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Stiglitz writes: "The United States and the world are engaged in a great debate about new trade agreements. Such pacts used to be called 'free-trade agreements'; in fact, they were managed trade agreements, tailored to corporate interests, largely in the US and the European Union."

Activists project messages about the Trans-Pacific Partnership onto the exterior of the Grand American Hotel in Salt Lake City. (photo: Jerrick Romero/Backbone Campaign/Flickr)
Activists project messages about the Trans-Pacific Partnership onto the exterior of the Grand American Hotel in Salt Lake City. (photo: Jerrick Romero/Backbone Campaign/Flickr)

How Trade Agreements Amount to a Secret Corporate Takeover

By Joseph Stiglitz, Reader Supported News

23 May 15


he United States and the world are engaged in a great debate about new trade agreements. Such pacts used to be called "free-trade agreements"; in fact, they were managed trade agreements, tailored to corporate interests, largely in the US and the European Union. Today, such deals are more often referred to as "partnerships,"as in the Trans-Pacific Partnership (TPP). But they are not partnerships of equals: the US effectively dictates the terms. Fortunately, America's "partners" are becoming increasingly resistant.

It is not hard to see why. These agreements go well beyond trade, governing investment and intellectual property as well, imposing fundamental changes to countries' legal, judicial, and regulatory frameworks, without input or accountability through democratic institutions.

Perhaps the most invidious - and most dishonest - part of such agreements concerns investor protection. Of course, investors have to be protected against the risk that rogue governments will seize their property. But that is not what these provisions are about. There have been very few expropriations in recent decades, and investors who want to protect themselves can buy insurance from the Multilateral Investment Guarantee Agency, a World Bank affiliate (the US and other governments provide similar insurance). Nonetheless, the US is demanding such provisions in the TPP, even though many of its "partners" have property protections and judicial systems that are as good as its own.

The real intent of these provisions is to impede health, environmental, safety, and, yes, even financial regulations meant to protect America's own economy and citizens. Companies can sue governments for full compensation for any reduction in their future expected profits resulting from regulatory changes.

This is not just a theoretical possibility. Philip Morris is suing Uruguay and Australia for requiring warning labels on cigarettes. Admittedly, both countries went a little further than the US, mandating the inclusion of graphic images showing the consequences of cigarette smoking.

The labeling is working. It is discouraging smoking. So now Philip Morris is demanding to be compensated for lost profits.

In the future, if we discover that some other product causes health problems (think of asbestos), rather than facing lawsuits for the costs imposed on us, the manufacturer could sue governments for restraining them from killing more people. The same thing could happen if our governments impose more stringent regulations to protect us from the impact of greenhouse-gas emissions.

When I chaired President Bill Clinton's Council of Economic Advisers, anti-environmentalists tried to enact a similar provision, called "regulatory takings." They knew that once enacted, regulations would be brought to a halt, simply because government could not afford to pay the compensation. Fortunately, we succeeded in beating back the initiative, both in the courts and in the US Congress.

But now the same groups are attempting an end run around democratic processes by inserting such provisions in trade bills, the contents of which are being kept largely secret from the public (but not from the corporations that are pushing for them). It is only from leaks, and from talking to government officials who seem more committed to democratic processes, that we know what is happening.

Fundamental to America's system of government is an impartial public judiciary, with legal standards built up over the decades, based on principles of transparency, precedent, and the opportunity to appeal unfavorable decisions. All of this is being set aside, as the new agreements call for private, non-transparent, and very expensive arbitration. Moreover, this arrangement is often rife with conflicts of interest; for example, arbitrators may be a "judge" in one case and an advocate in a related case.

The proceedings are so expensive that Uruguay has had to turn to Michael Bloomberg and other wealthy Americans committed to health to defend itself against Philip Morris. And, though corporations can bring suit, others cannot. If there is a violation of other commitments - on labor and environmental standards, for example - citizens, unions, and civil-society groups have no recourse.

If there ever was a one-sided dispute-resolution mechanism that violates basic principles, this is it. That is why I joined leading US legal experts, including from Harvard, Yale, and Berkeley, in writing a letter to President Barack Obama explaining how damaging to our system of justice these agreements are.

American supporters of such agreements point out that the US has been sued only a few times so far, and has not lost a case. Corporations, however, are just learning how to use these agreements to their advantage.

And high-priced corporate lawyers in the US, Europe, and Japan will likely outmatch the underpaid government lawyers attempting to defend the public interest. Worse still, corporations in advanced countries can create subsidiaries in member countries through which to invest back home, and then sue, giving them a new channel to bloc regulations.

If there were a need for better property protection, and if this private, expensive dispute-resolution mechanism were superior to a public judiciary, we should be changing the law not just for well-heeled foreign companies, but also for our own citizens and small businesses. But there has been no suggestion that this is the case.

Rules and regulations determine the kind of economy and society in which people live. They affect relative bargaining power, with important implications for inequality, a growing problem around the world. The question is whether we should allow rich corporations to use provisions hidden in so-called trade agreements to dictate how we will live in the twenty-first century. I hope citizens in the US, Europe, and the Pacific answer with a resounding no. your social media marketing partner


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+23 # Walter J Smith 2015-05-23 20:01
Thank you for articulating these things so clearly.

Now, hopefully, a few more politicians will see the light, and stop being so radically anti-American with their votes in favor of that Constitution-un dermining pile of trade agreements.

Maybe. I have lost faith in more than a handful of our elected representatives and Senators. Ron Wyden, of OR, for example, has not one whit of hesitation to join in that international criminal cabal whose design is destroying the US Constitution.

Perhaps he doesn't understand what he is doing. It is always possible that ignorance precludes fundamental civic decency, especially in high office.
+13 # itchyvet 2015-05-24 00:02
Walter, it has become glaringly obvious to me, over the last 15-20 years,( and in fact it has been PROVEN) that the U.S. Government is no longer a Democracy yet, the citizens of the U.S. blindly continue to behave as if it is. FAITH in such representatives is misguided at best, especially after years of evidence proving beyond a shadow of doubt these ALLEGED representatives are nothing of the sort. From where I sit, folks are usually judged by their actions, not the crap that spews from their mouths, and in the last 15-20 years very few representatives in Washington can claim they have ACTED with their constituents interests first.
This being the case, I fail to understand why anyone would still expect such representatives to all of a sudden turn around and act responsibly, when the record shows the opposite ?
Your representative KNOWS EXACTLY WHAT HE'SHE IS DOING, and that is responding to the folks who cough up the money to ensure he stays where he is, with all the lurks and perks until retirement.
Constituents be buggered.
+3 # BobboMax 2015-05-25 10:21
Quoting Upton Sinclair, 'It is difficult to get a man to understand something, when his salary depends on his not understanding it.'

I'm an Oregonian and I'm dismayed by Wyden's behavior- he's done such fine work on the NSA and has completely disappointed me on TPP. He's ignored all requests for an explanation of the contradictions in his positions.
-31 # FDRva 2015-05-24 00:50
I really want to believe Joe Stiglitz.

But I do not.

Why is he lying?
+7 # Inspired Citizen 2015-05-24 06:38
He's not lying; Obama and his cronies are lying.
+8 # RGV.REG 2015-05-24 10:32
FDRva: Why is it that you wish to create doubt?
How about you taking each of Stiglitz's statements and express whether you feel they are true or not... AND TELL WHY. Then we can have a factual discussion.
+1 # A_Har 2015-05-26 13:04
Quoting FDRva:
I really want to believe Joe Stiglitz.

But I do not.

Why is he lying?

Stiglitz is one of the few people who have worked in government who has fought for ordinary people's well being and has some sense of integrity.

I believe him as this is not the first time he has taken such a position.
-27 # FDRva 2015-05-24 01:07
Dr. Stiglitz might want to reconsider his arrangement with the incumbent president.
+10 # Inspired Citizen 2015-05-24 05:49
Stiglitz us understating the case against the TPP and TTIP (Obamatrade). They would be an international, corporate coup des lois.

These rigged regulatory regimes are an attempt to invert democratic self-government into international corporate rule.

This is a "When in the course of human events" type moment, a pivot point in American history.
+5 # RGV.REG 2015-05-24 10:35
Shouldn't the TPP really be called THE FASCIST TAKEOVER AGREEMENT (TFTA) !
+13 # Trish42 2015-05-24 05:57
Why are we surprised by the TPP? Anytime you have a country run by a collusion between corporations and the government, i.e. a fascist state, the people lose!!
+7 # Vardoz 2015-05-24 10:51
This TPP is a nightmare for us How Obama can back something so damaging to our Democratic system is unbelievable!!! And we better do everything we can to try and stop it. This is a war against us and we can either roll over and play dead or protest this this corporate take over. The TPP is serious threat to our health, safety & welfare, to our lives & if we don't get off our sorry butts & speak out & protest loud & clear in big numbers, we don't have a chance. We may fail anyway & there are no guarantees but we must try & try hard!!!! Sanders is strongly against the TPP as is Warren & Grayson & others. I call the white house comment line everyday & my reps. I email Obama at expressing my outrage about this constantly relating parts of articles like this one. So we should all get on the horn & launch a tsunami of calls. It would also be nice to have street protests across the nation over & over letting these fuking abusive corporations know we are not going to take this lying down. So let's join Stiglitz to save our lives. We should have the right to sue corporations for limiting our much needed revenues for tax evasion!!! For too much outsourcing that is hurting our economy & sue them for polluting our environment that is a threat to our health, our children's lives & our futures. This TPP is a is essentially a crime against humanity & a form of treason against our sovereignty!!!! This is a very, very serious threat for us & our nation.
+1 # A_Har 2015-05-26 12:59
Quoting Vardoz:
This TPP is a nightmare for us How Obama can back something so damaging to our Democratic system is unbelievable!!!

Since I never supported him or voted for him, it is no surprise to me. (I voted for write-ins). I always saw him as a head fake and a Trojan horse.

In any case, here is an article from the Guardian (UK) that might show us the shape of things to come:

EU dropped pesticide laws due to US pressure over TTIP, documents reveal

US trade officials pushed EU to shelve action on endocrine-disru pting chemicals linked to cancer and male infertility to facilitate TTIP free trade deal

Arthur Neslen Brussels

Friday 22 May 2015 06.58 EDT

IMO this demonstrates they do not CARE about anything but their profit$.

We are screwed.
0 # Robbee 2015-05-25 15:14
there is nothing that global corporations can do to undermine our democracy that cannot be undone by a con-am that gets private funds out of elections, federal, state, local, and out of public officeholders pockets, so that plugocrats wield money as their weapon against we the people
+4 # Shorey13 2015-05-25 23:01
The concept of "Free Trade" was created by Britain near the end of the 19th Century when their Empire and their navy dominated world trade. Like "Free Enterprise," the first rule is that NOTHING can ever be free. Everything must have a price. And that price is always determined by the dominant market players, not by the market. "Free," "Freedom," "Liberty" and similar words mean only what the dominant players want them to mean.

Moreover, secrecy and democracy are mortal enemies. The fact that the TPP is being created in secret is proof that it cannot stand in the light. There is no doubt that it is yet another step in the corporate takeover of the world economy. The real issue is whether or not this plan is acceptable. Since the President (who has always been a moderate Republican) and the Congress want it, it remains for the people to do whatever is necessary to stop it.

Again and again, I ask: how bad does it have to get?

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