Though Trans-Pacific Partnership is widely hailed as ‘ambitious, comprehensive, high standard and 21st century’ deal by its advocates, significant gaps remain among the members in finally passing it through their cumbersome legislative process to make it a reality. It is surely making once again a dollar-dominated preferential regional trade agreement. Another serious drawback of the agreement is that it is excluding Asia’s three big emerging economies at the moment: China, India and Indonesia
The Trans-Pacific Partnership (TPP), which was concluded in October 2015, is all set to change the status quo in global trade for the rest of the 21st century. The Trade- Related Aspects of Intellectual Property Rights (TRIPS) of the World Trade Organisation (WTO) — so far recorded as the most controversial ‘trade deal’ in the business world — has brought sea change in the global governance regime of Intellectual Property (IP). However, the TPP — dubbed as the ‘WTO-plus’ by many in the 21st century — is heading for making new rules in global trade, intensifying the ever increasing gap between the countries of the North and the South and even within the North zone itself.
The TPP is a free trade agreement (FTA) negotiated by 12 Pacific Rim nations: the US, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Originally, the TPP was launched in 2005 with an agreement among four of Asia-Pacific’s smallest nations: Brunei, New Zealand, Chile and Singapore. Later, the US and the rest of the seven nations joined the agreement to make it one of the most landmark trade deals of the century. On November 12, 2011, the leader of the nine TPP countries — Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam and the US — announced the achievement of the broad outlines of the agreement which covers ‘five defining features’: First, Comprehensive Market Access, to eliminate tariffs and other barriers to goods & services and investment, so as to create new opportunities for their workers and businesses and immediate benefits for their consumers; second, ‘Fully Regional Agreement’, to facilitate the development of production and supply chains among the TPP members, supporting their goal of creating jobs, raising living standards, improving welfare and promoting sustainable growth in these countries; third, Cross-cutting Trade Issues for building on work being done in APEC by incorporating in the TPP four new cross-cutting issues, which included regulatory coherence, competitiveness and business facilitation, small and medium-sized enterprises and development; fourth, ‘New Trade Challenges’, under which it would promote trade and investment in innovative products and services, including relating to the digital economy and green technologies, and to ensure a competitive business environment across the TPP region and finally, ‘Living Agreement’, which would enable the updating of the agreement as appropriate to address trade issues that emerge in the future as well as new issues that arise with the expansion of the agreement to include new countries.
It seems the TPP is covering the widest possible features, which will eventually turn it into purely a ‘21st century trade agreement’ heralding a new standard to global business and incorporating next generation issues. Unlike, many other FTAs, the TPP is unique plurilateral agreement, which is widely dispersed among members coming from four of the seven continents. Hence it goes beyond the nature of a pure regional trade agreement.
To be precise, ‘it is just as economically diverse. Australia’s per capita income is about 40 times that of Vietnam. The US economy is around 1,000 times the size of Brunei’ (Menon 2014). It provides a rare opportunity to bring a new agenda to the global trade but many are concerned about its longstanding effects particularly on the rest of the trading blocs and within the members of the group.
Why is there always a thaw in reaching consensus among the TPP members on major issues till date? Primarily, the TPP members include countries as varied as Vietnam, Mexico, Peru and the US where hardly there are any commonality of interests, negotiating positions and principles which clearly guide them to a single point.
Looking at their huge per capita income differences, it would be just obvious not to have a common ground for a lasting agreement. Another one serious and controversial aspect of the TPP is its Investor-State-Dispute-Settlement (ISDS) provision, which allows foreign investors to bring claims for money damages over violations of the investor protection clause before a private arbitration tribunal that operates outside the challenged country’s judicial system. Under the ISDS, one arbitrator comes from the investor’s side, one from the country being challenged and a third by agreement of the other two arbitrators. The irony is that these three arbitrators are not Government officials or state appointed judges and also they need not be nationals of the challenged country. And, finally these three arbitrators will have the last word as to whether the Government of a particular country will be compelled to pay damages to a business house, and there can be no judicial review about the merits of these arbitrary rulings within the country.
Even in America, there has been a strong opposition growing on the ISDS which questioned: Can the US President and the Congress, consistent with Article III (under which Judges in US are appointed) assign to three private arbitrators the judicial function of determining the merits of a TPP investor challenge? The economist and Nobel Laureate Joseph E Stiglitz, who wrote a letter to the US Congress supported by both Democrats and Republicans highlights that the “ISDS is about rewriting the rules of how our economy works, tipping the balance of power in favour of big businesses at the expense of workers and the public here and in partner countries.” Despite the positive spin that has accompanied the TPP talks so far, there has been a constant tussle between the two groups of its members — Asian and non-Asian — on the implementation part.
“But of all the obvious divisions among the 12 TPP participants, it is the clash of capitalisms that is the most difficult to overcome. The Anglo-American participants, especially the US, firmly believed in a market-led approach to economic growth. The Asian partners — notably Japan, Malaysia, Singapore and Vietnam — however, achieved much of their remarkable economic success by relying on a state-guided approach to economic development. These competing visions of how to advance economic growth affect nearly every one of the many issues that need to be negotiated —tariff elimination, reductions in non-tariff barriers, investment safeguards, protecting intellectual property rights and so on” (Stubbs 2014). Japan’s powerful agricultural lobby is opposing the TPP and in countries like Malaysia, political arch-rivals like Mahathir Mohammad and Anwar Ibrahim have already voiced against the agreement. Although the deal has now been signed by its members, approval from all its 12 legislative bodies are eagerly awaited.
What is at stake for the US in TPP? By November 2009, President Obama announced his country’s intention to participate in the TPP negotiations to conclude an ambitious ‘next generation’, Asia-Pacific trade agreement that reflects the US economic priorities and values. With the conclusion of the TPP, the Obama Administration seeks to boost the US economic growth and support the creation and retention of high-quality American jobs by increasing exports in a region that includes some of the world’s most robust economies, representing almost 40 per cent of the global GDP. For Obama, the TPP is crucial for ensuring US business interests in the Pacific and do-or-die battle after China’s move towards the creation of the Asian Infrastructure Investment Bank (AIIB) and the New Development Banks BRICS or formerly referred to as BRICS Development Bank, both stationing within the People’s Republic and largely throwing a challenge to the age-old dominance of the western financial institutions or to the Bretton-Woods Institutions. Apart from this, the conclusion of the TPP would also set a legacy in Obama’s global affairs.
Who gets what out of the TPP? As for the TPP signatories like Vietnam and Malaysia, they will have the opportunity to get access to crucial US markets where they will potentially be benefitted in the days to come. As a reaction to the successful conclusion of the TPP, WTO Director General Roberto Azevedo announced that the ‘TPP will serve as an inspiration for the WTO members’ in the 10th Ministerial Conference held in Nairobi, Kenya from 15-19 December, 2015. However, critics argued that neither the process of TPP talks nor its inbuilt structure were helpful in reaching an agreement on Doha Development Agenda (DDA) at all. In fact, the WTO was an utter failure to reach a consensus on DDA, whereas the TPP members concluded the entire deal only within a span of just five years. However, both have similar old as well as new issues like agriculture and non-agricultural market access (NAMA) and emerging issues like e-commerce and competition. Within the TPP members, dialogue and discussion on vital issues were possible despite having serious differences unlike the WTO’s huge 161-member club where two distinct blocs — North and the South — have their own agendas and permanent squabbles.
So, the TPP in this sense could hardly motivate the largely divided WTO members to seal the much-awaited DDA in future. On the question of WTO’s receding clout and relevance against the backdrop of the growing FTAs like the TTP, TTIP and RCEP, Azevedo remarked that the path of regional agreements should continue, but these agreements are not a threat to the WTO.
On the contrary, they can provide energy and direction to the multilateral trading system. It is worth noting that these RTAs have WTO DNA woven throughout them as their language on many issues is very close to existing multilateral rules (and often exactly the same). Thus, he broadly argued that ‘we have, therefore, seen no conflict with WTO rules, but it is true that these agreements cover areas that are not currently included in the WTO agreements’. Therefore, the WTO’s official version is very clear that WTO would remain relevant despite mushrooming of emerging FTAs and it would rule the roost in global trade. But in reality it is not so and these FTAs’ spearheaded by strong economies like the US, Japan, Canada, etc, would soon influence the vital agendas within the WTO more vigorously than ever before out of frustration and will long for faster growth and better protection of their worldwide interests.
For countries like India, it may seriously impact its exports though it is not part of the deal. India’s Commerce Minister Nirmala Sitharaman commented that the TPP may indirectly have an impact on several industrial sectors like textiles, leather, clothing, cotton and yarn, besides the country’s regime on investment, labour standards, IPRs, Government procurement and state-owned enterprises (SOE). As the TPP is setting very high standards, the Indian Government may have to work hard to improve its standards in areas such as labour laws and the ISDS mechanism might have to be studied in detail. The Minister also highlighted the fact that some of the standards of the TPP are much higher than that of the WTO norms, including the IPR and possible ever-greening of patents, which could hurt India’s pharma industry. She said the operations and production methods of India’s public sector units could also be constrained due to the TPP. Besides, the TPP countries will have the advantage of nil or low duties, so investors would rather prefer to invest in them, so it would be wiser considering investment in these countries for Indian companies as well. But once the TPP is completed it would seriously hurt India’s grand ‘Make in India’ project launched by the current Modi Government. Hence, the country needs to be cautious and bring in reforms in major sectors for wooing large investments. Given that seven countries within the Regional Comprehensive Economic Partnership (RCEP) are TPP members, there could be a possibility that they all may push for adoption of higher standards prescribed by the TPP. So India needs to set the course for an overhaul of a fresh round of economic reforms which are currently on their way.
Of late, the delays and internal complexities on the way to lock the TPP deal is largely overshadowed by another trade pact of the WTO i.e. Doha Round. The TPP, along with the TTIP, would surely be a game changer for the current WTO system. It has been realised for long that the multilateral trading system initiated by the WTO is mostly making slow progress and fast missing deadlines on issues of critical importance for developing countries over the years. In 2013, at the Bali Ministerial, the WTO members could somehow pass the Trade Facilitation Agreement (TFA) in the midst of acrimonious debates while sidelining and postponing core issues related to the Doha Round in the past. Thus, the WTO is quietly slipping back into the fast growing demands and issues that most of its members are seeking early negotiations.
An environment of slow action, growing concern over the divide between the North and the South bloc countries, frustration of the developed nations over the non-implementation of the TRIPS-plus measures and finally, the intensification of pressures from developing nations for substantial reforms in the existing global financial institutions, including the IMF and the World Bank, might lessen, first the role of the WTO as the sole arbiter of trade relations between its members and gradually, help fading its ‘over imposing neo-liberal economic ethos’ in the years to come.
Though the TPP is widely hailed as ‘ambitious, comprehensive, high standard and 21st century’ deal by its advocates, yet significant gaps remain among the members in finally passing it through their cumbersome legislative process to make it a reality. It is surely making once again a dollar-dominated preferential regional trade agreement. Another serious drawback of the agreement is that it is excluding Asia’s three big emerging economies at the moment: China, India and Indonesia.
Understandably, Obama desires to extend Washington’s current trade alliances with the East Asia to South and South East Asian nations pushing China behind.
Indeed, the TPP is presenting a difficult opportunity to choose between Washington and Beijing at a time when some of the nations in Asia are locked in a tight conflict with China in the South China Sea wherein all of them need a stronger and resurgent US power to make the sea waters safe, secure and free for all.
Drawing on the current complexities, the majority of the countries in the region is choosing not between China and the US, but ironically both and at some point each of them. Indonesia, the Philippines, and Thailand are currently out of the TPP for their own economic compulsions apart from other political reasons. On the other hand, Cambodia, Laos and Myanmar are technically not ready for an FTA like that of the TPP.
Many of the TPP members have made it an obvious choice as the WTO brings a gloomy picture at the fag-end of the 20th century. The 20th anniversary of the establishment of the WTO marks a narrative littered with missed deadlines, disappointments, and failed negotiations (Lehman 2015) and hence FTAs like the TPP is bringing a new horizon to the emerging global trade. At the same time, the RCEP which looks less intrusive, more flexible and less ambitious than the TPP might attract more countries than the latter in the days to come. Whatsoever it may be, hope the TPP would not turn itself into another machine to promote American interests by gradually sidelining the WTO.
Source: DailyPioneer.com
Keywords: TPP, Changing Status, Quo, in Global Trade
