Over the last several years, the U.S. has been engaged in a so-called ‘pivot’ towards Asia. Matteo Dian takes a close look at one of the major parts of that pivot: the Trans-Pacific Partnership (TPP). He writes that the TPP is important to the Obama administration not only for the economic benefits it will bring to the U.S. and to the region, but also for its strategic aspects, which aim to shape the norms of economic and commercial integration in the Asia-Pacific region to be more closely aligned with those of the U.S.
The enlargement and the reform of the Trans-Pacific Partnership (TPP) has been one of the most important policies promoted by the Obama administration in the Asia Pacific region. The TPP was originally conceived as a free trade agreement between Brunei, Chile, New Zealand, and Singapore. When it came into force in 2006 it was considered as one of the many economic and commercial agreements composing the complex web preferential trade in the Asia Pacific region. The relevance of the TPP was radically altered by the intention of the United States to participate in the negotiations, initially announced by the Bush administration in March 2008. In November 2009 the Obama administration announced that the enlargement of the TPP would be a keystone of American trade policy and that the enlarged partnership would have “the goal of shaping a regional agreement that will have broad-based membership and the high standards worthy of a 21st century trade agreement”.
Together with the United States, Australia, Canada, Malaysia, Mexico, Peru, Japan and Vietnam initiated negotiations for admittance into the TPP. The TPP has been described as a “comprehensive and high-standard FTA that aims to liberalize trade in nearly all goods and services and include commitments beyond those currently established in the World Trade Organization (WTO)”.
The agreement under discussion is formed by 29 chapters. Aside from free movement of goods, the TPP would cover services, agriculture, intellectual property rights, rules of origin, competition, labor, environmental standards, state-owned enterprises, regulatory coherence, and supply chain competitiveness. Several of those issues have never been regulated by an international free trade agreement before, nor are they covered by the WTO agreements.
The creation of this new mega- Preferential Trade Agreement is significant both for economic and commercial reasons and for strategic reasons. Economically the promotion of the TPP would contribute to promote the interests of the United States contributing to create a Pacific wide form of integration. As a consequence American firms would enjoy stable market access to the largest preferential trade area created to date. Secondly, the TPP will promote a form of capitalism very close to the American model. The rules contained in the proposed agreement reflect US interests in a number of sectors such as the protection of intellectual property rights, liberalization of services and investment, expansion of e-commerce, promotion of regulatory coherence, limitation of the role of the State Owned Enterprises.
The expansion of the TPP however should not be considered just as policy aimed to promote the economic interests of the United States or the interests of particular interests groups within the United States (as many anti-TPP groups do).
The role of the TPP should also be understood for its strategic purpose. Economic and trade policies are part of the Pivot to Asia (also called rebalancing), and are as a consequence they are integral part of the grand strategy of the Obama Administration. As Daniel Drezner has pointed out the grand strategy of the Obama administration was designed along two main axes. Firstly a phase of retrenchment reducing US direct military exposure, principally in the Middle East. Secondly a phase of counter-punching, namely a process of reinforcement of the American primacy wherever it is challenged. The main challenger is surely represented by China, due to its substantial economic and military growth.
The Pivot, as a consequence, has been conceived as a multi-dimensional response to China’s growth. On the one hand, the Obama administration has strengthen the US military presence in the region and reached out to new possible diplomatic partners in the region such as Vietnam and Myanmar. On the other hand, it has been promoting the TPP to reassert the American ability to shape the rules and norms of the economic and commercial integration in the Asia Pacific region.
The TPP should be interpreted as a response to the Chinese challenge for a number of reasons. Firstly it would re-launch the process of Pacific wide regionalization, as opposed to a narrower East Asian form of regionalization, promoted by Beijing and centred on China. During the last decade, while the United States enhanced security relations with East and South East Asian allies and partners, China promoted a number of institutions devoted to economic and financial governance, such as the ASEAN+3 and the Chang Mai Initiative. The enlargement and the reform of the TPP would signal that the United States wants to remain the central actor in the process of regionalization and aims to shape this process according to its preferences.
More specifically, several chapters of the new agreement aim at making the region less hospitable for the Chinese “state capitalism”. Chapters such as those limiting the role State Own Enterprises in member states, regulating intellectual property and liberalization of services are designed to structure economic and commercial integration according to rules favouring liberal market economies and their interests and penalize economies, such as the China’s, which relies heavily on State Owned Enterprises and an extensive role for the state.
Finally, the TPP should be considered as a relevant element part of the Obama administration’s attempts to reaffirm American primacy where it is seriously challenged in the Asia Pacific region.
This article is based on a talk given at the LSE US Foreign Policy Conference held on September 17-19th, 2014. You can watch video highlights from the conference in the player below:
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Note: This article gives the views of the author, and not the position of USApp– American Politics and Policy, nor of the London School of Economics.
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Matteo Dian – University of Bologna
Matteo Dian is an Adjunct Lecturer at the University of Bologna. He received his Ph.D. in political science from the Italian Institute of Human Sciences in Florence. He was a post – doctoral fellow at the Ca’s Foscari University in Venice, a visiting student at John’s Hopkins SAIS and a visiting graduate student at the European University Institute and at LSE IDEAS. He is author of The Evolution of the US-Japan Alliance, The Eagle and the Chrysanthemum (Oxford, Chandos Books, 2014) and editor of The Chinese Challenge to the Western Order (Trento, FBK Press, 2014)
While the TPP is being negotiated in secret, the content of leaked chapters suggest that US business models and strategic aims are foregrounded in this agreement, in many cases to the seeming detriment of sovereignty in the smaller nations that will be party to it.
Certainly in New Zealand there is significant and growing concern among the populace regarding the projected ability of foreign corporations to sue the government for making laws that affect their profits. It is likely to affect the cost of healthcare, impact on our environmental laws, and restrict our access to generic medicines and parallel imports.
I have yet to see anything leaked which shows a demonstrable benefit to the New Zealand population in terms of trade, and I fail to see what countries other than the US will get out of the TPP.
Thanks you for publishing this revealing article. This secretive trade agreement appears to be primarily about furthering US commercial interests. Public opinion has been sidelined because it is misleadingly referred to as a trade agreement, and media coverage has therefore been minimal. In fact if this agreement comes into place, it will circumvent national sovereignty through the operation of investor-state dispute settlement arrangements, which allow foreign corporations (notably litigious US corporations) to sue domestic governments for decisions which may affect their profits, thus holding national governments to ransom. Furthermore, the Australian government has no mandate for transforming our economy to US style capitalism, and the public will be thrown into a state of shock and awe when they see their labour, environmental, food safety, intellectual property and occupational health and safety reduced to the level of US law, the cost of pharmaceuticals rising steeply and US corporations running our social services. Pauline Westwood, Canberra, Australia
All free trade agreements are negotiated is secret, not just the TPP and not just those that include the United States. There’s nothing nefarious about it. It’s the only way agreements of this kind can be reached.
Yes, John, but the TPP is not really a free trade agreement. It is about changing the legislative environment of Pacific countries to suit the interests of US corporations, enabling huge companies to deter small countries from passing socially beneficial legislation or risk bankruptcy, and to to further US geopolitical interests by blocking Chinese expansion. This is why many Australian commentators refer to it as a Trojan horse.
Pauline, the TPP is a free trade agreement, your objections to it notwithstanding. It has all the standard trappings of an FTA, including tariff eliminations, IPR protections, dispute resolution, etc. Huge companies cannot stop small countries from passing socially beneficial legislation. If a party to the TPP passes legislation that a big U.S. corporation thinks is a trade law violation, the company can appeal to the U.S. Trade Commission to challenge the law in a World Bank tribunal. If it does, and wins, the country can be subject to sanctions, but it cannot be forced to withdraw the legislation. The United States has free trade agreements with 20 countries and have never done what you warn about. You’re quite right about the U.S. using the TPP to further its geopolitical interests in East Asia. It doesn’t want to be stripped of influence in the region by China. Japan and S. Korea don’t want that either.
Dear John, your say the TPP is a trade agreement. Yet. of 29 chapters in the draft Trans Pacific Partnership document, only five deal with traditional trade issues.
Despite your claim, there are many documented cases of legislative chill, whereby large corporations have merely threatened smaller countries with litigation, which has forced governments to back down on areas of public policy for fear of being bankrupted, not only by possible financial penalties, but by the actual cost of litigation in offshore courts, whose decisions are not bound by precedence and against which there is no appeal.
The foreign corporation does not have to show that a government’s action is a trade violation, but simply that an action may affect its future profits. At one stage Canada was threatened with litigation merely for running a government owned postal service.
You say that US companies have never done what I warn about, yet Canada has faced 22 cases, all brought against it by US companies under investor-state dispute settlement provisions of the NAFTA. A large proportion of these concern environmental legislation
Dear Pauline,
I’m not aware of any of the cases you mentioned, but I’ll take your word for it. Could you send me any cites for those? Who threatened Canada with litigation for running a postal service?
You are mistaken, though, about companies being able to sue foreign governments for any actions that threaten their profits, regardless of whether those actions are trade violations. If that were true, U.S. auto companies could sue Japan because its cars dominate the U.S. market, which has had a huge impact on U.S. auto industry profits. There are winners and losers in every FTA. The losers can’t sue just because they’ve lost.
I don’t doubt that U.S. companies have brought 22 ISDR cases against Canada. But ISDR works both ways. Canada and Mexico have also brought numerous cases against the U.S. I would add that the government of Australia strongly supports the inclusion of ISDR chapters in FTAs that it joins.
John
John, Australia has numerous treaties which include ISDS clauses. However, until this present Australian government came into power, we never agreed to ISDS clauses in any agreements with the USA. In fact, many academics and government advisory bodies strongly urge against them, for reasons I do not have space to go into now.
I recommend three treatises dealing specifically with a trade agreement we are formulating with Korea. They deal specifically with the issue of ISDS at great length.
Tienhaara, Kyla (2004) Investor-state Dispute Settlement in the Korea-Australia Free Trade Agreement; Ranald, Patricia, (2014) Submission to the Joint Standing Committee on Treaties Inquiry into the Korea-Australia Free Trade Agreement June 13, 2014; and Rimmer, Andrew (1014) The Korea-Australia free trade agreement: a submission to the Joint Standing Committee on Treaties. These may be found as Submission no. 1, 42 and 45 of Joint Standing Committee of Treaties website, at http://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/13_May_2014/Submissions
If our laws and policies are to be decided by large corporations rather than Australian voters, there will be no more democracy. Civil rights will be but a faint memory of a quaint, bygone age. Having been trained to consume additive-laced food, overpriced cars, ill-fitting sweatshop clothes and successive releases of technological gadgets which track our communications and monitor our every move, we will be compelled to comply with law, policy and services dictated by foreign firms whose sole motivation is to plump up their profits. Our gradual transformation from active citizens to passive “consumers” will be complete.
Pauline,
Chapter 21 of the US-Australia FTA has rather specific dispute resolution language. although it differs somewhat from that of the usual ISDR agreements. http://www.ustr.gov/webfm_send/2624
I agree wholeheartedly with your sentiment about corporate encroachment into our private lives. But we
don’t have to allow it. Whenever Wal-mart opens a new store in the U.S., all the independent stores in the area go out of business. Is that Wal-mart’s fault or is it the fault of the people who shop there? Today in the United States, you could be in the outskirts of any city and have no idea where you are, because they all look exactly the same — same stores, same fast-food and chain restaurants, same everything. It’s easy to blame corporations for this, but it’s more our fault than theirs. If Australians don’t want to buy American
products, then I say good for them. But that choice should be their’s to make, not the government’s.
Yes, John. We know the standard neo-liberal arguments on this. They are similar to the arguments used by Big Tobacco, Big Alcohol, etc. to defend their practices. Large corporations spend billions on advertising techniques to influence the public and they have many other means to further their ends. One such method is drastically undercutting smaller businesses on price, because they have ample means to sell at a loss, until such time as they drive local companies completely out of business. They have the economic clout to bully their supply chains. Struggling families have few disposable means and don’t have the luxury of taking the long term view, so they tend to buy at the lowest price available. I presume you have heard of the growing problem of Globesity. To take a case in point, people in small Mexican towns, who used to be on average quite slim, have increasingly become overweight following the arrival of huge American supermarkets in their towns. I don’t think in all conscience we can blame Mexican villagers, who possibly have fewer resources than the huge corporations preying on them, for naively purchasing foods they have been sold as “healthy” by corporate spin masters. While American citizens may support such policies, a real problem arises when such practices are forced onto citizens in foreign countries by so-called free trade agreements which they have never agreed to.
Aspects of the TPP that have leaked out do not bode well for us in NZ. The US especially have made opening of their agricultural markets off limits, so the bloated subsudiesed US corparate farmer will not have to compete againts NZ farmers on a level pegging. If the US are so keen on FTA’s why will they not open their boarders to agricultural competion? If as the author of the above contends US style capatilism is so perfect why is the US making area’s of their economy off limits or held as a carrot to be obtained somewhere in the future? If I want to embrace US style capitalism I would move to the US but I like how we do things down our way and I think we can survive without FTA’s from countrys that talk the talk but have no interest in walking any part of the walk.
Clean up your outdated taffrifs, payment of subsudies to all levels and sizes of private business and a financial system that is a global recession inducing money ponzi scheme. Basicaly until you can play by rules that are fair to everyone, stay in your own sand pit with your own friends.
I’m not sure where you heard that the U.S. ag markets would be “off limits” under the TPP, or what that means. All U.S. ag tariffs would go away under the TPP. What would not go away are the subsidies that the U.S. government gives to some farmers. There is no justification for that and you have every good reason to resent it.
Importantly for NZ, though, U.S. cattle producers are not subsidized. I would also point out that the U.S. already has the most open markets in the world. We have a huge trade deficit with the world and with most of the countries with which we have FTAs. It wasn’t I who defended US-style capitalism. I think it’s a disgrace. Corporations tell the government what to do. Our financial industry, whose principal motivation is greed, crashed the global economy and ruined the lives of working Americans. Yet not one person has been prosecuted for that. I hope to visit NZ someday. I understand it’s a beautiful place.