic growth shifts towards Asia, along with manufacturing and other elements of the ‘real economy,’ competition over who can maximize these markets is accompanied by an aggressive and sometimes militaristic tone. Despite aggressive rhetoric, economic weight is still distributed across a host of actors from the East and West. The Chinese-led Regional Cooperative Economic Partnership (RCEP) is a 16 country FTA that has significant membership overlap with the U.S.-led TPP. Japan, Malaysia, New Zealand, Australia, and Brunei are among those taking part in both sets of trade talks. The RCEP states account for 28% of the global economy. Many European countries have also joined the new Chinese Asian Infrastructure Investment Bank (AIIB), in spite of significant U.S. disapproval. The AIID intends to establish a Chinese-led alternative to the American-and European-dominated Asian Investment Bank and International Monetary Fund (IMF).
TTIP is perhaps an attempt by the U.S. to harmonize its trade objectives with the EU, at the likely expense of tougher regulations in both countries. However, there appear to be significant differences between the U.S. and the EU on many fronts, particularly in the aftermath of the 2003 invasion of Iraq. Increasing security cooperation and the aggressive multilateralism favored by the Obama administration may make these differences of little consequence–and TTIP appears to be the embodiment of this principle.
Complimentary geopolitical and security splinters that exist alongside the ones reflected in these trade agreements underscore the importance of trade integration for some and exclusion for others. For instance, if Ukraine entered the EU as a Customs Union, it would be prevented from entering into a Russian FTA.
If prevailing alliances are the mechanisms of foreign policy, they also seem to be the bulwarks of trade policy. The United States is making one last bid to secure its place as the sole hegemonic superpower. Yet, these FTAs are confounded by the irony that many countries–particularly former American and European colonies– have a seat at the table because no one power is dominant. In effect the U.S. is setting up a race that it not only has already lost, but which likely cannot be won by any single country.
So then, what is the end result of running a frivolous and potentially destructive race?