By Kevin Gallagher, Associate Professor of International Relations at Boston University, and a Senior Researcher at the Global Development and Environment Institute, Tufts. Originally published at The Globalist
Despite President Barack Obama’s charm offensive in the region, Pacific nations are well-advised to remain wary of the U.S. government’s position on the Trans-Pacific Partnership agreement (TPP).
If U.S. trade negotiators got their way, the Pacific Rim would reap surprisingly few gains — but take on big risk. Until the United States starts to see Asia as a true trading partner, rather than a region to patronize, it is right to hold out on the TPP.
Despite all Obama’s charm, the rosiest projections say that the TPP will raise incomes among the parties to the treaty by a mere 0.3% of GDP in 2025.
Many economists see these projections as gross over-estimates. For one, they heroically assume that a doubling of exports automatically leads to more than a doubling of income. Yet, even if these estimates were taken at face value, they amount to just over one penny per day per person way out in 2025 for TPP nations.
In exchange for these small benefits, the U.S.’s partners in Asia and Latin America have to take on big risks. One big risk that may be a deal breaker is that the U.S. is insisting that TPP partners surrender their right to regulate global finance.
Open to Wall Street
Through its financial services and investment provisions, the TPP would allow Wall Street banks to move into TPP countries’ financial services sectors. To do what? If you can believe it, to push the very financial products that triggered the biggest global financial crisis since the Great Depression.
That is not progress. That’s regress, given what the world now knows about these often toxic instruments.
What is more, if U.S. trade negotiators, acting at the behest of U.S. industry, got their way, the deal would prohibit the ability of these banks to be regulated to prevent and mitigate a financial crisis. They would be “free” to recreate the mess all over again.
In the early 1990s, Chile showed the path to resilience. It put in place regulations on surges in the inflow of financial flows that can trigger financial crises. Such regulations have been broadly credited in helping Chile avoid some of the worst impacts of the Latin American financial crises of the 1990s.
Likewise, Malaysia was among the least hard hit during the East Asian financial crisis because it put in place regulations on the outflow of financial flows after the crisis came. Malaysia’s measures helped its economy rebound by 5.4% the year after the crisis.
The Value of Safeguards
Such measures may be considered impolitic in Washington and New York, where it is always preferred that capital – especially U.S. capital – can always move in and out of a country without any restrictions.
The wisdom of such precautions is now even understood in the erstwhile citadel of financial orthodoxy, the IMF. In its official view on regulating global financial flows, the IMF expressed concern that agreements like the TPP ‘do not provide appropriate safeguards’.
The same cannot be said for the U.S. Trade Representative’s office. As a result, regulating the inflow and outflow of financial flows would not be permitted under the TPP — if the U.S. side got its way.
What is perhaps most risky for the U.S.’s TPP partners is that the foreign banks themselves will be able to directly sue governments for violations of the agreement.
This puts the other governments at a natural disadvantage, given the zealousness, might and cost of Washington and New York City lawyers. They are the specialists in such proceedings – and always on the prowl for business.
Say No to Deregulation
Indeed, Malaysia knows this all too well. Under a treaty similar to the now proposed TPP that Malaysia had with tiny Luxembourg, a private investor there attempted to sue Malaysia for its post-crisis regulations on financial flows. That time, Malaysia was lucky that the case was thrown out on jurisdictional grounds.
But it shows that foreign firms are ready to pounce on such regulations if given the opportunity. And when the suing party is based in the United States, the TPP partners might not be so lucky.
It is in the well-understood self-interest of Chile, Malaysia and other TPP countries to continue to push back on Obama’s proposals to de-regulate financial services and investment. It is also in the interest of financial prudence and international fairness.
In light of that, it is disconcerting to find a recent study which shows that these nations have been able to safeguard the ability to regulate finance in treaties with other nations such as the EU, Canada, and China, but that it is the U.S. which is pushing back with great determination.
The Picture at Home
Thankfully, there are important voices in the United States as well who are pushing President Obama to act with more prudence than the U.S. financial industry wants him to do. Americans are also painfully aware that financial crises hurt U.S. jobs and financial stability.
U.S. Congressman Sander Levin and others have been pressuring the Obama administration to ensure that trade deals don’t trump regulating global finance. In 2011, over 250 economists from across the world urged Obama to make trade deals consistent with financial reform as well.
With so little reward on the negotiating table, Obama will be hard pressed to get a TPP from the Pacific Rim nations. They are better off to remain holdouts until the U.S. government gives up its rather extreme, risk enhancing negotiating position on finance.
The fate of its own economy in recent years, still on the ropes from the fallout of the last financial crisis, would certainly suggest much more caution than U.S. negotiators are currently pursuing in their dealings with the TPP partner countries.
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LOL “financial reform” LOL. Widening the opening of the trough so the piggies can snort up more and more of the real economy. Adjusting the height of the feed bins that pour our treasure into the pockets of billionaires. Basel III jokes: Government and agency holdings held at *zero* reserve value, carry without end. Strip mining the cash flows of the world, then collapsing it in another heap, bailed out by taxpayers, who cares, buy another yacht. “Freedom & democracy for Ukraine” oops I mean Monsanto and Dow and Exxon for Ukraine, paid for by a 50% cut in babushka’s pension.
As Travis Bickle said “someday a REAL rain is gonna come…”.
This may be the one time we can all thank the Republican House for its intransigence where Obama is concerned. Along with 151 Democrats they may not give Obama fast-track authority to make the TPPA and thereby revert the authority to Congress where it belongs and where it can we may hope be stopped. Wikileaks documents show its intellectual property that’s also at stake. You may not know this but Australia and New Zealand currently negotiate drug prices with Big Pharma on drugs with current patents (which TPPA extends) and provide generics to their citizens for those where patents are over. Cost of meds are @ 5% of what people pay in the US. If these 2 countries buy into TPPA their citizens get to make Big Pharma richer.
It seems to me, given the benefits of the TPP are so minimal and the negatives so high, the Asian nations should simply abandon it. This piece discusses the financial regulatory issues with the TPP, but every section of it is horrible and aimed at ripping sovereignty away from the signatory nations and seating it firmly within international corporate boardrooms. This includes finance, but also environmental, intellectual “property”, and many other areas where nations will be forced to give up autonomy. Scrap it. Completely.
There are strong constituencies in Asian nations that favor an global imperial regime run by oligarchs rather than the nation system currently in place.
Interesting idea. Evidence?
I wouldn’t presume to speak for Banger here, but this may be some of what he has in mind:
http://www.asiantribune.com/index.php?q=node/7805
Here’s a concluding thought from the article I linked to:
“The local compradors fit the profile of the theorists I quoted above. They are local elites who had exchanged roles with white colonial dominance; the black skin of these compradors is ‘masked’ by their complicity with the values and agendas, of the white colonial powers. They comprise local intelligentsia whose independence has been compromised by a reliance on, and identification with, colonial power. They are a relatively privileged, wealthy and educated elite who command a highly developed capacity to engage in international communicative practices, and “who may therefore be less inclined to struggle for local and political independence.”
To resist incursion and prevent being recolonized by foreign powers, with the able connivance of their agents, the compradors, we need to be aware of the various stratagems they adopt. (It’s beyond the remit of this article to undertake such as expose.) To do that, we need to be alert. We need to make an effort to familiarize ourselves about the INGOs operating among us. We must not hesitate to probe and expose their agendas of native and foreign agents of neocolonialism. We must expose, communicate, resist. We would also be wise to beware of help with strings attached.”
From the article I linked to:
“The local compradors fit the profile of the theorists I quoted above. They are local elites who had exchanged roles with white colonial dominance; the black skin of these compradors is ‘masked’ by their complicity with the values and agendas, of the white colonial powers. They comprise local intelligentsia whose independence has been compromised by a reliance on, and identification with, colonial power. They are a relatively privileged, wealthy and educated elite who command a highly developed capacity to engage in international communicative practices, and “who may therefore be less inclined to struggle for local and political independence.”
To resist incursion and prevent being recolonized by foreign powers, with the able connivance of their agents, the compradors, we need to be aware of the various stratagems they adopt. (It’s beyond the remit of this article to undertake such as expose.) To do that, we need to be alert. We need to make an effort to familiarize ourselves about the INGOs operating among us. We must not hesitate to probe and expose their agendas of native and foreign agents of neocolonialism. We must expose, communicate, resist. We would also be wise to beware of help with strings attached.”
Right on cue, here’s intellectual rockstar Slavoj Zizek! on the Haitian Revolution (1791–1804) in the — aptly titled– First as Tragedy, Then as Farce:
“Properly communist revolutionary enthusiasm is unconditionally rooted in full solidarity with this ‘part of no-part’ (ie., the dispossessed) and its position of singular universality. The Haitian revolution ‘failed’ when it betrayed this solidarity and developed into a new hierarchical-nationalist community in which the new local black elite continued the exploitation process.
The reason for its failure was not the ‘backwardness’ of Haiti. It failed because it was ahead of its time—its plantations (mostly sugarcane) were not a remainder of premodern societies, but models of efficient capitalist production; the discipline to which slaves were submitted served as an example for the discipline to which wage laborers were later submitted in capitalist metropolises.
After the abolition of slavery, the new black Haiti government imposed ‘agrarian militarism’—in order not to disturb the production of sugarcane for export, ex-slaves were obliged to continue working at their plantations under the same owners, mostly now as technically ‘free’ wage-laborers. The tension that characterizes bourgeois society—democratic enthusiasm and personal freedom co-existing with slave-like work discipline—this slavery in equality appeared in Haiti in its most radical form.
What makes capital exceptional is its unique combination of the values of freedom and equality and the facts of exploitation and domination: the gist of Marx’s analysis is that the legal-ideological matrix of freedom-equality is not a mere ‘mask’ concealing exploitation-domination, but the very form in which the latter is exercised.”
What is ironic is the the USA has pursued bilateral trade agreements with Japan for many decades. The sticking points have always been rice, health care, autos and finance. Japan has successfully kept these sectors in check by way of a managed economy through MITI (Ministry of International and Trade Industry). Like previous American trade missions, Team Obama tries to ignore this strong group exist. MITI civil servants carry a ton of weight. They also have very loud constituents.
Why Obama would expend all his political capital on these trade agreements which are bound to damage the larger economy raises serious concerns on who is actually behind his blind ambitions.
His “efforts” are not serious–everyone knows new trade agreements won’t pass Congress. No one wants to make the obviously toxic provisions of the TPP, for example, known to the public they may start connecting the dots.
Australia is not an Asian nation but is certainly being targeted by this incipient rip off TPP.
We already have a “free” trade agreement/s with the USA and other nations,none of which have proved to be of much,if any benefit, to us.
Given the calibre of the Flat Earthers who govern us I predict that we will be hearing “yes sir,no sir ,Uncle Sam” in the near future.
According to our Dear Leaders, you freeloaders don’t pay enough for your drugs. They say that it’s because of all you public healthcare nations that we must pay more!
That’s what they say.
We shouldn’t overlook Snowden’s efforts for, if not waking anyone up, firming up the understanding that the US is an untrustworthy partner and long ago stopped working in the interests of its citizens.
The FTAs are a much worse scandal than the surveillance. Americans just don’t know it yet. Most of what’s been (not) happening in healthcare is a cover up for the FTAs. Gridlock is just their cover story.
RE: Proposed TPP: Buyer Beware
It will almost certainly be rejected. All the other participants are painfully aware of “Barry the Plutocrat-Butt-Kisser’s overwhelming thrust: Serve his plutocrat, neocon good buddies, and their posse of “Dogpatch-DC” shills regardless of anything else. Good or bad for participants has almost nothing to do with it.
At least one of my legislators is saying they may reject it while writing in letters sounding like they support it, so I think a lot of Dems are going to vote for it at the last minute. few people follow the actual voting.
Please remember, they are POLITICIANS
Honesty is not in their vocabulary anymore.
Good point!! Don’t trust them at all!!!
The ones who care more about ego-pleasuring through continued officeholding than about personal enrichment after office could be pressured by credible threats of revenge voting against those who vote for fast track.
Here is just the latest in a long string of reasons we should dump the TPP. Its proving to be another “trade agreement” vehicle that the US is trying to use to attack public health care in other countries.
As Obama Visits TPP Countries, New Obama Administration Report Targets Their Public Interest Policies as “Trade Barriers” to be Eliminated
Everybody should repeatedly call and write their legislators, all of them to tell them in no uncertain terms that you will never vote for them again if they vote to ratify the TPP and any other secret trade agreements. Also that you want investor state ended. The secrecy issue alone is reason enough to dump these agreements. They should throw them out. According to Global Trade Watch, the US is
The TPP and all other formal trade agreements are going to go nowhere. American negotiators are acting in bad faith–they know very well any agreement that comes before Congress will be DOA. They are “negotiating” to please their masters some of whom don’t realize that dog won’t hunt–the negotiators are hustling up for their next big corporate job–Obama may well be doing the same. Politicians and public officials are not afraid to flim-flam their benefactors by going through the motions.
Did you ever watch Romney’s 47% video, not just the infamous clip? Romney’s stuttering was the most intelligent thing said.
I’m still very wary of a few cosmetic changes allowing the faux progressives to claim they “stopped” a bad deal, with an almost equally bad deal fast-tracking through in the midst of other distractions.
The TPP is a bit too massive to be effective for our elite. High salary chief officer types are grasping at the final smallest straws of globalization. How can you enforce the measures of TPP, particularly in a world of disillusioned underclass first-worlders? Patent law has become too bizarre, even for its experts. Same goes for copyright, trademark, ect. Regarding TPP, I am uncommonly optimistic. It is just too complex, too vague, too desperate. I am imagining its passage, followed by multiple attempts to enforce, followed by Seattle WTO style protests in every participating country. The total (i.e. security, cultural, economic) work to maintain TPP will outweigh the gains.
I fear you are too optimistic.
Probably, I suppose I’m still in denial that things could be going so well for the modern feudal class.
I think Obama will try to use the situation that he is creating in Ukraine to push for the tpp and the tap . I would expect him to claim national security needs to pass both plus increased fracking here. all while claiming that it’s Russia’s fault .
Seattle style protests will recieve Bloomberg/Obama style suppression. If it happens beFORE trade pacts pass it could be bad TV making trade pacts harder to pass. If it happens AFter they pass, it won’t matter.
Here is a counterpunch article called How The Democrats Rebranded Fast Track. (Wyden and others have begun calling it Smart Track). People might read the article, be warned, and prepared to reject Smart Track just as much as Fast Track or any other track.
http://www.counterpunch.org/2014/04/25/how-the-democrats-re-branded-fast-track/