Why "free" trade deals put property rights above workers' rights

There's an eye-opening piece in this week's New Yorker written by James Surowiecki discussing "free" trade policy and intellectual property rights. Specifically, he is interested in the practice of the US leveraging its trade policies to force its trading partners to rewrite their own laws.

He illustrates his point by using the US's recent free-trade agreement struck with South Korea on April 3 as a case study. He notes that the recent free-trade agreement is concerned - ostensibly - with lowering tariffs, opening markets to competition, and all the other wonderful things free market fundamentalists like to carry on about. But he notes, quite correctly, that a very important but overlooked facet of the deal has nothing to do with "free" trade, or "free" markets whatsoever.

Rather, Surowiecki notes that it requires South Korea to rewrite its rules on intellectual property (IP) - the rules that deal with patents, copyright and legal ownership rights for inventions or ideas. He reports that:

South Korea will now have to adopt the US and EU definition of copyright—extending it to seventy years after the death of the author. South Korea will also have to change its rules on patents, and may have to change its national-health-care policy of reimbursing patients only for certain drugs. All these changes will give current patent and copyright holders stronger protection for longer. Recent free-trade agreements with Peru and Colombia insisted on much the same terms. And CAFTA—a free-trade agreement with countries in Central America and the Caribbean—included not just longer copyright and trademark protection but also a dramatic revision in those countries’ patent policies.

Suddenly, it makes sense why corporate lobbyists representing, say, the pharmaceutical industry, how plowed so much money into Congress in order to ensure these trade deals are crafted the way they are: That is, with comprehensive protections for corporations but without any enforceable protections for workers or the environment.
Understanding the next part is crucial for understanding just how economically inefficient, not to mention morally reprehensible, these type of deals that are supported by members of both major political parties really are:

Intellectual-property rules are clearly necessary to spur innovation: if every invention could be stolen, or every new drug immediately copied, few people would invest in innovation. But too much protection can strangle competition and can limit what economists call “incremental innovation”— innovations that build, in some way, on others. It also encourages companies to use patents as tools to keep competitors from entering new markets. Finally, it limits consumers’ access to valuable new products: without patents, we wouldn’t have many new drugs, but patents also drive prices of new drugs too high for many people in developing countries. The trick is to find the right balance, insuring that entrepreneurs and inventors get sufficient rewards while also maximizing the well-being of consumers.

In other words, there exists a trade-off between protecting Merck and Pfizer's profit-margins and ensuring people in developing nations are able to purchase generic life-saving drugs exported by US corporations, even if this trade-off is purposefully kept hidden by most journalists and politicians when discussing the costs of "free" trade.

The article goes on to cite some studies that indicate a declining utility curve for increasing IP protections, meaning that there are diminishing returns after some point. This is almost certainly true, as basic microeconomic theory would predict, but I still think the key problem of these deals is the unequal protections provided to multi-billion dollar corporations at the expense of workers and consumers in the developing nations trading with us (not to mention the downward pressure on wages and hundreds of thousands of job losses here in the US). Of course, this disparate treatment is not surprising at all, as corporations are able to funnel hundreds of millions of dollars to the pockets of the lawmakers sitting on the financial services committee in Congress, whereas workers in the developing world have practically no power to advocate for legislation that protects their own rights.

Surowiecki instinctively understands just how destructive and unfair the status quo is and has done a great job explaining it to a lay audience and deserves our thanks.