The Transpacific Agreement on Economic Cooperation (TPP) is the largest plurilateral trade agreement (12 member governments) since the Ottawa Trade Agreement of Imperial Cooperation of 1932 (58 member states) by which the British Empire was strengthened and the pound Sterling monetary zone was consolidated. The TPP includes the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, who in total represent about 40% of the global economy. Of this, Japan and North America make up four fifths of the total.
What is surprising is not the size of the agreement, but the way the negotiations have been brought about and the reach that it could have. In general it is a bad sign if there is something to hide, in these times of transparency. In terms of goods the agreement does not add anything new or enlarged given that there are already Free Trade Agreements (FTA) between almost all of the 12 member States and among these and the United States with few exceptions such as Australia and New Zealand. In this sense it is analogous to the 1932 Ottawa Agreement when Great Britain was at the centre of the agreement and without exceptions.
Recalling the 1932 agreement, Obama says in the Washington Post: "The world has changed. The rules change with it. The United States and not China should write them". Obama buried the multilateralism of the WTO with his phrase and is ready to define the rules unilaterally. Perhaps it should be baptized an "imperial agreement" like the 1932 agreement. In any event it points to the weakness of multilateralism. The manner in which the negotiations were held points to the privatization of global governance. It was negotiated privately.
From the beginning the negotiations have taken place secretly and now, little by little, they are coming to light, and one can see the different angles that this agreement brings with it. Intellectual property rights, the patents and branding of medicine, the possibility that private firms can sue governments in an international board of arbitration, as well as reduced rules of origin are matters that generate much concern. At the same time chapters 9 and 11 on investments and financial services warrant attention.
Médecins sans Frontières have called attention to the fact that the TPP will extend the period of patents beyond the 20 years at present in force, which will delay or block the possibility of generic medicines. The high prices of brand-named medicines will keep them beyond the reach of the poor and with it the quality of health treatments in the less prosperous economies of the region will see no improvement, in spite of the existence of retrovirals, medicines for heart conditions and cancer treatments, to mention a few whose patents were ready to expire or have already done so. In Peru, for example, the budget for retrovirals in the Ministry of Health doubled between 2010 and 2015 but the coverage was halved. There are three deaths per day from AIDS, an illness that is no longer lethal if correctly treated. It remains to be seen if there is a direct correlation between this and the Peru-US FTA, or if it is an impact of the presence of the Catholic Church in the Ministry of Health.
The harshness of the intellectual property terms affects access to music and films, books and published materials, leading to knowledge becoming more difficult to get and more costly, in general, making the development process of emerging economies more difficult.
The TPP also threatens the sovereignty of countries. A document revealed by WikiLeaks some years ago indicates that the TPP will allow big business to bring governments to court and demand compensation when their profit expectations are not realized. Gutiérrez Haces is working on this in detail for the set of countries with bilateral investment treaties (BITs) within the ICSID framework.
According to Gutiérrez Haces, companies can sue governments using arbitration panels made up of corporate lawyers in the ICSID thus avoiding national courts and cancelling the will of national Congresses (rule of domestic law) if they cannot get what they want. The rulings in ICSID can involve expected but unachieved profits. That is to say, if expected profits are 12% from a mining investment but the mining license fees are increased, for example, the company can sue the State in order to restore the 12% profitability. This would completely destroy the legislation and the fundamental rights of democratic states, which would be at risk over and above tax stability agreements.
In labour questions, the TPP obliges member states to change their labour legislation, in order to guarantee a greater exploitation of the work force. This has consequences not only for economically dependent countries, but also for the US working class, which will be under the pressure of their sources of employment moving to other countries, leading to wage reduction and the loss of employment. The benefit for the other eleven countries is the generation of precarious employment, but with reduced labour rights following the labour reforms that, at least in Latin America, have broken up the trade unions. The trade unions that survive are those protected by national parties in government.
The agreement also establishes reduced demands in the rules of origin for the automobile industry, a very important sector for nations such as Mexico. This is attractive for Argentina whose auto industry partner is Brazil. This is the reason why Argentina wants to enter the Pacific Alliance (AdelP) as an observer en route to the TPP. It is an Atlantic country looking to enter the Pacific Alliance.
The Latin American countries that make up the agreement can expect little dynamism in their exports. Peru, Mexico, and Chile are already trade partners of many of the twelve members. Colombia, which has an industrial, banking and a national bourgeoisie has chosen not to join the TPP. The comprador bourgeoisie, as it was christened five decades ago by Amilcar Cabral in reference to Africa, does it. The problem for them is that they do not have much of an alternative as they sell commodities and cheap labour. In the best case they are financial investors.
The TPP signatory countries have great differences among themselves. For example, while an Australian has an average income of 60 thousand dollars per annum, a Vietnamese makes 2 thousand dollars. With reference to per capita income, of the group of signatory countries, Mexico is only richer than Vietnam and Peru at the bottom of the list. The inequality among the countries that make up the TPP makes us think about who will gain and who will lose. What separates the developed countries from less developed ones is a knowledge gap, and the TPP will make this gap more difficult to close.
The TPP also represents a geopolitical manoeuvre led by the United States to recover influence in the Pacific basin, dominated by China in recent years. At the same time it seeks to destroy all Latin American regional integration initiatives that exclude the US. This is the case with MERCOSUR in South America, the Andean Community and ALBA. In this sense the president of Argentina, Mauricio Macri, has made it clear that he will seek to join the TPP.
On the other hand, China has established her own version of the TPP, the so called Regional Comprehensive Economic Partnership, (RCEP), that will involve a market of 3,400 million people and will be composed of the ten countries that make up the Association of South East Asian Nations (ASEAN); that is to say Malaysia, Indonesia, Brunei, Vietnam, Cambodia, Laos, Myanmar, Singapore, Thailand and the Philippines, in addition to the six countries with which ASEAN maintains Free Trade Agreements: Australia, China, India, Japan, South Korea and New Zealand. Trade within ASEAN is paid in yuan.
In spite all of the mystery behind the TPP, its intentions are clear. It is clear who benefits and who is affected. Again it is Multinational Corporations that will take the lion’s share of the deal, giving way to a greater concentration of capital that adds to those arguments already made by Anthony B. Atkinson, Thomas Piketty, and Emmanuel Saez.
- Oscar Ugarteche, Instituto de Investigaciones Económicas UNAM, SNI/Conacyt. Coordinator of the Observatorio Económico de América Latina, www.Obela.org. Ex president and Member of the Board of ALAI
- Jorge Arturo Luna colaborates with Obela.
interview with Giovanny Infante, ex-director of MHOL, Lima.
Anthony B. Atkinson, Thomas Piketty, and Emmanuel Saez, “Top Incomes in the Long Run of History”, Journal of Economic Literature 2011, 49:1, 3–71 http:www.aeaweb.org/articles.php?doi=10.1257/jel.49.1.3