Reprinted from Smirking Chimp
The concept of the children's table has moved from Thanksgiving dinner to presidential politics with the networks having a separate debate for the low-polling candidates for the Republican nomination. But the concept of the children's table is also useful for understanding trade policy and the Trans-Pacific Partnership (TPP).
The TPP has two classes of issues. On the one hand, there are the issues that really matter to the drafters of the deal. These are issues like protection of patents and copyrights and other forms of investment. Disputes that arise over investment can be taken directly by foreign investors to the investor-state dispute settlement tribunals set up by the TPP.
The investor bringing the complaint gets to appoint one of the three judges hearing the complaint. A second judge is appointed by the country against whom a complaint is being brought. The third judge is jointly appointed by the investor and the government. This panel is then empowered to impose fines of whatever size it considers appropriate. This is entirely an extra-judicial process. The verdict is not appealable to any domestic court.
That is the story of the adult table. The children's table is for issues that are of concern to labor rights, human rights, and environmental rights activists. There is no mechanism through which any of these issues can be brought directly to an independent panel by labor unions or civil society groups that believe they are being violated.
Rather, action must depend on a complaining government asserting that a country had not met the terms of the agreement. For example, the requirement that Vietnam respect the rights of its workers to organize will have to be enforced in the same way that the United States has in the past enforced provisions requiring that countries like Colombia respect the rights of workers to organize. Of course, union organizers in Colombia have continued to be murdered as the Obama administration highlights the reduced pace as progress.
As a practical matter it is almost inconceivable that any administration will make a determination that Vietnam has failed to respect workers' rights and take away its privileges under the TPP. In other words, this is one for the children's table.
The same applies to the rules on currency management. The agreement calls for consultation which will allow the United States to allege that one or more of the countries has managed its currency. This is sort of like the power that the United States has now to call out of a country for managing its currency and then proceed with retaliatory trade measures.
Those keeping score know that the United States has never used this power. That's another one for the children's table.
It is worth noting that the concern over currency management should be front and center on the agenda of anyone that actually wants free trade between the countries in the TPP. If a country takes steps to depress its currency by 20 percent against the currencies of its trading partners, it has the same impact as if it imposes a 20 percent tariff on all imports and gives a 20 percent subsidy to all exports.
While this sort of currency management is a story in which millions of manufacturing workers in the United States may see their jobs threatened, it is also a situation that has all the economic distortions assorted with this sort of protectionist policies. However in this case since the beneficiaries are likely to be major importers, like Walmart, or outsourcing manufacturers, like GE, the issue gets placed at the children's table.
There is one other point worth highlighting on the TPP. The obsession in the TPP with making patent protection stronger and longer is striking for those who like to blame technology for the rise in inequality in recent decades. Technology doesn't create patents, governments do. The argument here is that we need more government protection in order to give enough "incentive" to those responsible for innovation.
In plain English, the TPP proponents want the government to make the rest of us pay more for goods and services so that people involved in the process of developing new technology can get paid more money. This means that they want the government to redistribute income from ordinary workers to those who will profit from this technology. It's not technology causing this inequality, it is government policy and the TPP is a big part of this policy.
The proponents of the TPP are hoping that the rest of us will be happy that we got seats at the children's table. We will be hearing much about this table as they push to have the deal approved. But it's long past time that the rest of us be treated like adults. Trade and investment policy does not have to be designed to make the rich richer.