logo logo

TPP is a mistake

Forbes 4/09/2015

TPP Is A Mistake

Jean-Pierre Lehmann

The proposed Trans Pacific Partnership (TPP) trade deal is a mistake.

For starters the conventional view that TTIP (Trans-Atlantic Trade and Investment Partnership) is about Europe, whereas TPP is about Asia is wrong.

TTIP is indeed a proposed agreement between two parties, the US and the EU. It does not include other Atlantic nations such as Canada and Mexico, which are both members, with the US, of the North Atlantic Free Trade (NAFTA). Nor does it include non-EU member European states such as Iceland, Norway, Switzerland or Turkey. By currently common consent, TTIP negotiations appear to have got bogged down in bureaucratic technicalities and would seem to be going nowhere. There are hopes however that TPP might be concluded if President Obama can secure Trade Promotion Authority (TPA) from Congress.

Yet TPP is a really strange mélange of 12 members (see map below), including five from the Americas (Canada, Chile, Mexico, Peru and the US), five from Asia (Brunei, Japan, Malaysia, Singapore and Vietnam), along with Australia and New Zealand. In terms of populations the total American contingent which stands at 535 million, more than half the total population of the Americas (947 million), is significantly larger than the Asian population figures which amount to no more than 256.6 million (285 if you add Australia and New Zealand), compared to Asia’s total population of 4.3 billion: almost half of the Asian contingent is accounted for by one member, Japan. Missing are large Asian economies, notably South Korea, India and Indonesia, all three members of the G20.

Also missing of course is China; but that would seem to be deliberate, the economic arsenal of Washington’s (supposedly) strategic pivot to Asia, the fundamental aim of which is to contain China. Thus TPP is above all a geopolitical ploy with trade as a decoy.

Supporters and defenders of TPP argue that the reason China is excluded is not geopolitical but that TPP aims to achieve a very high standard trade agreement. Hence, they say, other Asian nations, including China, can apply and qualify for membership once they commit to meeting these high standards. Whether some of the current members, Vietnam, for example, are in a position to meet the high standards is for now an unresolved question. Though there is opposition to TPP in all member states, including in the two heavy-weight industrialized countries, Japan and US, a key question for developing countries, leaving aside the geopolitics, is whether TPP is what they need at this particular stage of their development.

This is the subject addressed in an interesting publication by the Malay Economic Action Council (MTEM) entitled, TPP – Malaysia is not for Sale. It includes a foreword by former Malaysian Prime Minister Tun Dr Mahathir Mohamad, architect of Malaysia’s impressive economic growth and development during his tenure, 1981 to 2003. As can be expected from Mahathir, he does not mince his words. He states that “the strongest campaigner of TPP is America … [which seeks] … to contain China and to safeguard its own economic interests [by] exploiting all resources from small but growing independent nations such as Malaysia”. He adds that “TPP is not a fair or free trade partnership, but an agreement to tie down nations with rules and regulations that would only benefit American conglomerates”. Furthermore, as Mahathir points out, the negotiations are occurring entirely in secret, thereby adding to the suspicion that it is a conspiracy. (Similar complaints on both counts can be heard in Europe in respect to TTIP.)

The fact is that just as TPP is on the US’ Asia Pacific geopolitical agenda, the Asian nations that became members also did so principally for geopolitical reasons, in order, so they hope, of tightening security links with the US as a means of defense against China.

Besides that, the five Asian members of TPP are rather strange bedfellows. Even stranger is the prospect of putting in the same bed the five Asian and five American members. Whereas there is some cohesion in the membership of TTIP, both the US and the EU share a similar level of economic size and development, and a shared modern economic and political history, TPP is something else. There are growing economic ties between Latin America and Asia Pacific, but these are mainly with China. There is very little in terms of trade or investments between, say, Peru and Malaysia, or Chile and Brunei, nor can it be expected in the foreseeable future.

Nor is there much integration in their respective regions.

Three of the five American TPP members, Chile, Mexico and Peru, are among the four members of the Pacific Alliance, founded in 2011 – the fourth is Colombia. While the laudable aims are to promote “deep integration” of their economies through the free movement of goods, services, capital and labor,” the current reality is that trade and other forms of economic exchange among the members is tiny in aggregate and an equally tiny proportion of their overall trade.

Whereas there is a great deal of intra-Asia Pacific trade and investment, it is mainly between Southeast and Northeast Asia. Trade and cross-border investment within the Association of South East Asian Nations (ASEAN) is small in comparison. Though there are ambitious plans to create an ASEAN Economic Community this year, in reality, as Professor Barry Desker, Former Dean of the Rajaratnam School of International Studies (RSIS), has pointed out, “ASEAN integration remains an illusion”.

In many respects TPP appears essentially to be coming down to a US-Japan bilateral trade treaty that might complement the US-Japan security treaty.

For many reasons, concluding TPP would end up being a costly mistake. Economically it does not make much sense. The two communities have very little in terms of synergies – and very few prospects of finding them in the foreseeable future. The needs of developing countries would be much better served by concluding the WTO Doha Development Round!

Furthermore, the architects of the post-World War II trade régime sought to de-geo-politicize trade. It is probably impossible to do so completely. TPP, however, is highly geopolitical and highly geopolitically divisive.

Both communities, ASEAN and the Pacific Alliance, should continue to focus on solidifying their intra-regional institutions and ties, rather than seeking to expand to inter-regional, let alone inter-continental, dimensions! That is, as things currently stand, a bridge far too far and a distraction from more immediate priorities. In the jargon of the profession, TPP would definitely feature among the “stumbling blocks”, not building blocks, to greater global economic integration, peace, equity and prosperity.

 source: Forbes