Monday, June 3, 2013

A Bunch of Acronyms and Some Trade Politics

. Monday, June 3, 2013

Last February Sarah and I* speculated in a short National Interest article that a EU-US trade deal (Transatlantic Trade and Investment Partnership, or TTIP) could put pressure on the recent prevalence of investor-state dispute clauses (ISDs):

While ISD clauses are widespread, they usually exist within the context of treaties between states characterized by economic asymmetries. For instance, of the more than 2000 bilateral investment treaties (BITs) worldwide, none exist between two advanced industrial countries. The United States generally embraces investor-state dispute clauses; both their model free-trade agreement (FTA) and BIT contain such language. However, it is far from certain that a US-EU treaty would include an ISD clause. Generally, advanced industrial countries have shown they are more interested in promoting legal regimes that protect "their" multinationals while they are less willing to cede jurisdiction over investment disputes in which they might be defendants.
Today, via Simon Lester, we see that the EU is not super-thrilled with the idea of having an ISD in TTIP that is typical of US ISDs, although it's tough to know from the formal language exactly what the EU is after. Or as Lester puts it: 

What are the authors saying here? Are they saying: 
1. Investment protection and investor-state will only be included if high EU standards for investment protection, as opposed to the weaker U.S./Canadian standards, are met? 
or are they saying: 
2. Investment protection and investor-state will only be included if the usual provisions are weakened so as to ensure that public policy objectives can be pursued? 

I don't know the answer (perhaps Sarah could chime in?), but it seems clear that any ISD in TTIP will have to be different than that in the model US bilateral investment treaty. So far our article is holding up pretty well.

Meanwhile, Eyes on Trade doesn't like Obama's secrecy on another potential trade deal, the Trans-Pacific Partnership (TPP)**. They also nail the reason for the secrecy:
So why keep it a secret? Because Mr. Obama wants the agreement to be given fast-track treatment on Capitol Hill. Under this extraordinary and rarely used procedure, he could sign the agreement before Congress voted on it. And Congress’s post-facto vote would be under rules limiting debate, banning all amendments and forcing a quick vote.
Eyes on Trade think all of this is severely crippling democracy. In a way it is, it by "democracy" you mean legislators favoring parochial interests over the good of the nation as a whole. The Congress has often given the President fast-track authority. Clinton had it for part of his terms. George W Bush had it for most of his. The reason for this is so that individual Congresspeople can't fiddle with the deal in order to privilege local constituencies after its been agreed to by the negotiators of both sides. It's basically a legal way to curtail rent-seeking exceptions and other Congressional shenanigans. These are generally questionable on welfare grounds when things like tax bills are being debated, but when negotiating a trade deal they can be deadly: each new Congressional exception has to be approved by the foreign party, which will likely demand further concessions in exchange, which would have to be approved by Congress in turn, etc. Each iteration of this lowers the chance of any deal being reached. Fast track authority cuts that process out. Interested groups can still lobby the US Trade Representative, and Congress still has to approve any deal, so it's not exactly undemocratic. But fast track makes the policy process more efficient.

Obama hasn't been given fast track authority. Democrats have typically been skeptical of trade deals -- remember that renegotiating NAFTA was a big issue during the 2008 Democratic primary -- and Republicans seem intent on blocking anything Obama chooses to do on grounds of principle. It doesn't seem to have been a major priority for Obama until now, as he's preferred to focus on health care, immigration, and other issues first. But without fast track trade deals are much more difficult to complete. So much so that foreign countries often prefer not to negotiate at all because they know that whatever agreement they reach will end up being altered by Congress. Given that, what's the point of negotiating in the first place?

Although they are fairly obscure these issues are quite important. I continue to think there's a decent chance that Obama gets fast track, and if he does that some deals will get done. The business community is very interested in seeing agreements made, so they will likely push the GOP to give in to Obama. Democrats are a bit less enthusiastic, but are more likely to give Obama authority than they would be to lengthen Romney's leash. And if Sarah and my article is correct, there are not many important interest groups that oppose a EU-US deal. The TPP makes sense in a number of ways as well.

All of this remains to be seen of course, but I'm still pretty optimistic that we'll see some movement on trade during Obama's second term.

*Really Sarah. She knows much more about ISDs than me and wrote that part of the article more or less on her own.

**Yes I know. TPP and TTIP and ISDs, oh my.

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A Bunch of Acronyms and Some Trade Politics
 

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