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Terence Jeffrey
Terence Jeffrey
27 Jan 2016
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Will GOP Congress 'Affirm' Legitimacy of State-Owned Businesses?


In October, President Barack Obama said that the Trans-Pacific Partnership his administration had just finished negotiating "reflects America's values."

In November, in an official notice to Congress, he called it "a free trade agreement."

Yet the deal itself expressly affirms government-ownership of industry.

The deal's preamble states that the "Parties to this Agreement" resolve to: "Establish a comprehensive regional agreement that promotes economic integration to liberalise trade and investment ..."

So, how exactly are the 12 nations that are the parties — Brunei, Canada, the United States, Chile, Japan, Mexico, New Zealand, Peru, Singapore, Australia, Malaysia and Vietnam — going to work to integrate their economies to liberalize trade and investment?

In the same preamble, these 12 would-be "free trade" partners resolve to: "Affirm that state-owned enterprises can play a legitimate role in the diverse economies of the Parties, while recognising that the provision of unfair advantages to state-owned enterprises undermines fair and open trade and investment, and resolve to establish rules for state-owned enterprises that promote a level playing field with privately owned businesses, transparency and sound business practices ..."

Thus, in the name of "American values" and "free trade," Obama has cut a multinational deal that promotes the integration of the U.S. economy with the economies of other nations while seeking to provide a level playing field for both privately owned and government-owned businesses.

An entire section of Obama's deal — Chapter 17 — is dedicated to defining the nature and status of the state-owned enterprises that will operate within the "free trade" zone Obama says he is creating.

It says that the term "state-owned enterprise means an enterprise: (a) that is principally engaged in commercial activities; and (b) in which a Party [1 of the 12 governments]: (i) directly owns more than 50 percent of the share capital; (ii) controls, through ownership interests, the exercise of more than 50 percent of the voting rights; or (iii) holds the power to appoint a majority of members of the board of directors or any other equivalent management body."

Chapter 17 further says: "Nothing in this Chapter shall be construed to prevent a Party from: (a) establishing or maintaining a state enterprise or a state-owned enterprise; or (b) designating a monopoly."

That means anyone hoping to establish state-owned enterprises in the United States can relax: The Trans-Pacific Partnership permits it.

It also means the Vietnamese and Malaysians can relax.

Vietnam, says the State Department, "is an authoritarian state ruled by a single party, the Communist Party of Vietnam."

"Malaysia and Vietnam," says a Congressional Research Service report published in January, "also stand out among the TPP countries without existing U.S.

FTAs [free trade agreements], given the rapid growth in U.S. trade with the two nations over the past three decades and substantial presence of state-owned enterprises (SOEs) that will be affected by the TPP's SOE provisions."

The Constitution of the United States does not give the president the power to make a significant deal with a foreign government — let alone 11 foreign governments — on his own authority.

Article 2, Section 2, Clause 2 says: "He shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur."

But last summer, the Republican-controlled Congress enacted legislation giving President Obama so-called "fast-track" authority to negotiate trade deals. Under that legislation, Obama only needs a simple majority in both houses to approve his state-owned-enterprise-affirming 12-nation "free-trade" deal.

The Republican leaders in Congress presumably believe it "reflects America's values" — as Obama might put it — not to impose the Treaty Clause of the Constitution on a president making a trade deal with multiple foreign governments.

If the Republican Congress now approves that deal, entrepreneurs and workers from South Carolina to California can look forward to competing on the "level playing field" Obama and Congress envision building for them and the state-owned enterprises of the Socialist Republic of Vietnam.

Terence P. Jeffrey is the editor-in-chief of To find out more about him, visit the Creators Syndicate Web page at



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