To go ahead with Trans-Pacific Partnership or not?

14 June, 2014
As appeared in

INDEED, that is the question. But not just for Malaysia and other potential partners, now numbering 11, of the United States. It is a question for the Americans as well.

There is a discussion now whether or not the United States should still go for the “gold standard” Trans-Pacific Partnership (TPP). Whether the United States should lower its sights to achieve its aim of a Trans-Pacific trading and investment community.

Of course the “gold standard” is of US definition. Incorporating its values and interests. Sometimes identified as the global liberal trading and investment system which has brought growth and prosperity to the world, the post-World War 2 world, especially to rising Asia which has thrived on it.

But the TPP “gold standard” seeks to do two additional things. First to make up for violation and exploitation of that liberal system from which the United States feels it has suffered. And second to enhance it in the American strategic and business interest.

However, if for the United States the TPP must have strategic as well as vested interest content, so must it for Malaysia and the other countries.

While it is fashionable to call the American-conceived terms the “gold standard”, it does not shine that bright from the viewpoint of other countries.

So, as in any negotiation, there has to be give and take. Japan, for instance, is not giving in with respect to the agricultural sector. But so does the United States its agriculture, even if it dims the allure of the gold.

Even with respect to procurement, the United States protects certain sensitive industries from the penetration of open bidding.

The United States’ desire to protect rights with respect to medicines and tobacco is not healthy for other countries and peoples.

The compulsory international arbitration of investment disputes belittles the legal regimes of potential US partner countries, and is in some cases seen as a violation of their sovereignty (not that I agree, but the United States itself in other contexts shuns compulsory judicial settlement of international disputes). This reality must be taken into account.

State-owned enterprises

The US policy of wanting to see state-owned enterprises (SOEs) rolled back is another major issue with many TPP negotiating countries where SOEs are an expression of some corporate clout, not only internally but also in a global business world dominated by American multinationals.

There are other outstanding issues in the TPP negotiation, but the main point is there are counter arguments and interests to an American-defined trade and investment regime in a world now not so fully dominated by the United States.

The negotiating countries still want the liberal global system. With, however, their interests and perspectives incorporated.

Malaysia has said it wants to sign the TPPA, if possible by the end of this year. But clearly only when its concerns are adequately addressed. Malaysia takes its international obligations seriously and does not jump into any agreement with alacrity only to subsequently renege on the terms.

Indeed the “gold standard” TPP the United States so desires could become beset with non-adherence and interminable disputes. And then inconsistent enforcement which takes into account factors such as geopolitical interest could push it towards becoming meaningless.

Rather than a platform of cooperation it could become one of dissension – which will be really counter-productive.

Don’t forget competing arrangements such as the RCEP (Regional Comprehensive Economic Partnership), constituting 30% of the world economy with about half of global population, might then be seen as alternatives. Better a TPP that is inclusive, based on terms that can accommodate even more than the present 11 negotiating Asia-Pacific countries.

Gold standard

America has to take a long, hard look at the best way forward. The prospect of a grouping comprising 38% of global output which, with the Trans-Atlantic Trade and Investment Partnership (TATIP) on the other side of the world, would constitute about 85% of global gross domestic product (GDP), cannot but be an alluring one out-shining any “gold standard.” But is the United States doing enough to make this happen by truly leading and taking into account the interests also of other potential partner countries?

What can be seen is, to put it mildly, a rather lackadaisical domestic political will in the United States for concluding the TPP, or the TATIP for that matter. Congress is not giving President Barack Obama fast-track powers to complete the negotiations.

The situation is likely to get worse after the November mid-term Congressional election. Indeed Congress is showing all the protectionist instincts of not conceding to other countries’ interests and of only projecting US interests.

Given this US domestic political conundrum, how can it be expected that America’s negotiating partners will have any sense of urgency and fair expectation in finalising the TPP? The United States itself is not ready.

In the never-ending debate on relative US decline, not sufficient emphasis is given to how its dysfunctional political system has massively undermined American strategic interests.

While it is true when China shortly becomes the world’s largest economy its per capita income will still be way down the league table, one thing is evident to other countries: In Beijing, government works.

The US system of checks-and-balance has become one of check-mate. At every turn Obama is countermanded, even humiliated – at whatever cost to American interest. It is as if there is this battle cry: America may have had its first black President, but history will forget him because he left no worthwhile legacy.

So, against this background, can there be successful conclusion of the TPP? This the Americans must ask of themselves, and not just of other countries.