No Ordinary Deal

by John Quiggin on March 21, 2012

Max Weber once described politics as the slow boring of hard boards, and this is an apt description of the continuing efforts of the advocates of a globalised capitalism to grind down all the obstacles that might be posed by democratic government.

The dominance of global capital has been greatly enhanced by trade agreements such as those establishing the World Trade Organization. But, over time, the WTO has been less and less able to avoid public scrutiny and popular resistance. Moreover, it has an unfortunate tendency to stick to the rules even when US business doesn’t like the outcome. So, we’ve seen a steady shift to bilateral deals, in which the US can dictate the terms.

The Free Trade Agreement with Australia was one example. But, as the case of the AUS FTA showed, things don’t always work perfectly. The US pharmaceutical industry, which had hoped to destroy Australia’s pharmaceutial benefit scheme (PBS), made only marginal progress, and attempts to encode the content of the failed Multilateral Agreement on Investment

The “Trans-Pacific Partnership” now being negotiated between the US and a number of countries on the Pacific Rim represents something of a pivot. From the US viewpoint, the basic idea is to combine all the bilateral agreements on a “levelling up” basis, wiping out all the concessions made in individual deals.

Surprisingly, the Australian government is showing some resistance to  US attempts to bypass Australian courts in favor of investor-friendly arbitration. I contributed to a book on all this, called No Ordinary Deal. I’m not sure if it’s available outside Australia (previous link) and NZ  but it’s well worth reading if you can get it.

My main point was that the political climate is at least as important as the legal text – the retreat of the WTO from its anti-environmental stance of the 1990s (exemplified by its equivocal endorsement of the legality of border tax adjustments in the context of carbon pricing) is one example, as is the case of the PBS in Australia

 

{ 18 comments }

1

Vance Maverick 03.21.12 at 12:37 am

and attempts to encode the content of the failed Multilateral Agreement on Investment

on the surface of a Vioxx tablet, perhaps?

2

P O'Neill 03.21.12 at 12:52 am

Somewhat related, people are noticing that there’s a lot of previously-ignored stuff in trade deals that could imperil post-crisis financial sector reform.

3

Antti Nannimus 03.21.12 at 1:33 am

Hi,

“…the slow boring of hard boards… is an apt description of the continuing efforts of the advocates of a globalised capitalism to grind down all the obstacles that might be posed by democratic government.”

Which explains better than anything I’ve seen why we’ve lost democratic process throughout the world. That drill is inexorable, and the boards are actually quite soft.

Have a nice day,
Antti

4

Merp 03.21.12 at 2:55 am

(FYI, that third paragraph ends mid-clause. The meaning as written seems to be “efforts by the US pharma industry to sneak MAI content into the AUS FTA failed”; if the facts are much different than that, might want to change it.)

5

Peter T 03.21.12 at 7:59 am

Perhaps those CT folk who thought “The world economy is not a tribute system” can go along with “protection racket” instead?

6

nb 03.21.12 at 10:12 am

So, your post suggests that “global capitalism” is far from always successful in its efforts to grind down the obstacles posed by “democratic governance” – two amazingly simplified and simplistic abstractions anyway. But even in those simplified terms, the evidence in your post suggests that the outcome is a tense but often socially productive balance between the two – which is pretty much what supporters of liberal democratic capitalism have always claimed anyway.

7

John B 03.21.12 at 2:39 pm

To say the WTO “has an unfortunate tendency to stick to the rules even when US business doesn’t like the outcome” is not quite accurate.

The WTO Appellate Body rules against the party with trade barriers more than 80 percent of the time. The secretariat believes strongly both in the virtues of free trade, and in the virtues of expanding the power of the WTO. This happy coincidence means that the right thing to do is always to strike down trade barriers, regardless of whose they are, even if it means bending the rules.

The multinationals and mass retailers who hold sway in Washington like having more imports. So they quite like the WTO, even if some dying manufacturers and unions bleat about trade deficits.

You are correct, though, that US negotiators wrongly assumed that we could control or ignore the WTO, as we had with other international organizations. We were a bit shocked when we discovered that the WTO had become too big for that. So the TPP may be an attempt to restore the more natural order of things. It may fail at that, however, unless the rules are carefully crafted. After all, the US has largely failed to control even NAFTA, though the US accounts for about five-sixths of NAFTA’s GDP.

8

David S. 03.21.12 at 9:26 pm

Of course the Australian govermet is “showing some resistance” to the proposed TPP rules – if they are adopted Australian lawyers would be negatively affected! No way would a govermemt of lawyers allow that to happen…

9

Watson Ladd 03.21.12 at 9:43 pm

Sorry, I’m missing something. The WTO is the haven of special interests, and tariff bills aren’t? Just because democratic governments do something doesn’t make that outcome democratic: each manufacturer wants tariffs on their outputs and free trade for their inputs. The position of the vast majority of people, as well as the class interest of the proletariat, is pro free trade, as Luxemburg explained.

It is very strange to have negotiations in which each country seeks the right to do the other a favor by providing them goods for less.

10

John Quiggin 03.21.12 at 9:57 pm

@nb Thanks for your observations. In the spirit of openness, I’d welcome a blog-length analysis of the TPP which avoids “simplified and simplistic abstractions”.

@JB A good point. I didn’t mean to present the WTO as some sort of disinterested arbiter, just to say that isn’t as pliable as the US business class expected. As I mention later on wrt environment, the WTO is a thoroughly political body, with a clear sense of its own interests.

11

John Quiggin 03.21.12 at 10:02 pm

@Watson You appear to be the first person to mention either tariffs or special interests. I think you are arguing with an imaginary opponent.

Given the thread derailment that typically arises from your contributions, I’m going to restrict you to one comment per day on this thread, starting with the one that you just made. In fairness, I ask for no snarky responses to Watson’s comment.

12

Henri Vieuxtemps 03.21.12 at 10:08 pm

I don’t know anything about this, but it seems odd that it’s framed as ‘US business’ against the Australian and other governments. I don’t think there is such a thing as ‘US business’ anymore. Like with MAI before, it has to be simply: business interests trying to dominate national and local governments. It’s just that the US government is already in their pocket.

13

white collar crime kills 03.22.12 at 2:35 am

WTO/Trade negotiators act as official representatives for their country.
I think Watson (and Henri) was only saying: but don’t forget that negotiations exclude many residents of those countries.
Democratic wishes pass through layers of representation on the way to WTO/Trade negotiations. And typically, the ‘proletariat’s interests have been hijacked and scrubbed out of existence.

14

derrida derider 03.22.12 at 8:34 am

Let’s not get in to general arguments about the abstract virtues and vices of free trade/globalisation, else John’s point is lost. Take it as read that the long-run interests of global capital are for free trade. YMMV as to whether this interest coincides with that of either the poor or the middle classes (FWIW I’m a firm globaliser there), but it doesn’t affect the specific issue we’re considering here.

Of course “global capital” is as diverse a grouping of interests as any other class grouping – the reason so much “class analysis” is simply bullshit. John’s point is that WTO arrangements serve the broad interests of global capital, but have failed to serve the interests of specific and large sectors of US capital because their internationally negotiated rules are driven by the interests of other (especially but not only non-US) capital interests. So the response of a captive US government has been to try and negotiate non-transparent Free Trade Agreements (actually, Managed Trade Agreements) with governments beholden to their own special interests. You can see this most clearly by looking at the intellectual property clauses of these agreements, especially relating to Big Pharma, which are anything but pro-competition.

15

Henri Vieuxtemps 03.22.12 at 9:21 am

Again, if it’s anything like MAI, it’s hardly a fight between global (or US) and national capitalists; it’s a fight of global capital against national interests: national labor, liability, environmental laws, the public sector, etc. Not capital vs capital, but capital vs people.

16

Watson Ladd 03.22.12 at 2:26 pm

JQ,
I think the enemy of french theory has put the reading of your argument that makes mine irrelevant above, so I’ll concede the point about relevance. I was focusing in on the construction of national governments as democratic, which doesn’t necessarily mean the interests of the public are served: the ECJ is a constraint on democratic government that improves peoples position.

But it isn’t that the US interests are served by expanding Pharmas reach. Drug reimportation benefits lots of consumers, and is one of the things specifically being targeted. You might argue that the US benefits from being the sole exporter of brand-name drugs, and higher prices for those drugs being payed to the US, but that’s not so clear to me: if we wanted to export more drugs, we could always throw them into the ocean.

Part of the reason for this drive is that the US pharma industry is in real trouble. The reasons for this are simple: they have no promising products coming up, and many products are about to become generic. As a result there is a mad scramble to find as much profit as possible in the time remaining. To the extent that this can be fitted into the strange logic of trade negotiations, in which nations offer as ‘reward’ an end to taxation of their own population in the most regressive manner possible, Pharma seeks to shape trade negotiations that way.

This of course doesn’t mean that the entire US capitalist class or the global capitalist class supports such a claim. Capitalists always have self interest over class interest, which makes them a divided class politically. So in understanding NZ US trade relations, it is NZ dairy farmers vs. NZ manufacturers, vs. US dairy farmers and US manufacturers, each wanting to expand their market abroad while protecting their market at home.

Henri, read Marx. When they say all economists like free trade, that includes Marx. National labor doesn’t want tariffs, but each section of it does. This is discussed in the Luxemburg piece referenced above. Protectionism’s logic doesn’t advance liberation, but rather constructs nationalism. Whose interests are served by keeping Japanese cars from the road? The interests of GM. But the workers of GM only benefit to the extent that they can take advantage of this new-found insulation of their employer from competition. If they ever buy into the idea that we must blockade our ports with taxmen to defend our country, they will have lost sight of their interest contra the national bourgeois.

17

Henri Vieuxtemps 03.22.12 at 4:38 pm

Watson, people of any given country or locality may want, for example, paid overtime calculated by some formula, clean water as defined by their own criteria, to be able to sue for damages. MAI tried to limit their freedom to impose these requirements, and to create a set of unified metrics instead.

What does Marx have to say about this?

18

Watson Ladd 03.23.12 at 2:45 pm

Henri, that’s a mendacious summary of the MAI drafts. I actually sat down and read them and didn’t see anything about any of those topics. The MAI was simply establishing parity between foreign and domestic investors with respect to domestic law. It’s possible there is something I missed, but I’d like a citation rather then an assertion. Anyway, it doesn’t seem like this topic is live: a pity, because there is a lot to say about the drive for monopolies of various forms in capitalism.

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