This week the United States will host a meeting of Trans-Pacific Partnership Trade Ministers in Atlanta. The National Cattlemen’s Beef Association (NCBA) urges a swift conclusion to a TPP deal.
“Cattlemen and women have high expectations for the TPP as a true 21st century agreement, eliminating tariff and non-tariff trade barriers across 12 member countries,” said Philip Ellis, NCBA president. “We are encouraged by reports of a ministerial meeting this week in Atlanta and urge our negotiators to work quickly to bring this agreement to conclusion. Every day that goes by without a comprehensive agreement erodes our market share in these member countries and it is imperative that our negotiators find common ground.”
Senator Elizabeth Warren (D-MA) has urged caution, though, stating this warning in the Washington Post: "The United States is in the final stages of negotiating the Trans-Pacific Partnership (TPP), a massive free-trade agreement with Mexico, Canada, Japan, Singapore and seven other countries. Who will benefit from the TPP? American workers? Consumers? Small businesses? Taxpayers? Or the biggest multinational corporations in the world?"
She answered her rhetorical questions this way: "One strong hint is buried in the fine print of the closely guarded draft. The provision, an increasingly common feature of trade agreements, is called 'Investor-State Dispute Settlement,' or ISDS. The name may sound mild, but don’t be fooled. Agreeing to ISDS in this enormous new treaty would tilt the playing field in the United States further in favor of big multinational corporations. Worse, it would undermine U.S. sovereignty."
The problem caused by ISDS is it would force binding arbitration in trade disputes to a panel of 'judges' outside the U.S., exposing the government to fines of millions of dollars. Think of it as akin to the recent WTO dispute over animal agriculture in North America but potentially on a much larger economic scale.
And also think of who is most favored by this treaty. If your business is dominant on a world-wide scale, like American agriculture, you'll probably win in any trade dispute. If you're just another player, like our medium to small businesses, you might have a problem with dispute resolution.
ISDS is a little known and, until recently, a rarely used arbitration system that's been on the fringes of international trade dispute settlements since 1959.
The Massachusetts Senator noted the use of ISDS is on the rise around the globe. Until 2002, there were less than 100 ISDS claims made worldwide. As large international businesses discovered its legal benefits, claims took off.
ISDS hit the big time with cases, both real and insanely frivolous, filed by all kinds of companies. According to Warren, "in 2012, there were 58 cases filed. Recent cases include a French company that sued Egypt because Egypt raised its minimum wage, a Swedish company that sued Germany because Germany decided to phase out nuclear power after Japan’s Fukushima disaster, and a Dutch company that sued the Czech Republic because the Czechs didn’t bail out a bank that the company partially owned. U.S. corporations have also gotten in on the action: Philip Morris is trying to use ISDS to stop Uruguay from implementing new tobacco regulations intended to cut smoking rates."
The NCBA, anxious to maintain our strong hand in the international beef market, said "Last year Australia and Japan signed the Japan-Australia Economic Partnership Agreement that phases down the tariff on beef imports over 15 years and removes a 50 percent snapback tariff on Australian beef. This agreement gives Australia a competitive advantage and, as a result, Australia is taking market share away from U.S. beef. The Trans-Pacific Partnership will put U.S. beef producers on a level playing field with Australian beef producers."
With the legendary status of American beef around the world plus the strong international ties forged by the USMEF, a level playing field favors the U.S.
Ellis wants that playing field leveled ASAP and, knowing the detrimental trade effects of a strong tilt toward aggressive Australian beef resources, cautioned, “This is why agriculture cannot afford to delay action any longer. Other nations are actively pursuing individual trade agreements to benefit their producers. The U.S. is already one of the most open markets in the world and if we do not act to expand new market opportunities in these growing economies, our cattle producers will be severely disadvantaged.”
The TPP agreement will join the United States with 11 nations of South America, North America and Asia, providing a heavy geopolitical counterweight to the rising economic impact of China. The pact would be especially valuable if Japan is willing to join.
Japan's participation would make the agreement an economical powerhouse. Their negotiators have a bone of contention,though; an unshakeable insistence on protecting their agricultural interests at all costs.
"So it was disappointing," editorialized the Post, "to learn that a meeting (last September) between American and Japanese trade negotiators in Washington broke up after only an hour over the same old issue, Japanese resistance to U.S. farm exports, that has plagued the two nations’ dealings for decades. The Japanese departed without touching a sandwich buffet that had been laid out in anticipation of an extended working session, according to the Wall Street Journal."
The Brookings Institution estimated the TPP could generate $5 billion in economic benefits to the US in 2015, and $14 billion by 2025. Their research indicated growth opportunities for small and medium business exporters in the US, which represented 40% of exports as of 2012. Offsetting a more difficult method of arbitrating trade disputes, small businesses tend to benefit disproportionately from trade liberalization.
The New York Times says, "the clearest winners of the Trans-Pacific Partnership agreement would be American agriculture, along with technology and pharmaceutical companies, insurers and many large manufacturers" who could expand exports to the other nations that have signed the treaty. Other businesses might suffer setbacks or find it more difficult to enter important markets surrounding the Pacific basin.