Jerri-Lynn here. In this short post, Jomo Kwame Sundaram makes the case against the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) – a free trade agreement originally intended to draw the US back into the Pacific region to counter the influence of China. To endorse this agreement would have required Trump effectively to flip flop on his previous decision to withdraw from the Trans-Pacific Partnership.
The CPTP is a free trade agreement among eleven countries in the Asia-Pacific region: Australia, Brunei, Canada Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The agreement entered into force on December 30, 2018 among the first six countries to ratify it: Canada, Australia, Japan, Mexico, New Zealand, and Singapore. Once fully implemented, its 11 member countries will form a trading bloc representing 495 million consumers and accounting for 13.5% of global GDP.
By Jomo Kwame Sundaram, former UN Assistant Secretary General for Economic Development. Originally published at Inter Press Service
After US President Donald Trump withdrew from Obama’s Trans-Pacific Partnership (TPP), involving twelve countries on the Pacific rim, on his first day in office, Japan, Australia and their closest allies proposed and promoted the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) to draw the US back into the region to counter China’s fast-growing power and influence.
Geostrategic Deal to Re-engage US in East Asia
The modest projected gains claimed by the most popularly used trade models are based on dubious methodologies. President Obama had explicitly promoted the TPP for geostrategic reasons even though both US government cost-benefit analyses found very modest gains from the free trade agreement (FTA).
With miniscule real trade gains from the original TPP, US withdrawal has made benefits from the regional agreement even more trivial. Without the US market, the TPP’s supposed benefits largely disappeared with the CPTPP. Hence, while its proponents hope the CPTPP will re-engage the US as hegemon in the region, TPP advocates have become even more desperate for US participation.
The Peterson Institute for International Economics (PIIE), the main TPP and CPTPP advocate, claimed most (85%) growth gains from non-trade measures (NTMs), not trade liberalization per se. Such claims were largely refuted by the 2016 US International Trade Council (ITC) report.
The World Bank used PIIE consultants to make even more exaggerated claims of TPP gains in early 2017, ignoring most costs and risks. CPTPP advocates have made even more extravagant claims about supposed benefits since.
To make matters worse, besides the meagre trade gains, enhanced intellectual property rights (IPRs) and investor-state dispute settlement (ISDS) provisions will fetter developing countries’ ‘catch-up’ economic prospects. Besides raising costs, e.g., for buying medicines and technologies, strengthened IPRs will further limit technology transfer.
ISDS will enable foreign investors to sue CPTPP governments, not in national courts, but rather, private arbitration tribunals. Besides undermining national judicial sovereignty, small country governments with limited legal resources will be disadvantaged. Ironically, Trump’s US Trade Representative now rejects reciprocal ISDS for undermining US sovereignty!
From the Frying Pan into the Fire
Informed analysts know that CPTPP losses, costs and risks are much greater than for the TPP while gains will be more trivial despite cheerleaders’ claims to the contrary. More worryingly, very few developing country negotiators have actually scrutinized and understood the likely implications of the 6350 page TPP agreement.
Some minor changes were made to the TPP agreement for the CPTPP. Several onerous provisions were amended, and some others suspended, leaving most unchanged. Only a few CPTPP governments secured ‘side letters’, exempting them from some specific clauses.
Thus, most onerous TPP provisions remain. The CPTPP has committed Malaysia to further trade liberalization, accelerating deindustrialization, besides constraining the growth of modern services, development finance and ‘policy space’.
With the economic slowdown of the last decade wrongly attributed to the end of trade expansion since 2009, and the more recent ‘populist-nationalist’ reversal of trade liberalization, wishful thinking has emerged that the CPTPP will somehow magically enhance economic growth and progress.
Developmental, Multilateral FTA Needed
Increased market access for exports typically requires trade liberalization by others, but trade liberalization also undermines food and industrial production. Recognizing such problems after the end of the Uruguay Round of trade talks led to the creation of the World Trade Organization (WTO) in the mid-1990s, most developing country members have since sought to ensure that WTO rules are more development-friendly, launching a Development Round at its Doha biennial ministerial conference in late 2001.
As trade liberalization advocate Jagdish Bhagwati has argued, bilateral and plurilateral FTAs have long undermined WTO-led trade multilateralism. At the national level, developing country governments should amend legislation and policy in line with their needs, especially for development, not at the behest of corporate lobbyists or geostrategic priorities.
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I had thought the TPP dead when Trump announced that he was bailing and I thought thank dog for that but wouldn’t you know it, our political leaders gave it a triple bypass to resurrect it again in a different format. The fact that our Prime Minister at the time was an ex-banker had nothing to do with it of course. The original treaty was so toxic that government representatives were barred from attending the negotiations as it was nearly a negotiation between different corporate representatives alone. And if the gains are minuscule but the downsides catastrophic, why would you sign up to it at all?
“….why would you sign up to it at all?”
While the gains for the country as a whole are miniscule, or as imo, nonexistent, the gains for the global overclass are massive, and they are trying to lock in their gains before “populism” takes them away. The US in the TPP seems to offer us up as consumers of last resort, but walking down main st mt. vernon wa the other day all I saw were closed brewpubs. The international businesses on the other side of the skagit river in burlington, home depot costco bed bath and beyond, best buy mixed in with lots of mattress stores are doing some biz due to location and interstate 5, but those stores it’s hard to tell how they are doing, they could just be loss leaders for all I know. then I went through cascade mall in burlington just to check it out and it’s a ghost town…movie theater, spencers gifts, kay jewelers and macy’s. The bus comes every half hour, I spent some enjoyable time perusing spencers gifts, and bought some incense just because I wanted to say I bought something at cascade mall and got back to the bus stop with time to spare. So the long story short is in these small towns the only place I see actual consumers is the grocery store, because we’ve all got to eat, but no restaurants to speak of because few people can afford $50+ for dinner/lunch. And that means no jobs. There’s not much glue holding the fabric of society together is all I’m saying. The TPP in any form is a lousy deal.
And Obama was hustling the TPP? What would it take for Elizabeth Warren to pick up with some form of this again? Or some other Democrat other then Bernie Sanders?
“The original treaty was so toxic that government representatives were barred from attending the negotiations as it was nearly a negotiation between different corporate representatives alone”.
That is not the case. The only people present at negotiations were government representatives. I agree that, especially for the US, corporations had an unduly significant interest. But their representatives were never at negotiations.
And Obama was hustling the TPP? What would it take for Elizabeth Warren to pick up with some form of this again? Or some other Democrat other then Bernie Sanders?
Comprehensive and progressive?
How about Enhanced, Comprehensive and Progressive High Grade Super Trans Pacific Treaty? Something that nobody could reject and with some help of extint Bear Stearns.
It’s interesting how the TPP and CPTPP differ, because the changes reflect a removal of US priorities from the agreement.
This means that we know what the main US priorities were, and it comes down to draconian copyright, patent, and related IP provisions particularly with regard to Pharma.
No meaning changes to the (already toothless) worker protections.
It’s a natural experiment, and it proves that the US priorities in a trade deal are to extend the reach of private monopolies.
Your observations and analysis on how the TPP and CPTPP differ are insightful. I’m glad you pointed to this important content in this post. I missed it on my first and second readings.
Both Canada and Mexico are signatories to the CPTPP. They are also signatories to the USMCA.
If I were a setting up a goods or services business with intentions to export, why would I set up in the US when I could set up in Canada or Mexico and receive the benefits of both treaties?
“Informed analysts know that CPTPP losses, costs and risks are much greater than for the TPP while gains will be more trivial despite cheerleaders’ claims to the contrary.” — It would be nice it this post provided a little more information about how CPTPP will be much worse than TPP. But I wouldn’t trust any agreements 6350 pages long whether CPTPP or TPP. I guess the Corporate Powers intend to ‘party-on’ right to the end. Things just get more and more interesting in these interesting times.
The CPTPP is some 600 pages in length.