Trans-Pacific Partnership: A Different Perspective
Trans-Pacific Partnership (TPP) or what is being called the biggest international trade deal in years refers to common standards in trade and reduced trade tariff. The TPP transnational legal regime will involve 12 countries initially and encompass 40 per cent of global GDP and one-third of world trade. Members of TPP are the United States, Japan, Singapore, Brunei, New Zealand, Chile, Australia, Peru, Vietnam, Malaysia, Mexico and Canada.
Trade agreements take place amongst countries all the time but there is a reason why TPP has stirred up debates about costs and benefits of trade liberation across the globe. From a pragmatic point of view, TPP would boost the economies of weaker players such as Brunei, Chile, Peru, Vietnam but the dichotomy arises because a majority of American feel this will cause job losses in their country. Agreement among negotiators from 12 Pacific Rim countries on the TPP represents a triumph. Tremendous political obstacles, both domestic and international, had to be overcome in order to conclude the deal. And now critics of the TPP’s ratification, particularly in the United States, should read the agreement with an open mind.
Seen in this light, the TPP that has emerged is a pleasant surprise. The agreement gives pharmaceutical firms, tobacco companies, and other corporations substantially less than they had asked for. On the other hand the deal gives environmentalists more than they had bothered to ask for. Perhaps some of these outcomes were the result of hard bargaining by other trading partners (such as Australia). Regardless, the TPP’s critics should now read the specifics that they have so long said they wanted to see, and reconsider their opposition to the deal.
So what exactly is inluded in the final TPP? Among the environmental features, two in particular stand out. The agreement includes substantial steps to enforce the prohibitions contained in the Convention on International Trade in Endangered Species (CITES). It also takes substantial measures to limit subsidies for fishing fleets– which in many countries waste taxpayer money and accelerate the depletion of marine life. For the first time these environmental measures will be backed up by trade sanctions.
Similarly, various provisions in the area of labor practices, particularly in Southeast Asia, are progressive. These include measures to promote union rights in Vietnam and steps to crack down human traffic in Malaysia.
Perhaps the greatest uncertainty concerns the extent to which big US corporations would get what they want in the areas of investor-state dispute settlement and intellectual property protection. The TPP’s critics often neglected to acknowledge that international dispute-settlement mechanisms could ever serve a valid purpose, or that to some degree, patent protection is needed if pharmaceutical companies are to have sufficient incentive to invest in research and development.
There was, of course, a danger that such protections for corporations could go too far. The dispute-settlement provisions might have interfered unreasonably with member countries’ anti-smoking campaigns, for example. But, in the end, the tobacco companies did not get what they had been demanding; Australia is now free to ban brand-name logos on cigarette packs. The TPP also sets other new safeguards against the misuse of the dispute-settlement mechanism. Likewise, the intellectual property protections might have established a 12-year monopoly on the data that US pharmaceutical and biotechnology companies compile on new drugs, thereby impeding competition from lower-cost generic versions. In the end, these companies did not get all they wanted; while the TPP in some ways gives their intellectual property more protection than they had before, it assures protection of their data for only 5-8 years.
The focus on new areas of deep integration should not obscure the old fashioned free-trade benefits that are also part of the TPP: reducing thousands of existing tariff and non-tariff barriers. Liberalization will affect manufacturing sectors such as the automotive industry, as well as services, including the Internet. Liberalization of agriculture – long a stubborn holdout in international trade negotiations – is noteworthy. Countries like Japan have agreed to let in more dairy products, sugar, beef, and rice from more efficient producers in countries like New Zealand and Australia. In all these areas and more, traditional textbook arguments about the gains from trade apply: new export opportunities lead to higher wages and a lower cost of living.
Many citizens and politicians made up their minds about TPP long ago, based on seemingly devastating critiques of what might emerge from the negotiations. Some even said that governments negotiating a far-reaching global service agreement are ‘surrendering a large part of their global sovereignty’ and exacerbating the social inequality of poorer countries in the process. We can not be sure whether TPP will benefit or harm the global economy but it is important to consider the counter arguments these critics provide.
At a time when growth is failing to meet expectations almost everywhere, the TPP seems like a good move. To be sure, because tariffs in the TPP member countries are already low (with some exceptions, such as Canada’s tariffs on dairy products and Japan’s on beef), the net benefit of eliminating them would be modest (except for a few items that are very sensitive to small price changes). But the TPP is also expected to reduce non-tariff barriers (such as red tape and protection of state enterprises); harmonize policies and procedures; and include dispute-settlement mechanisms. So maybe it isn’t that bad after all?
WRITTEN BY CHETAN SHARMA FOR BESA
PLEASE DIRECT ANY INQUIRY TO AS.BESA@UNIBOCCONI.IT