July 10, 2013 1:09PM

“Democracy” in Trade

About two months ago I questioned whether self-appointed "consumers' advocates" were, in fact, friends of consumers after all, at least when it comes to trade policy. They seem to place little, if any, value on the benefits to consumers from opening trade, which include lower prices, more variety, and--arguably, the most important benefit--freedom to choose. Most of their adovacy efforts seem to center around maintaining or increasing regulatory burdens, thus preventing people from exercising their preferences for the bundles of goods they want, or from weighing up the mix of features--price, quality, durability or what have you--that best suit them and their families. No siree, if the Sierra Club or Public Citizen don't think you should have it, then the government should prevent you from accessing it. Combined with the strong mercantalist bias of trade negotiators, that's some strong anti-freedom headwind to counter. My colleague Dan Ikenson suggested on Monday that the "other side" in trade negotiations is in fact the best advocate that American consumers have.

A story in yesterday's edition of Inside U.S. Trade [$] highlights the increasing concerns of "civil society" groups about the mooted preferential trade agreement between the United States and the European Union, formally known as the Transatlantic Trade and Investment Partnership (or TTIP). Initially those groups were assumed to support the agreement, and indeed their earlier statements seemed neutral-to-mildly positive, rather than exhibiting their usual reflexively negative opposition to freeing trade. The power of trade unions is generally higher in Europe than it is in the United States, and product standards (including those relating to the environment, animal welfare etc) are higher, too. The thinking was that an agreement that aimed to reach common ground on regulatory issues would have the effect of strengthening U.S. regulations, rather than racing towards that bottom that civil society groups are always worried about. Apparently, though, many of these groups are no longer convinced that the EU standards would set the benchmark and are now actively fighting the agreement:

As the first negotiating round of a U.S.-EU free trade agreement kicked off yesterday (July 8), consumer groups, unions and non-governmental organizations publicly warned that the deal could facilitate deregulation and thereby lower existing protections in both economies for consumers, workers and the environment.

This message was delivered by 63 U.S. and EU civil society organizations in a July 8 letter to President Obama and European Union leaders, and by five U.S. advocacy groups in a teleconference with reporters the same day...

In their letter, the groups said they were worried that TTIP will focus in particular on regulatory issues and non-tariff barriers, and that U.S. and EU companies are using the negotiations as a way to pursue deregulation.

“A transatlantic agreement that is little more than a vehicle to facilitate deregulation would not only threaten to weaken critical consumer and environmental safeguards, but also conflict with the democratic principle that those living with the results of regulatory standards – residents of our countries – must be able to set those standards through the democratic process, even when doing so results in divergent standards that businesses may find inconvenient,” the groups said. [emphasis my own]

The substance of the letter is unsurprising, and neither is the focus on "democracy," really. That's standard fare. But implying that regulatory standards are set through the democractic process--as opposed to the tawdry, industry-and/or-interest-group-captured sausage manufacture that our system most often resembles--is, I think, a bit rich.

Certainly in theory, when governments are democractically elected, the decisions they make are "democratic." But are they? Why are standards preferred by the Sierra Club, or Big Business, or anyone else who manages to lobby and cajole bureaucrats and politicians into setting the standard that suits them, more "democratic" than those preferred by consumers, who vote every day with their wallets? Why should we leave product or process choices to governments, with all of the unsavory forces to which they are subjected, rather than with individuals themselves? Why not let consumers decide which standards suit them, by allowing them choice in the first place, and then watching what the voluntary spending of money yields? I am sure that if some consumers want a certain standard of product, then all of those greedy profit chasers will be more than happy to provide it. And if it turns out that some consumers care more about, say, the price and/or quality of products than the kind of attributes that environmental or animal welfare groups want them to care about (the fear behind many interest groups' resistance to giving consumers freedom to choose), then so be it. To each their own.

Why in principle are businesses' preferred standards any less democratic than those preferred by environmental or labor groups? They look equally (un)deserving to me, at least in the context of democracy.