The Trans-Pacific Partnership, representing 40% of global GDP, is the largest trade deal in history, short of the General Agreement of Trade and Tariffs. It is a victory for more openness and trade liberalization, which economics shows increase national welfare as a whole for all countries involved. However, while the TPP is a macro-economic victory, in the micro-economic spheres of individuals and small businesses, there is going to be significant displacement and loss. The forces behind the TPP are not economists or government trade negotiators; rather, big corporations and financial institutions have had unprecedented influence at the expense of smaller business and the working
With tariffs and quotas at historic lows, the TPP strives to liberalize trade through standardization of regulations for seamless transactions and elimination of byzantine regulation. Perhaps the biggest change stemming from the TPP is the fact that corporations can sue states over regulations that they feel are unfair; a right that only massive corporations rather than small business could possibly exercise. With access to an international tribunal of private attorneys, corporations can get compensation for any lost profits due to regulations and subsequently force regulatory change. In the competitive and cutthroat corporate environment where profits are the number one goal, countries especially could face attack over regulation regarding environmental protection, consumer rights and labor rights protection; one such example is Phillip-Morris suing the Uruguayan government over anti-smoking campaigns (allowed under the Swiss-Uruguayan bilateral trade agreement). The TPP will only accelerate a race to the bottom where corporations will fight for lower costs rather than balanced sustainable growth for all countries. Government is typically expected to limit unfettered capitalism, but in this deal it seems that corporations will take the upper hand. On the other hand, small businesses and workers with limited influence and capital will be woefully unequipped to handle the potential opportunities and dangers that are present in the TPP. If fair and sustainable trade is the goal, the TPP may in fact take us a step backward.
In today’s world, economic policy is foreign policy. The United States, as a proactive global leader, should have the courage to advocate for liberalized trade and reject protectionism. Engaging in freer trade can make the US and its trade partners more prosperous and more cooperative. The US cannot enact tariff walls high enough to protect uncompetitive domestic industries anyway. In other words, the outsourcing train has already left the station, so the US should focus its efforts on evolving its economy and training its workers to succeed in the global marketplace. The TPP also makes the US’s hyped “pivot to Asia” real, establishing formal and strategic US leadership in the region. Additionally, the agreement appears to have the added benefit of setting some minimum standards for labor and environmental practices, which will help reign in the “race to the bottom” effects associated with free trade.
However, the lack of transparency throughout the negotiation of the TPP is cause for real concern. Although getting fast-track authority is truly a requirement to complete any treaty or trade deal and get other countries to buy in, the Obama administration could have done much more to engage with stakeholders not to mention the American public throughout negotiations. This would have helped defuse the fast-track fight and made administration updates on the TPP feel less propagandist. Just as economic policy is foreign policy, the Obama administration’s love of secrecy in foreign policymaking has carried over into the economic policy world. Trade agreements should not feel as shadowy as NSA surveillance programs (complete with the publication of leaked files on WikiLeaks). The TPP appears to be a solid deal—and being more public about its negotiation could have made it less controversial and garnered it far more popular understanding and support.
I find myself perplexed by Obama’s brazen statement once the TPP was reached. I find his claim that “We cannot let China write the rules” borders on hypocrisy, although it reflects the sentiments of many Americans. For years, America has been calling on China to be a “responsible stakeholder” in the global economy, and actually China has done exactly that in recent times. China has done considerable developmental work in regions such as Central Asia and Sub-Saharan Africa. It has also taken the next step and set up the Asian Infrastructure Investment Bank (AIIB) to help institutionalize its development aid projects. It even recently stepped up its commitment to the United Nations by committing more troops as UN Peacekeepers.
When the TPP negotiations began, everybody knew in the back of their head that it was at least in part designed to keep China out in its initial formation. The pretense was “21st century standards”, which is merely code for America-on-top free trade—a system that America hopes strategically can bring China more in line with its own agenda. Nobody came out and said this agreement intended to encircle, contain or “tame” China, and even China itself said that it was willing to consider joining the TPP at a later date.
But Obama’s chest-pounding rhetoric presents the TPP as some victory over Chinese infiltration into global economic governance, nearly precluding the possibility of future free trade cooperation with China. At best, it’s perplexing and confusing given the context. At worst, it’s conceited and inappropriate. Of course there is rhetoric and there is action, but Obama’s words still strike me as inapt in an age where people-to-people, society-to-society relations are essential. Defining the TPP as anti-China not only stirs up Chinese anger towards what they perceive as an arrogant, hypocritical America, but also fuels America’s own growing Sinophobia, as made apparent in the current election season (embodied by the infamous Chinese professor advertisement and the belief among Republican hopefuls that more China-bashing will get approval and votes). I’d rather not have the President of the United States instigate more societal tension through rhetoric than is necessary.
The world is officially moving away from neoliberal-style global trade. When the Doha rounds stalled and failed to provide hope for significant progress, it was only a matter of time until the rise of the regional trade agreement. The world has seen NAFTA, the European Union’s free trade agreement, ASEAN, the rise of China’s Economic Silk Road policy, and now the successful agreement of the Trans-Pacific Partnership (TPP).
When examining the TPP within the context of this new world of regional trade agreements, it can only be seen as beneficial. The 12 state parties to the TPP represent an annual GDP of roughly $28 trillion and about a quarter of all global trade, making it the largest regional trade agreement in history. It is projected that the agreement will grow the group’s percentage of world trade to closer to 50%, and that TPP will boost the world economy by $223 billion in ten years. The 18,000 tariffs and barriers to trade removed by TPP would come at a time of a slowing global economy and could provide a much needed solution to stagnation and increasing protectionism in the wake of the failures of the Doha round.
Perhaps the most confusing aspect of the TPP is why the United States is blocking its successful implementation. Setting aside the fact that it could boost US GDP by 0.4% and massively increase the country’s share of world trade, it would provide a platform for the United States to check the power of China and dictate the terms of trade in the Pacific. The provisions in the agreement that protect workers and the environment, ensure a free and open internet, regulate against state-owned businesses in protectionist countries like Vietnam and Malaysia and protect intellectual property rights all give the US important policy leverage over China. The TPP is comprised of important regional trading partners for China, and it could gravely affect Chinese exports should the TPP members experience more success trading with others in the agreement. Moreover, since it is an open agreement, if China wanted to join the bloc, it would be held to the same standards as the rest of the group, forcing its business policies to fit a more US-friendly model.
While perhaps not as effective as a global agreement, if the TPP is implemented it could result in massive benefits for both the world and individual nations alike. Moreover, it would give the United States a clear strategic advantage over China in Pacific Rim trade policy, making the opposition in the US somewhat baffling.
The views expressed by the author do not necessarily reflect those of the Glimpse from the Globe staff, editors or governors.