Nations Agree on the Trans-Pacific Partnership … and My First Take of Its Significance

Yesterday, the U.S. and the eleven other nations announced that they had finally – after rounds and rounds of delays – an agreement.  The Trans-Pacific Partnership (TPP) have been controversial and widely criticized, with secret negotiations taking place behind closed doors.

Even the ultra liberal and Western brain-washed readers of the New York Times see little to like about the agreement.  For example, within a day of the announcement of the agreement, the top 10 comments (as voted by the readers) in the piece in which the NYT reported read:

1. Charles, Los Angeles: Why is it so hard for the New York Times to do its job and point out the serious flaws of this piece of legislation. This article reads like a sales brochure for the US Governnent.
2. David S., Illinois: Congratulations to the global 0.1%. As for the rest of us? Good luck, and hold on to your wallets, if not your jobs.
3.  BenB93, Chicago: The American People do not want this deal. It is being forced upon us, and we should protest.
4.  Dean Charles Marshall, California: Globalization sounds good in theory, but has fallen “abysmally” far short in actual implementation. To claim such an trade agreement as NAFTA a tremendous success is pure “hogwash”. In fact, the disemboweling of America’s middle class and the exporting of millions of high paying jobs to foreign “lowballers” is the real legacy of NAFTA. The Trans-Pacific Partnership Trade Agreement has all the makings of a “wolf in sheep’s clothing” with the American worker once again “gang raped” by the ravages of catabolic capitalism and the “greed” of the global oligarchy.
5. David K, Cleavland, OH (NYT trusted commentator): *Now* do we get to read this deal? How about our congressmen and senators, to they get to read it and make public comments about it?  The secrecy around the actual contents really really bothers me. What Wikileaks has given us citizens to work with does not look like this is a deal that is in the interests of the vast majority of people of the United States (or of anywhere else, for that matter), and the fact that citizens have had to rely on guesswork about the proposed law of the land actually will be if enacted is very disturbing.
6.  usa999, Portland, OR (NYT trusted commentator): Get ready for the gradual elimination of country-of-origin labels, testing of imported foodstuffs for toxics and contamination, and other factors putting American consumers at risk. And until we see the true provisions of the Investor-State Dispute Settlement process we should anticipate they tilt against the public interest to support trashing of protective regulations. After years of consistently ignoring or undermine the public interest it would be a surprise for the Obama Administration to change direction now.
7.  J Baltimore: Good to see at least the commentators, against the tilt of the presentation by the NYT, recognize this “deal” for what it is: an initiative bought by transnational corporations at the expense of, well, everything – the environment, workers, small business, local economies, political sovereignty, Democracy, freedom.  Take your pick. There is stuff in here for almost anyone to hate. As citizens of a Democratic country, we must take as stand.
8.  ando arike Brooklyn: If Congress ratifies this monstrosity, we might as well kiss the last vestiges of democracy and local self-determination goodbye! Don’t like fracking? Too bad! Corporations will make the rules! Think drug prices should be regulated? That’s so 20th century! Get a job!  Welcome to the Brave New World of corporate feudalism! Thanks, Obama! Your legacy as a faithful servant of the One Percent is secure!
9.  Bunk McNulty Massachusetts: From commentary by Joseph Stiglitz, posted yesterday:  “Imagine what would have happened if these provisions had been in place when the lethal effects of asbestos were discovered. Rather than shutting down manufacturers and forcing them to compensate those who had been harmed, under ISDS, governments would have had to pay the manufacturers not to kill their citizens. Taxpayers would have been hit twice – first to pay for the health damage caused by asbestos, and then to compensate manufacturers for their lost profits when the government stepped in to regulate a dangerous product.  It should surprise no one that America’s international agreements produce managed rather than free trade. That is what happens when the policymaking process is closed to non-business stakeholders – not to mention the people’s elected representatives in Congress.”
10. EJS, Granite City, Illinois: A sad day for America. This corporate “free trade” deal will continue and accelerate the undermining and destruction of our middle and working classes, along with all the pathologies coursing through our economy. It is a neoliberal deal of, by and for the 1%. In addition, it will also undermine our national sovereignty by permitting corporations to continue creating private common law in private kangaroo courts presided over by corporate lawyers. They are empowered to sue our governments, federal, state and local, for damages if our laws cost them money. It is hard to believe that anyone but the super rich thinks this is a good idea for America. How President Obama can support this boondoggle and claim to be a champion of the middle class is beyond me.

Since the text of the agreement has not been released, I can’t make much substantive comment about the agreement itself, only about what are being said.  And many things sound … well … troubling.

First, the agreement is beginning to be touted less and less like a trade deal and more and more a platform for containing China.  In the article titled “U.S. Allies See Trans-Pacific Partnership as a Check on China,” the New York Times reported:

BEIJING — The Trans-Pacific Partnership trade deal was welcomed on Tuesday as a win for the United States in its contest with China for clout in Asia, as America’s allies expressed optimism about the impact of the 12-nation accord on a region worried about its dependence on the slowing Chinese economy.

The pact still must win approval in Congress, and analysts said the economic effects may be less sweeping than Washington predicts. But the mere fact that President Obama delivered on his pledge to close the deal came as a relief to allies in Asia. It was seen as a counterweight to China’s efforts to expand its influence not just in trade but in other areas, including its island-building in the disputed South China Sea and the establishment of a new regional development bank to compete with Western-led institutions.

“The TPP may not be the game-changer the Americans say it will be, but if the TPP failed, it would certainly have been a blow to U.S. credibility, and its conclusion is to be welcomed,” said Bilahari Kausikan, a former permanent secretary of Singapore’s Foreign Ministry. Yet, he cautioned: “This is not going to erode what China does.”

The victory for the United States comes as China’s position in Asia has been thrown off balance by questions about the condition of its economy, which is expanding at its slowest pace in a quarter century and has sent tremors across the region. Even with the slowdown, though, the Chinese economy is growing faster than those of most industrial nations, and China enjoys deepening economic ties with almost all countries in the region.

The trade agreement is unlikely to change that, but it is an important symbol of America’s staying power in Asia, some experts said. “It does at least temporarily halt the seemingly inexorable waning of U.S. influence and the corresponding rise of Chinese influence in the Asian region,” said Eswar S. Prasad, a professor of international economics at Cornell University and former head of the China division at the International Monetary Fund.

The TPP is not a win-win forward-looking deal to propel the world into the 21st century, not even a win-win for just the citizens of the twelve negotiating nations, but a  mere I-win-you-lose-geopolitics.  Take, as another example, the companion piece titled “Trans-Pacific Partnership Is Reached, but Faces Scrutiny in Congress” in the NYT.

ATLANTA — The United States, Japan and 10 other Pacific Rim nations on Monday reached final agreement on the largest regional trade accord in history, teeing up what could be the toughest fight President Obama will face in his final year in office: securing approval from Congress.

The conclusion of the Trans-Pacific Partnership, after years of negotiations and a series of sleepless nights here, was merely “an important first step,” conceded Michael B. Froman, the United States trade representative, as he and other weary officials announced their accord.

Now the deal faces months of scrutiny in Congress, where some bipartisan opposition was immediate. That debate will unfurl against the backdrop of a presidential campaign in which populist anti-trade talk against the deal is already prominent.

Still, for Mr. Obama the accord could be a legacy-making achievement, drawing together countries representing two-fifths of the global economy, from Canada and Chile to Japan and Australia, into a web of common rules governing trans-Pacific commerce. It is the capstone both of his economic agenda to expand exports and of his foreign policy “rebalance” toward closer relations with fast-growing eastern Asia, after years of American preoccupation with the Middle East and North Africa.

“When more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy,” Mr. Obama said in a statement. “We should write those rules, opening new markets to American products while setting high standards for protecting workers and preserving our environment.”

That argument — that the Pacific pact would be a bulwark against China’s power and a standard-setter for global commerce — will be central to the president’s hard sell ahead to Congress, administration officials said.

…

Among Democrats, too, opposition from the presidential arena is certain to bleed into debate over the Pacific pact.

Senator Bernie Sanders of Vermont, who is running for the Democrats’ 2016 nomination, began a fund-raising appeal within hours of the deal’s announcement. “Wall Street and big corporations just won a big victory to advance a disastrous trade deal,” he said in a statement. “Now it’s on us to stop it from becoming law.”

The pressure now builds on Hillary Rodham Clinton to take a stand. She promoted the trade talks as Mr. Obama’s secretary of state, but as a presidential candidate she has expressed enough wariness before liberal audiences that her support for an agreement is widely in doubt.

…

Key members of Congress in both parties and interest groups influential in Washington expressed ambivalence at best or outright opposition, though the agreement’s 30-chapter text will not be available for perhaps a month.

China aside, there appears to be very strong domestic opposition in each of the twelve negotiating countries, including Japan and the U.S.

Here is my sort take: if the trade deal  is really meant to contain China, it is at most symbolic.  I can see four scenarios.

1. Trade deal is negotiated in good faith and meant to favor the developed nation over the developing or non-developed nation.  If this is about rich vs. poor, I don’t think this agreement can be used as a platform to contain China.  While we might see some desperate developing nations join nevertheless, to cull favor from the U.S., for the most part, most of the rest of the world would simply stay away.  WTO – for all its faults – should be sufficient.
2. Trade deal is negotiated in good faith and really meant to tie the global economies tighter, under better governance.  If that’s the case, then China will have no problem joining at a later time.  China will leverage the agreement as a guide for reforming its economy, and join as soon as it deems itself to be ready.  Rather than feeling outcast, China will thank U.S. for its leadership and openly express gratitude to the TPP.  Talks of how much China will lose vis-a-vis other TPP members such as say Vietnam or Malaysia is purely speculative because it would presume that those members will adjust their economy faster to TPP than China even after China recognizes TPP standards as being good.
3. Trade deal is negotiated in bad faith and contains details to specifically target China.  Problem with this scenario is that if the TPP is really designed to disfavor China, China will just be that much more incentivized to negotiated its rival set of agreement.  As many commenters have noted, whatever TPP is or is not, China is not going away.  China will be an important player in global trade.  By explicitly rejecting China, the U.S. would be explicitly abdicating global leadership, not seizing it.
4. Trade  deal is not so much about free trade, but a friendship treaty, a platform for signatories to express like-minded values and cull similar interests (i.e. corporate-driven economies) – and to commit to mutually accepted set of domestic policy and regulations, touching on Intellectual Property policy, labor regulations, environment regulations, etc.  If this is America’s way of leading the world, China should ignore it.  It is short-sighted.  Putting aside the fact that different nations are in different stages of development, with different histories, priorities, etc., the thing is that even within one nation – say the U.S. – outlooks over what is the appropriate level of IP protection, environment protection, and labor regulations rise and ebb … depending on circumstances and political winds of the time.  Consider IP, throughout history, it has risen and ebbed.  Most recently, there seems to be a wind against very strong patents with the Supreme Court, starting with the 2006 decision on injunction to more recent decisions against software patents and drug company profiteering.  Hillary has even come out promoting further regulations on drug companies that profit from overly strong patents.  The recent Greek fiasco shows the disastrous consequences that can arise when regions with different circumstances are forced under the same monetary policies (under the EU).  Many in the U.S. believe the TPP gives away too much U.S. sovereignty for it to be Constitutional). By forcing nations to give up so much policy making discretion, the TPP may be inviting Greek disasters that are an order of magnitude larger.

In summary, despite the noise surrounding the TPP, we don’t know much about it.  Much of noise seem to be about containing China, which is disconcerting as a political matter, but I see little substance in how the agreement as a trade pact per se can be a tool for containing China.