Will the demise of TPP be a bane or a boon?

Every trade agreement ever reached between two or more trading partner countries has to have a winner and a loser. It cannot be a ‘win-win’ situation for each partner as was claimed in the Trans-Pacific Partnership (TPP). Donald Trump killed this idea on Monday to protect American jobs. Trump has been labelled as protectionist, but we have to realise that all American presidential candidates in the recent election were opposed to the TPP. The TPP is an expansion of the Trans-Pacific Strategic Economic Partnership (TPSEP) which was formed in 2006 by Brunei, Chile, New Zealand and Singapore. Since 2008, eight other countries including the USA, Australia and Japan joined at different points of time.

The TPP’s 12 members represented 40 per cent of the global trade, and comprised two big world economies - US and Japan - along with much smaller countries like Chile, Brunei, and Vietnam. The productivity gap of these countries did not support the ‘win-win’ situation theory. The negotiations on the TPP took place secretly to avoid public outrage. The proceedings of the secret negotiation are critical to understanding whether the TPP is a boon or bane. In this regard, the TPP is a fit case to understanding the relationship between democracy and business interest in the current world order. Let us fathom it via the TPP’s main proponent, the United State of America’s perspective.

In 2012, Hillary Clinton, then Secretary of State, said: “The TPP sets the ‘gold standard’ in trade agreements to open free, transparent, fair trade; the kind of environment that has the rule of law and a level-playing field”. As Democratic candidate in the primaries, Clinton aggressively supported the TPP. But after recognising the support earned by Democratic challenger Bernie Sanders and Republican nominee Trump for opposing TPP, Hillary changed her stance. She went on to do what politicians usually do: backtrack. Clinton said: “I will stop any trade deal that kills jobs or holds down wages including the Trans-Pacific Partnership. I oppose it now, I will oppose it after the election, and I will oppose it as President.”

Clinton’s changed stance clearly shows that the American people had rejected the TPP as an idea of economic growth through secret negotiation. The TPP would have provided the power to big companies to to safeguard corporate interests by rigging official rules from patent protection to food safety standards. The most provocative tool included under TPP is the Investor-State Dispute Settlement (ISDS), which protects the interests of big corporations over the State through a secret tribunal. The ISDS licenses companies to sue member governments if any state law challenges their potential future profit. US Senator Elizabeth Warren (D-Massachusetts) had question this provisions and said that “American should not be signing lousy trade deals”.  

On September 7, 2015, more than 200 Law and Economics professors wrote an open letter to reject the TPP and the ISDS. They said: “We write now to express our extreme disappointment that the final text of the TPP that was finally made public in November 2015 did not heed those warnings about this controversial provision’s negative consequences for our legal system”. The second controversial rule set down in the TPP is the eight years’ data exclusivity to pharmaceutical companies for every prescription for all countries except Australia. In effect, this means that no member country would be able to make generic drugs.

However, pro-TPP lobbies blame Trump’s decision as a loss of USA geopolitical power, and it could be a gift for China in the Asia-Pacific region. US Senator John McCain  averred that with the US retreat from TPP, China will economically dominate the Asia-Pacific region. Many of the TPP members are construing the US departure as a strategic failure of the TPP. Now TPP members like Japan and Malaysia are keen to participate in another trade block- Regional Comprehensive Economic Partnership (RCEP), a sixteen-member trade block of Asian nations which include two other prominent economies: India and China.