Commentary

Don’t Overstate the TPP’s Infringement on American Sovereignty

Recently, NR’s Andrew McCarthy explained his reasons for opposing the Trans Pacific Partnership (TPP), which President Trump has just scuttled. Among other things, he criticized the broad scope of the issues the deal would have governed, and the power given to the TPP Commission that it would have created. While some of his concerns have merit, in other respects he has misunderstood the nature of the TPP and its administration.

As McCarthy points out, the TPP does a lot of things. Chief among them is the traditional task of trade agreements, which is to lower tariffs through binding commitments made by each government. In the case of TPP, those commitments can be characterized as binding because, unlike much of international law, the deal has a dispute process that countries can use to enforce the agreement. Thus, if Mexico promised to lower its tariff on car imports to zero, but failed to do so, the United States could file a complaint, and impose sanctions provided a neutral arbitrator found Mexico to be in violation of its commitments.

By agreeing to lower tariffs, of course, a country abdicates some small part of its sovereignty in exchange for large economic gains. Beyond tariffs, a few decades ago, governments began to include rules on a limited number of domestic-policy issues in trade agreements. McCarthy refers to this as “global governance,” and his concerns about a larger loss of sovereignty are legitimate: We should think carefully about how international agreements influence and regulate domestic policy.

The expansion of trade agreements into new policy areas has been controversial, but it is now firmly entrenched. Labor, the environment, intellectual property, and other policies have all become core parts of trade deals. As with tariff commitments, these rules are enforceable, which means that if one country believes another is not complying with its obligations, it can bring a complaint.

The loss of sovereignty in such instances is greater than that inherent in tariff commitments, as it affects domestic policymaking more broadly. We need to be careful, however, not to exaggerate the scope of the power of trade agreements and their accompanying institutions. This is where McCarthy’s piece misunderstands how trade agreements function, in a couple of ways.

For one thing, the labor and environmental rules McCarthy worries about were largely pushed by the United States, and U.S. law is already consistent with their terms. As a result, they would have had no practical impact on U.S. policy. For another thing, there is no trade-agreement prosecutor who can force countries to change their laws. The worst that can happen is that, based on a ruling by an arbitrator, a complaining government could get authorization to impose trade sanctions against an offending country. But when faced with sanctions, the government in question could simply decide to keep its regulations in place anyway.

McCarthy also expresses a fear of the so-called TPP Commission. In reality, this kind of body has been part of U.S. trade agreements for years. Typically, both bilateral and regional trade deals create a commission or committee to oversee implementation of particular aspects of their implementation. What this means is that signee governments send representatives to meet once or twice a year and talk about how the agreement is working. They offer diplomatic statements, express concerns, and have long discussions. And every now and then, they actually make a decision.

Importantly, the TPP Commission is not conceived as something akin to the neutral arbitrator mentioned above who hears complaints. Rather, it is meant to serve as a place for governments to talk about issues related to the agreement. It acts by consensus, and would not be, as McCarthy puts it, “empowered to turn the TPP into something different … from the deal to which the United States agreed.” It is not a group of “unelected bureaucrats” who have “sweeping powers” over governments, as McCarthy suggests. It is merely the collective expression of the will of the governments themselves.

At the same time, the power of trade agreements over national legislation and regulation has grown, and their proper scope should be debated fully. By their nature, treaties and other international agreements constrain national sovereignty. When governments make promises not to take certain actions, they voluntarily consent to limit their own power, and that process is worthy of discussion. But there are significant benefits to international cooperation through binding agreements, and any criticism of these agreements should take into account the precise nature of the power that has been surrendered and the reasons for its surrender.

Simon Lester is a trade-policy analyst at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.