Senator Elizabeth Warren and the Values of Free Trade

Senator Elizabeth Warren was interviewed today on NPR's Morning Edition.  Read and listen here.

It struck me that certain aspects of Senator Warren's argument against the Trans-Pacific Partnership (TPP), a 12-nation trade and investment treaty, were, though hardly outrageous, at least worth looking at more closely.

1) Senator Warren states that 'corporations under this deal are going to get to sue countries for regulations they don't like and...the decisions are not going to be made by courts, they're going to be made by private lawyers.'  There are a couple issues here:

First, it needs to be pointed out that companies doing business in another country can always, trade deal or no, sue that country if the company believes it has been unfairly and/or illegally regulated.  The difference is that in the absence of a trade agreement they would have to do so in that host country's own courts.  This is not a particularly daunting prospect if you're an Asian company doing business in the U.S., where local courts are, by comparison, extremely fair, competent and efficient.  But U.S. companies doing business in, say, Vietnam, might not relish the prospect of trying to hold the government of Vietnam to fair regulatory practices in the courts of Vietnam.  Thus, the provision of the treaty which grants to companies doing business in a foreign country the right to bring a claim against that host country in arbitration, are in fact far more beneficial to U.S. interests than to the interests of any non-U.S. company doing business in the U.S.  Put simply, such arbitration provisions are not being pushed on us by devious foreign countries seeking to circumvent established standards of fair play; rather, we wrote these provisions, and we gain from them far more than we lose.

This brings up a second point.  Senator Warren repeatedly says that 'decisions' in any dispute are going to be made by 'private,' and/or 'corporate' lawyers.  She says this enough times to raise the suspicion that her staff must have stressed to her the need to evoke the vague dastardliness of 'corporations' and 'lawyers,' rather than referring to the process of Investor-State Dispute Settlement (ISDS) as the more or less neutral and procedurally sound process that it is, namely, the process of arbitration.  While it's true that arbitrators are paid by the parties to the dispute, and thus in this sense 'private,' they are bound by the procedural rules of the arbitral venue under which they are operating.  The most common of these venues are the Arbitration Institute of the Stockholm Chamber of Commerce, the London Court of International Arbitration, and the International Center for the Settlement of Investment Disputes (ICSID) in Washington, D.C.  These are hardly the shadowy back rooms where Senator Warren seems to suggest that the protection of American interests will be dealt away for a few dollars by unscrupulous 'corporate lawyers.'  In fact, whatever the moral failings of American businesses in recent years, why is it assumed at all that attorneys who work for private businesses (again, those nefarious 'corporate lawyers') are unscrupulous?  To insinuate this is to edge up on the kind of inflammatory demonizing that so paralyzes and degrades our national dialogue, and it's surprising to see it come from a dedicated guardian of the public interest like Senator Warren.

2) Senator Warren expresses reservations about so-called fast track authority ('greasing the skids') for the executive branch to negotiate trade treaties which would then be subject only to approval or disapproval, and not to amendment, by Congress.  This reservation is not ideological, but more a part of the eternal American give-and-take between the branches of government.  The argument on that count does not begin, nor will it end with Senator Warren.  I bring it up here only to point out that especially in the case of trade and investment treaties, with their mind-boggling number of technical provisions relating to individual products, it is difficult to imagine how the USTR could conduct a viable negotiation with other nations if those nations knew that every agreement reached with the American negotiators could later be nitpicked to death and amended to the point of unrecognizability by a Congress with complex motives.  Such a state of affairs would undercut any credibility our negotiators would have in making promises, and the resulting unwillingness of our trading partners to negotiate with us would redound to the detriment of American credibility generally; it would be a (further) signal to the world that our house is not in order.

3) One suspects as well that an effort to conduct a reasonable, viable negotiation is behind the secrecy with which the TPP has been negotiated.  Irrespective of other considerations, it seems rather certain that should the negotiating parties' every proposition be shouted about on television in the apocalyptic tones that now characterize our political and cultural climate, basic trust between the parties would be sacrificed, quickly to be replaced by exasperation among our partners, and demoralization among our own negotiators.  One struggles to understand how this could be a sustainable, let alone a desirable, state of affairs.

4) Senator Warren points out that 85% of the 500 individuals comprising 28 working groups that have 'helped shape the trade deal' are 'either corporate executives — senior corporate executives — or lobbyists for the industries that are being affected.'  Senator Warren is unarguably right to be concerned that the full diversity of American constituencies be allowed to provide input into U.S. trade policy.  However, while I don't know the source of the Senator's statistics, nor how they were calculated, I would make two points.  First, the USTR, throughout the negotiating process has opened multiple public comment periods on multiple aspects of the TPP, and received testimony and written submissions from everyone from the United Steel Workers to the World Wildlife Federation to the University of Tokyo (see, e.g., here).  Second, though one may assume that industry experts will push for the most beneficial possible terms for their companies and industries, their very expertise is crucial to an understanding of what individual provisions actually mean and of what impact the agreement as a whole will have on various sectors of the U.S. economy.  It is difficult to imagine that USTR negotiators will be so in thrall to these experts that they (the negotiators) will be incapable of taking into account the experts' natural biases in favor of their own interests.  This is not to say that there are never damaging, improper relationships between government officials and industry insiders, or that undue influence is never brought to bear.  At the end of the day, however, government and the private sector have to rely on and complement each other, and the mere fact of private sector involvement in the formation of trade policy is not necessarily evidence of anything untoward or insidious.

It is true that my personal instinct is to favor free trade and investment.  In fact, I'm interested in a line of thinking that holds it as something of a human right -- the right to full expression of professional identity, we might say.  (Though there are clearly problems with such a formulation, perhaps chief among them the fact that very large businesses do not possess anything like the nearly sacred 'identity' that persons may be said to have.)  But to be generally in favor of international trade and investment that is as free as it can safely and reasonably be is not to be a blood ideological foe of environmental or labor protection.  Rather it is to begin from the premise that exchange, of nearly every kind, between the diverse peoples of the earth is good, and that instead of opposing it, those who have righteous concerns about its consequences should work to make it better, more fair, more just.

I'm reminded of a quote in the New Yorker from then-U.S.-Senate-candidate Obama, who opined that most people are ultimately in favor of free trade, whether they realize it or not, because (among other things) they like having affordable, high-quality consumer goods.  "They just don't want their communities destroyed" because of it, he said.  That is surely the balance we have to strive for.

There's likely no reason to doubt that Senator Warren's reservations are principled and heartfelt.  I write only to clarify some of her statements in my own mind, and to examine as fully as possible whether her outright objection to free trade and investment has merit or ultimately fails to persuade.  For the reasons above, I don't think the Senator's argument carries the day.