Diatribes of Jay

This is a blog of essays on public policy. It shuns ideology and applies facts, logic and math to economic, social and political problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear. Note: Profile updated 4/7/12

15 June 2015

Why the TPP’s “Pay for Rules” Provision Must Go


[This post is a follow up and continuation of a single-page series of posts on the TPP debacle. It appears separately here because, I think, it holds the key to getting the TPP adopted.]

In an earlier post, I waffled on the narrow issue, because in the big picture, something like the TPP is a necessity, as least for those of us who aren’t Chinese. But the current draft’s still-secret “pay for rules” provision is, as far as we know, an abomination in just about every way.

How so? Let me count the ways.

1. It’s far, far too broad.
2. Nothing rounds its sharp edges.
3. It’s unnecessary.
4. It sends China a horrible message.
5. It won’t be hard to get rid of.
6. It’s a bastard spawn of secrecy.

1. It’s far, far too broad. One of the first things you learn in law school is to gauge the breadth or narrowness of a law or rule. In fact, the Law School Admission Test (LSAT), which most Yankee law-school applicants take to enter law school, tests applicants’ ability to gauge breadth.

“Pay for rules” is not just broad. It’s sweepingly, ridiculously, viciously, infernally broad.

Here are some of the many laws it could force governments to pay for having on their books: (1) minimum-wage laws, (2) maximum-hour laws, (3) child-labor laws, (4) working-condition laws, (5) workplace-safety laws, (6) laws regulating dust and air pollution of the workplace, (7) country-of origin labeling laws, (8) trademark laws, (9) laws requiring accurate labeling of the ingredients of food, drinks, and cosmetics, (10) laws requiring the disclosure of genetically- modified ingredients, (11) laws requiring the disclosure of fats, saturated fats and trans-fats, which are known to cause heart disease, (12) laws limiting bacteria, viruses, prions and other pathogens in food and drink, (13) laws requiring the disclosure of common allergens, (14) laws requiring that synthetic chemicals, especially those used in food and drink, be tested and certified for purity, (14) laws limiting or forbidding contaminants, including known toxins and carcinogens, in food and drink, (15) laws limiting pollutants and effluents from industrial plants, (16) laws limiting carbon pollution, which causes global warming, and (16) laws requiring warning notices on hazardous products, including tobacco products and dangerous machines and appliances.

Think I exaggerate? Every one of these laws has the potential to reduce the profits of corporations that produce and sell things. Conceivably, even laws against fraud and false advertising, inaccurate labeling, unfair competition and bullying (antitrust or competition law), could be causes of suits for damages.

2. Nothing rounds its sharp edges. Under our Anglo-American system of law, known as “the common law,” judges could, conceivably, inject some common sense into this absurdly sweeping provision. But this particular provision does not permit common-law judges, or any regular judges, to apply it.

The “pay for rules” provision is designed to be applied in private, secret “tribunals,” similar to what our Yankee business knows as “arbitration panels.” The “judges” will likely include “experts,” i.e., self-interested parties, in the very business or industry raising the complaint. Talk about conflicts of interest!

As is usual in arbitration, appeals will be limited to the vanishing point. There will be no precedent. That is, a good decision in one case will have no effect on the next.

In short, it will be the Wild West out there. Nothing in substantive rules or procedure will limit a private tribunal’s power to reward a business, and punish a government, for the government’s having the temerity to adopt rules that make its people’s lives less harsh.

3. It’s unnecessary. The purposes of the TPP, in roughly this order, are: (1) to facilitate trade in services and intellectual property, (2) to add a counterweight to China’s growing economic power, and (3) to reduce the few remaining non-tariff trade barriers.

“Pay for rules” does absolutely nothing to advance the first two purposes. As for the last, it does nothing to distinguish legitimate, people-protective rules from disguised trade barriers, because it’s so broad. So it fails to advance any of the the TPP’s purposes.

There are still a few disguised trade barriers, to be sure. But there are a lot more rules whose characterization as “trade barriers” is in the eyes of the beholder. They include such trade-neutral rules as Europe’s privacy regulations and requirements for GMO-ingredient disclosure, and near-universal rules for country-of-origin disclosure.

The proper way, if any, to “negotiate away” laws suspected of being disguised trade barriers is to bargain them one by one, trading one country’s allegedly nonsensical rules against another’s. That way, everything is on the table. This way sweepingly burdens legitimate people-protective provisions: it trades disguised burdening of salubrious labor, consumer and environmental protections for disguised trade barriers. That’s something no one with any humanity or common sense should want to do.

4. It sends China a horrible message. If China eventually joins the TPP, “pay for rules” will send the wrong message and hurt China’s people. One of the goals of the TPP is to set the rules for trade and commerce in Asia. We’d all like to see the TPP eventually become a commercial necessity, so much so that China joins, just as both China and Russia have joined the WTO. In this way, the world’s leading (mostly English-speaking) rule-makers will have brought outliers into a mutually acceptable rule-of-law regime—an economic “new world order,” if you will.

The problem with “pay for rules” is that it sends the wrong message and would make China’s people worse off.

Most of what’s wrong with China today derives from China’s government’s Hell-for-leather stampede toward rapid economic development at all cost. Justice, let alone health and safety, for China’s 1.3 billion people has gotten trampled in that stampede. Why? Because China’s businesses and government have adopted the mantra of cowboy capitalism: profit and expansion above all.

“Pay for rules” would enshrine that mantra in positive law. It would reinforce every negative corporate instinct toward miserable working conditions, adulterated food, drink and drugs, unsafe buildings for work and living, and a killer environment. Don’t we want the TPP to send exactly the opposite message?

In a strange way, “pay for rules” would also make China’s own alternatives to the TPP, whether bilateral or multilateral, more attractive to our trading partners. Might at least some of them prefer a trade treaty that doesn’t burden the rules they pass to protect their own people with possible payments of damages for lost profits? We want to offer the best alternative trading rules, not the most dangerous ones, don’t we?

5. It won’t be hard to get rid of. Not having been at the table myself, I of course can’t be sure. But every instinct I’ve acquired in forty years of international study, teaching and practice of law tells me this bastard clause can only have come from us Yanks. Our own corporate lawyers and lobbyists likely spawned this monster.

I know of only two nations in which “profit over people” is a religion. One is our own, at least among the right wing and its lackeys. The other is China. And China is not a party to the TPP negotiations, at least not yet.

Other foreign lawyers and trading partners just don’t think that way. Not only that. As every lawyer who’s ever studied or practiced in Asia knows, Asians are nowhere near as litigious as us Yanks. They might think of putting melamine in milk to increase their profit, but they don’t think of suing to increase their bottom line. Only we Yanks think like that, because we have too many lawyers with too little to do.

So chances are the “pay for rules” abomination is something our Yankee negotiators imposed on our trading partners, not vice versa. That being the case, our partners will heave a sigh of relief if we ask them to strike it, and accede readily. Then the TPP and its otherwise useful purposes can move on.

6. It’s a bastard spawn of secrecy. No one with the least appreciation of probable consequences, let alone common sense, would have proposed such a ridiculously broad, sweeping and damaging provision in public. No one would even have attempted such blatant overreach, with such tenuous relationship to the TPP’s legitimate purposes. Such an abomination could only have come in the dead of midnight secrecy, from a table around which representatives of real people were absent or marginalized.

The lesson for future trade negotiations is patent: be less secretive and more open. At least take key Senate leaders, majority and minority, into youse confidence. Doesn’t the Senate eventually have to give its “advice and consent,” anyway?

* * *

This is a time for supporters of the TPP, of which I am one, to reflect and regroup. It’s a time for overreachers, caught with their hands in the cookie jar, to blush, confess, repent, change course, and back down. It they don’t, the TPP may fall, and a useful attempt to influence the big picture—this century’s global economic order—may fail.

Some might say “That’s a shame!” Some might call it poetic justice. But smart pols do what they have to do to reach the greater good. Didn’t someone once say that politics is the art of the possible? Jettisoning “pay for rules” is step one toward putting the TPP into effect.

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