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Trans-Plutocratic Partnership Part 1

If you’re running for election these days, it’s all the rage to talk about income inequality — from Prime Minister Justin Trudeau’s pledged tax hikes on the richest one per cent, to U.S. presidential hopefuls Bernie Sanders and Hillary Clinton wanting the rich to pay their fair share, to U.K. Labour leader Jeremy Corbyn’s admiration of Marx.

It’s not just the Council of Canadians talking. It’s the OECD, the IMF, and even articles in Italian Vogue magazine about Thomas Piketty, economist and income inequality guru. Recently, Oxfam said that the world’s richest 62 people, most living in the U.S., own as much wealth as half of the population

Last week, in his State of the Union address, U.S. President Barack Obama made a passionate plea for the 99 per cent, saying that, “after years now of record corporate profits, working families won’t get more opportunity or bigger paycheques just by letting big banks or big oil or hedge funds make their own rules at everybody else’s expense. (Applause.) …. Food stamp recipients did not cause the financial crisis; recklessness on Wall Street did. (Applause.)”

He also argued that globalization was eroding workers’ rights and concentrating economic benefits at the top, that it is now harder for people to pull themselves out of poverty.

And then, in the same breath, he flogs the Trans-Pacific Partnership. “Approve this agreement. Give us the tools to enforce it. It’s the right thing to do,” he says.

Come again?

The very globalization that is hindering Obama’s beloved Main Street while bolstering Wall Street is exemplified by trade agreements such as the TPP. 

A study from Tufts University issued this month showed that the TPP is not the economic panacea proclaimed by the free trade gospel movement. Yes, there will be economic growth in countries signing the TPP, but this growth will be negligible. In Canada, it is projected to be 0.28 per cent over 10 years.

And the risks are significant. A loss of 58,000 jobs in Canada and greater inequality due to labour’s reduced share of the gains achieved under the agreement will reinforce the very inequality that Obama wants to resolve.

This study is based on the United Nations economic model. 

The World Bank, no shirker in backing free trade agreements, uses another model. But its premise, assuming that there is full employment, is wrong. Even with that context, however, the World Bank study still only projects a growth of less than one per cent for Canada’s economy by 2030.

“What trade agreements are really doing is fixing the rules of international trade. Rules, in themselves, are not bad things. But these rules are far from innocent.”

But growth is good, right? We’ll all have good jobs, a Prada handbag and a new car. But growth doesn’t necessarily mean the average Canadian is better off. Many economists are pointing to the phenomenon of economic growth with stagnant job growth. As one writer wrote in the Guardian, “In the last 35 years, the world has experienced the fastest economic growth in human history. Yet, according to the Organization for Economic Co-operation and Development (OECD), unemployment went up.”

Maude Barlow, chair of the Council of Canadians, explains eloquently how Canada’s income distribution before the signing of the North American Free Trade Agreement resembled that of an egg, with a healthy middle class. It has since hollowed out in the middle.

If we look at the economy like a pie with workers getting a certain portion and corporations another portion, in the four decades before NAFTA, workers were getting more of the pie. Since NAFTA, workers have been getting a smaller portion, according to Bruce Campbell of the Canadian Centre for Policy Alternatives. In particular, people without college educations see declines in their incomes.

Joseph Stiglitz, the American economist and Nobel laureate, says in the New York Times, “The argument was always that the winners could compensate the losers. But the winners never do. And that becomes particularly relevant when we have a society with as much inequality as we have today.”

There is also the myth that somehow trade deals will “open markets,” that signing a trade agreement means we’ll soon be selling more car parts to Japan, and wheat to Malaysia for example. David Hamilton, an economist in the officer of Senator Céline Hérvieux-Payette, crunched the numbers. Free trade agreements have been proliferating but, in some cases, have exacerbated trade deficits. They have not created trade surpluses.

Jim Stanford, senior economist with the Unifor trade union, writes: “These FTAs will have zero immediate impact on key indicators like employment, investment and exports (and their long-run impact, likely negative in my view, won’t be dramatic in any event). But signing FTAs is a high-profile symbolic act, which makes the government seem competent and globally engaged (especially when cheered on by the breathless boosterism of most of the media).” 

Trade agreements are also seen as lowering tariffs. But the World Bank says tariffs amongst TPP countries are already low. The goal is to go after non-tariff barriers. These take many forms, but can affect areas such as government procurement, regulations, policies and supports that a country may institute.

Out of the 30 chapters in the TPP, only two truly focus on tariff elimination, while six deal with traditional trade issues. So, what trade agreements are really doing is fixing the rules of international trade. Rules, in themselves, are not bad things.

But these rules are far from innocent. The TPP is the new corporate rulebook, and it is eroding our public policy space to benefit the world’s plutocrats.

First published in the Huffington Post.

Read part two of this blog post here.

Photo: Obama hugging people after the State of the Union Address, Steve Baker, Flickr Media Commons