On a number of occasions, we’ve discussed the fact that the agreements we’ve come to call “free trade agreements” are in fact preferential trade agreements. Dartmouth economist Douglas Irwin, reviewing Jagdish Bhagwati, explains:
Aren’t these agreements — such as NAFTA — almost invariably opposed by anti-trade groups precisely because they open up markets? Why is one of the world’s staunchest supporters of free trade protesting so passionately against this method of reducing trade barriers?
The problem, Mr. Bhagwati shows, is that not all trade agreements are created equal. The right way to reduce trade barriers, he explains, is on a multilateral basis and in a nondiscriminatory way. After World War II, America led the world in creating the General Agreement on Tariffs and Trade (GATT), which did just that, by encouraging the reduction of tariffs and liberalization of other import restrictions. In recent years, however, countries have increasingly bypassed this system. Now, it is common for two or more countries to agree to eliminate tariffs and reduce other trade barriers for each other, but not for others, as is the case with NAFTA. Such agreements have been in vogue around the world, particularly with the current Bush administration: Under Bush, America has concluded a major trade agreement with Central American countries (CAFTA) and a series of bilateral agreements with countries ranging from Oman to Australia, and — most recently and controversially — Colombia.
The main problem with these bilateral and regional agreements is that they exclude other countries. In Mr. Bhagwati’s view, they are more accurately called “preferential” trade agreements because they discriminate against non-participating countries. This is a violation, Mr. Bhagwati suggests, of the principle of nondiscriminatory trade liberalization that served as the cornerstone of the tremendously successful post-World War II trading system under the GATT (and now the WTO).
By introducing discriminatory treatment into the trading system, the movement toward preferential trade agreements sacrifices economic efficiency and, perhaps more troublingly, throws the carefully constructed postwar system into disorder. [Emphasis added]
There is another dimension to preferential trade agreements: they tend to be an instrument through which affluent countries impose unfavorable terms on less affluent countries to protect the interests of powerful domestic constituencies. These powerful domestic constituencies use these provisions as leverage to extract rents from domestic consumers.
The Anti-Counterfeiting Trade Agreement (ACTA) closely resembles the IP provisions of many recent PTAs. Tim Lee explains the problems with ACTA:
In the US, ACTA was dubbed an “executive agreement” rather than a “treaty,” which allowed negotiators to skip the ordinary Senate ratification process. If ACTA becomes a binding part of international law, it will create a precedent for future treaties that avoid basic principles of transparency and democratic accountability.
On the merits, the problem with ACTA is less that it would require changes to American or European law as that it would become another mechanism for Western governments to force poorer countries to adopt bad copyright policies. For example, the treaty requires signatories to adopt anti-circumvention rules similar to those in the American DMCA, and a regime of statutory damages like the one that produced a $1.5 million judgment against Jammie Thomas-Rasset for infringing 24 songs. Once ACTA is adopted by wealthy countries, the US government is likely to make its adoption a factor in its Special 301 report, which lists countries Washington regards as having insufficiently strong copyright laws. Thanks to this kind of arm-twisting, copyright treaties that are adopted in the US and Europe are eventually foisted on the rest of the world.
More generally, the treaty continues the one-way ratchet toward ever-stronger copyright protections. ACTA establishes a new, higher minimum of copyright protections and enforcement that countries must provide, but it doesn’t require countries to preserve mechanisms like fair use and intermediary immunity that protect intellectual freedom.
In a similar vein, an anti-CAFTA organization, with which I wouldn’t normally be inclined to be in sympathy, observed the following:
Another potentially debilitating aspect of DR-CAFTA is the impact of its mandates regarding intellectual property rights. DR-CAFTA allows corporations to extend patent restrictions on pharmaceuticals, which means that once DR-CAFTA passes in a country, any medicine still under patent in the United States can extend that patent for twenty years in a CAFTA country. This creates an even more pervasive monopoly: local pharmaceutical companies must wait even longer before producing generic products for impoverished citizens that are unable to afford band-name products.
I support free trade. I strongly support free trade, in fact. What I don’t support is the hijacking of preferential trade agreements by corporations seeking to rig regulations on their own behalf and against the interests of consumers, whether in the United States or abroad.
I’ll also note that many of our allies, including market democracies governed by center-right parties, resent the imposition of excessive IP protections by the U.S. (under the influence of legacy media firms), yet they are, as allies, reluctant to piss us off. I have no problem with the U.S. government throwing its weight around — but as an American, I don’t want my government throwing its weight around on behalf of companies that are trying to game U.S. consumers.
