Morici: Trade agreements do not threaten US sovereignty

Peter Morici

At the U.N. General Assembly, U.S. President Donald Trump stood up for the sovereign responsibility of each government to put its national security and citizens first.

Globalists cringe but every president, king and potentate has struggled with the limits of sovereignty domestically and in the conduct of foreign policy.

Our government does not enjoy absolute power – we have the Bill of Rights and a broader right of privacy the U.S. Supreme Court found implicit in the U.S. Constitution. Even the Chinese Communist Party and Saudi royals would be flummoxed if virtually all their citizens decided to stay home from work for a few weeks.

In our legal tradition, formal limits on the sovereign began with the Magna Carta, assent of the British Parliament and the American Revolution.

In foreign affairs, the United States respects the sovereignty of other nations and asserts its own but only selectively.

Through the Monroe Doctrine, the United States substantially limited European influence in the Western Hemisphere but often without the consent of its southern neighbors.

After the two World Wars, the Allies limited Germany’s self-defense capabilities and its discretion in foreign affairs.

Chancellor Angela Merkel presides over a parade ground army – lots of hardware but little hot war experience. If Mr. Trump really wants to stop the Nord Stream 2 natural gas pipeline, which will help fund the Russian military, he could withdraw U.S. troops from Germany.

More practically, the United States, like all other nations accepts limits on its sovereignty in international agreements where they see compensating benefits. In the Nuclear Non-Proliferation Treaty, signatory nations accept that five states – the United States, China, Russia, the U.K. and France – have weapons but agree to abstain to better ensure their own security.

Iran is a signatory but North Korea has withdrawn – much as the United States has withdrawn from the U.N. Human Rights Council. That gives the United States and its allies some legal justification to bully Iran to dismantle its nuclear program, but Mr. Trump now acting alone is on shakier ground.

Front and center these days, are free trade agreements. President Trump and his trade advisers see those as a threat to American sovereignty but that is hardly the case.

In their view, the international dispute settlement panels those establish – and in whose composition the United States enjoys considerable influence – are a burden on the authority of U.S. courts. However, the United States has historically insisted on international arbiters as a safeguard in bilateral, regional and multilateral commercial agreements.

Presidents and Congress have concluded the gains in security for U.S. commercial interests and workers far outweighed the cost of letting those panels resolve disputes instead of U.S. and foreign courts.

Investment and trade agreements are much like domestic contract law in two respects. Ordinary folks and governments do not always honor their obligations, and what those obligations require can become imprecise or inadequate with the passage of time.

Under their cover, American multinationals and ordinary folks invest across the globe and those dispute settlement panels protect their private property – financial, physical and intellectual – from expropriation and foreign courts that are often politicized and biased in favor of local interests.

Ultimately, those arrangements have proven a virtually indispensable protection for those whose interests Mr. Trump says he is bound to defend.

Trade agreements and in particular, the World Trade Organization (WTO), have failed the United States not because dispute settlement violates American sovereignty – we are merely pooling sovereignty there with other governments. Rather, the rules do not cover practices that have come into malignant use with the ascent of China.

WTO rules were created for market economies adhering to Western concepts of law, and China has taken industrial policy and state-sponsored confiscation of foreign intellectual property and industrial espionage to criminal levels that the WTO was simply not designed to discipline. China has exploited North American and European commercial interests and workers to unconscionable dimensions.

The Europeans want to negotiate new rules in the WTO, but that is about as futile as handing a serial killer a Bible with a bookmark to the Sixth Commandment. Protectionism and stealing commercial property are written into the Chinese Communist Party’s DNA.

The answer is not to gut dispute settlement – either in the WTO or other agreements – but rather to boot China from the club and quarantine it as best we can.

Peter Morici is an economist and business professor at the University of Maryland, and a national columnist. © 2018, The Washington Times, LLC.

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