2018 seems to be the year of the Progressive trade agreement. The Trans-Pacific Partnership has been renamed the “Comprehensive and Progressive Agreement for Trans-Pacific Partnership” (CPTPP). Canada has floated proposals in the NAFTA renegotiation that it has advertised as progressive.
Populists in 2016 reminded us that trade agreements are inherently not progressive. Economic theory and real world experience agree on this point: trade favors capital over labor, and skilled workers over unskilled workers.
The backlash against trade, as reflected in the 2016 Presidential campaign (and to some degree Brexit), did not come out of nowhere. As the United States has pushed for more and more trade agreements, there has been no corresponding emphasis on addressing the inequality these agreements promote. But the financial crisis sharpened Americans’ focus on income inequality and juxtaposed the interests of Wall Street and Main Street.
That newfound concern over the relationship between Corporate America and government has not been confined to the financial world. The negotiation of TPP reflected the increased scrutiny over the role corporations play in forming government policy. Trade is an obvious candidate for this kind of skepticism, as it is formulated through an opaque process that seems (and is) heavily weighted in favor of corporate input. The U.S. government, be it the Department of State or the Department of Defense, engages in classified negotiations all the time — but trade negotiations are almost uniquely singled out when it comes to demands for transparency.
Just because trade, when left to the Invisible Hand, aggravates income inequality does not mean that a trade agreement can’t be progressive. The push for enforceable labor standards reflects the effort to improve the terms of these agreements. But in the United States, including enforceable labor (and environmental) provisions in trade agreements has been a bipartisan position since 2007. In a post-financial crisis world, those provisions cannot alone be considered progressive.
How do the CPTPP and the Canadian proposals stack up? Well, it’s hard to say, because they don’t seem to be public (see transparency issues, above). However, press reports shed some light.
The text of the CPTPP has not been released. But public reports seem to indicate that the TPP-11 have agreed to “suspend” the application of the special set of labor rules applicable to Vietnam. Bear in mind that Vietnam is not even eligible for GSP in the United States. Special rules in TPP were necessary, and appropriate, to promote meaningful worker rights there.
If reports are true – that these provisions have been suspended in the absence of U.S. participation – it would speak volumes about the commitment of the TPP-11 to meaningful worker rights in Vietnam, not to mention any other countries that have one-party rule and a prohibition on independent unions. That is not a progressive outcome.
Other changes are more in keeping with a progressive perspective. These include suspension of provisions seen as providing unwarranted patent extensions, as well as some aspects of investor-state dispute settlement.
Canada’s progressive proposals in NAFTA cover several issues: labor, environment, indigenous peoples, and gender.
According to press reports, the labor proposals include language addressing “right to work” laws, as well as Mexico’s labor regime. These are certainly areas of concern to progressives. However, these proposals seem to be a departure from Canada’s other trade agreements. For example, labor provisions in Canada’s agreement with Chile are on the model of the original NAFTA side letters – enforceable only with monetary penalties, capped at $10 million. The United States, on a bipartisan basis, rejected the monetary penalty approach years ago; even CAFTA, which has comparatively weak labor obligations, subjects the operative provision to proper dispute settlement. Yet when Canada and Chile amended other parts of their agreement in 2017, they left these dated labor provisions in place.
In this context, there are questions as to whether the NAFTA proposals are genuine, or simply a negotiating tactic.
There are parallel concerns about Canada’s proposal on the environment. Press reports indicate that the language is similar to CETA, Canada’s agreement with the EU. If so, the language is along these lines: “The Parties recognise the value of international environmental governance and agreements as a response of the international community to global or regional environmental problems and stress the need to enhance the mutual supportiveness between trade and environment policies, rules, and measures.” (Article 24.4) This language is tradespeak for provisions that are aspirational rather than binding. Indeed, the CETA environment chapter as a whole was carved out of the agreement’s dispute settlement mechanism in favor of what can perhaps best be described as a name-and-shame mechanism (Articles 24.15-24.16).
Gender and Indigenous Peoples
Canada has also tabled proposals in NAFTA on gender and indigenous people. A threshold question is whether, and how, international trade affects women and indigenous people differently than people in other communities. Without identifying the problem, it is difficult to evaluate whether trade agreement proposals offer any solutions.
Insight into the Canadian approach can be found in other trade agreements. For example, last year, Canada and Chile agreed to amend their existing agreement to include provisions on gender. A review of that chapter reveals language that is aspirational but contains no real commitments, other than setting up a committee to “report,” “facilitate,” “discuss,” “consider,” and “consider and discuss.”
A Canadian Member of Parliament pressed Foreign Affairs Minister Chrystia Freeland as to whether Canada was seeking binding or symbolic language; Minister Freeland demurred. In pursuing this line of questioning the Member, a Conservative, made it clear that he considered the Chile language “symbolic.”
The Downside of Overstating the Progressive Nature of an Agreement
If the benchmark of a progressive trade agreement is the effect that agreement will have on addressing inequality, then it is difficult to see how symbolic provisions, or inadequate provisions, satisfy that goal. To the contrary, they risk giving the appearance of doing more than they actually do, which contribtutes to trade skepticism when results don’t follow.
This approach is particularly problematic when negotiators characterize proposals as being progressive while shielding those proposals from public scrutiny. For all the complaints about secrecy surrounding TPP, the United States did publish its “green paper,” a proposal setting novel conservation goals for the TPP environment chapter. Publishing the paper allowed outside groups to evaluate the level of ambition for themselves.
Furthermore, as the line of questioning from the Conservative Member of Parliament indicates, labeling provisions as “progressive” has costs, in terms of making those provisions unpalatable to non-progressive legislators. Losing some votes may be the price of having progressive trade agreement provisions – but if that’s the case, then all the more reason those provisions need to be effective.
Concrete, rather than symbolic, provisions are possible. For example, indigenous Canadians floated a proposal that would recognize a 1794 treaty to allow members of the tribes on either side of the border to have privileged cross-border trading relationships, including an exemption from de minimis limitations, i.e., limitations on the amount of dutiable goods that can be entered duty-free within a given period of time. The de minimis amount in Canada is $20; the de minimis amount in the United States is $800. Modifying those provisions would directly affect the movement of at least some goods.
The Second Gilded Age
Comments abound that we are living in a Second Gilded Age. The original Gilded Age was followed by the Progressive Era. In that context, it is not surprising that negotiators are rushing to deem provisions “progressive” – the backlash is upon us. But the Progressive Era created real programs designed to help real people, not Potemkin provisions that look pretty but don’t withstand inspection.