By Dean Baker, Real-World Economics Review Blog, February 4, 2017
The trade deals negotiated in the last quarter century are becoming less focused on traditional trade barriers like tariffs and quotas. Instead, they are imposing a regulation structure on the parties, which tend to be very business oriented. In many cases, the rules being required under the trade deals would never be accepted if they went through the normal political process.
The renegotiation of the North American Free Trade Agreement allows the United States, Canada and Mexico to get rid of rules that have no place in trade deals. At the top of this list is the Investor-State Dispute Settlement (ISDS) tribunals. These tribunals operate outside the normal judicial process. Their rulings are not bound by precedent, nor are they subject to appeal. Also, they are only open to foreign investors as a mechanism to sue member governments.
These tribunals can be used to penalize governments for measures designed to protect the environment, consumers, workers or to ensure the stability of financial institutions. TransCanada, the company that had been building the XL pipeline, gave us an example of how these tribunals can be used. It initiated a suit after President Barack Obama decided to cancel the pipeline. It is likely that we would see many more suits in the future using the ISDS tribunals if they are left in NAFTA and other trade deals.
The other non-trade elements that should be removed from NAFTA are the provisions requiring strong patent and copyright protection. These are forms of protectionism – the opposite of free trade – that can raise the price of the protected items by a factor of 10 or even 100. The impact of these protections is especially pernicious in the case of prescription drugs.
Drugs that would be readily available in a free market can be prohibitively expensive because of patent protection. For example, the Hepatitis C drug Sovaldi has a list price of $84,000 in the United States. A highquality generic version is sold in India for less than $200.
While companies need an incentive for innovating, there are far more efficient mechanisms than patent monopolies. It doesn’t make sense for a 21st century economy to be dependent on this relic of the feudal guild system for supporting innovation.
Ending the patent and copyright requirements in NAFTA would be a good first step. We need a fuller debate on modernizing our systems for financing innovation and creative work.
Our Comment
Why do we go on electing governments who “negotiate” trade deals that don’t go through the normal political process!? What is there to encourage any hope that this government will take the existing NAFTA opportunity to behave any differently from his predecessors?
The greatest insulation our government has against democratic interference in what it is about, is our ignorance, hence out timidity, and the misinformation and general conditioning to which we are daily subjected. Yet another shield against meaningful public opposition is our antediluvian electoral system that perpetuates the power of existing fossilized political parties who take turns serving the few at the expense of the many.
Prime Minister Justin Trudeau’s brazen retraction of his campaign promise to support electoral reform is no small hint of what we can expect this time around.
Without an effort to learn the truth – and it is out there – and to commit ourselves to supporting groups working for positive change, we greatly fortify the status quo.
Élan
