The good, the bad and the really ugly aspects of the Trans-Pacific Partnership
By Tim Loncarich, NAPC CEO
The Trans-Pacific Partnership (TPP) is a trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam. Finalized on October 5, 2015 and the text signed on February 4, 2016, it has yet to be ratified by each nation but some nations have started the ratification process.
The full impact of the agreement is unknown but would be significant and long-lasting.
Citizens of most of the 12 countries are overwhelmingly against the TPP. Anti-TPP demonstrations have been held in every country except maybe Vietnam. In the U.S. a number of communities have passed resolutions opposing it. Even the New York Congress sent a letter to Obama demanding that he not approve it.
If ratified by each of the 12 nations, it would create the world’s largest trade zone, spanning four continents and 800 million people with a combined GDP of $28.5 trillion, or approximately 40% of the world’s economic output. The agreement consists of thousands of pages of complex legalese but essentially reduces or eliminates tariffs and barriers on a wide range of goods and services, extends copyrights and patents and greatly erodes national sovereignty and undermines democracy.
As the agreement was written and negotiated, it was kept secret from all but a few hand-picked insiders who included supportive politicians, lobbyists and large corporations such as Walmart, McGraw-Hill, Dow Chemical, Chevron, etc. It was kept secret at least until portions were leaked and published on WikiLeaks.
Each nation must either ratify the agreement or not. No further changes are allowed until after ratification.
Some aspects of the TPP could benefit most of the member countries - but at a cost. The worst aspect of the TPP is that transnational corporations can sue governments over legislation or policies made in the public interest. Another bad is that it extends patents and copyrights and restricts the sharing of creative works previously allowed.
The Good (Maybe)
Tariffs & Trade Barriers – Reducing or eliminating tariffs and trade barriers can be a good thing. In a perfect world it levels the playing field and provides each country with lower-cost goods and more jobs. But we don’t live in a perfect world, and many trade barriers exist to protect domestic industries from unfair competition. Wages in the communist dictatorship of Vietnam are less than .65/hour. It is idiotic to force developed countries to compete with Vietnam, yet the TPP does just that.
Some protectionism will continue under the TPP. Subsidized industries in countries with powerful lobbies, such as the dairy industry, will continue to retain their privileged status. The North American auto industry will see more imported parts but will still have some protections and will find it easier to sell cars in countries with previously high tariffs on U.S.-made products.
The U.S. and Canada already had low import duties on most goods and so will benefit more from the reduction in barriers to their exports to other countries.
Labor –The agreement provides the opportunity to improve labor standards and working conditions in TPP member countries by requiring that national labor laws respect international standards. This means the right to collective bargaining and the elimination of child labor and slave labor. However, in countries like Vietnam, where the only trade union is controlled by the government, it will remain to be seen if labor standards improve there or actually worsen.
SMEs – The TPP should make it a bit easier for small and medium-sized enterprises (SMEs) to do business in other TPP countries through streamlined customs regulations and greater transparency in regulations. It may also provide more opportunities to SMEs by opening up government contracts in each country but is likely to ultimately diminish any special support for SMEs in the U.S. and Canada.
Government Procurement – Government procurement under the TPP should become more transparent and accessible to foreign suppliers. This may ultimately mean the end to “prevailing wage” and minority and woman-owned business set-asides in the U.S. because they put foreign corporations at a disadvantage. Greater foreign participation in government contracts may also mean more stringent contracts and risk management and ultimately higher costs to government to compensate for the risks.
Manufacturing – Developed nations can’t possibly compete with low-wage countries for the manufacture of many products. Without some trade barriers to protect industries in countries with higher manufacturing costs, the higher-cost countries will further erode their already-decimated manufacturing base. Predatory countries like China will likely expand their use of Vietnam and Mexico to gain greater access to the rest of the TPP market with goods sold at below cost. China has already started expanding operations in the two countries.
Vietnam’s unskilled labor will stand to temporarily benefit from the elimination of the 17% tariff on textiles to the United States. But more low-wage sweatshop jobs won’t necessarily benefit the country in the long term. The clothing industry is highly transient and relocates jobs to countries with the cheapest and most productive labor force without providing former workers with new job skills.
A large percentage of the clothing manufacturers in Vietnam are Korean-owned companies, some of them run like mafia operations. Korea’s Dong-IL Corporation has already started construction on a $52-million yarn factory in the south of Vietnam. Vietnam’s largest textile operation is state owned and is investing $714 million to expand and upgrade its operations and boost profits for the Communist Party.
Under the TPP, automobiles could be imported duty-free into the U.S. even if most parts in those vehicles were made in countries that are not in the trade alliance. This will likely result in fewer jobs and lower wages for American and Canadian auto workers and ultimately even workers in Mexico.
While opening up more markets for US and Canadian products may aid some North American industries in the short term, it is delusional to think that in the long run higher-wage countries can compete with low-wage countries. With the continued wholesale theft of technology by China, the U.S. and Canada have little to no technological advantage. Foreign manufacturers can and will make things cheaper.
Canada’s new Liberal government has promised to spend billions of dollars aiding the industries that will be damaged by the TPP. However, because the government doesn’t have the extra money, it will borrow it and put the burden on future taxpayers.
Drug Patents – The TPP will extend patents on drugs, protect drug monopolies and substantially increase the cost of many drugs. This will result in the deaths of large numbers of people and will have a cascading effect on the health systems of every signatory nation as those systems must absorb dramatically higher costs to support greater profits for big Pharma.
“MSF expresses its dismay that TPP countries have agreed to United States government and multinational drug company demands that will raise the price of medicines for millions by unnecessarily extending monopolies and further delaying price-lowering generic competition. The big losers in the TPP are patients and treatment providers in developing countries. Although the text has improved over the initial demands, the TPP will still go down in history as the worst trade agreement for access to medicines in developing countries, which will be forced to change their laws to incorporate abusive intellectual property protections for pharmaceutical companies.“ - Médecins Sans Frontières
Outsourcing & Offshoring – The agreement is likely to mean the loss of jobs from the U.S. and Canada as barriers in the other TPP signatories are dropped. As the agreement takes root, there will likely be substantial shifts of jobs from higher-wage to lower-wage countries.
Foreign Investment – The TPP will make it easier for foreign capital to buy into and control domestic companies and turn them into transnational corporations that are above the law and can influence elections.
Climate Change – In its thousands of pages, the TPP makes no mention of climate change, and it could make it more difficult for any of the signatory nations to impose regulations that would reduce carbon emissions.
Income Disparity – NAFTA greatly reduced manufacturing jobs by making it easy for U.S. & Canadian manufacturers to shift jobs to low-wage sweatshops in Mexico while actually lowering wages in Mexico and the U.S. This made the rich richer and the working class poorer. The TPP will be substantially worse and will further empower the 1% and disempower almost everyone else in developed nations.
Food Safety – The TPP reduces food safety by reducing standards and enabling corporations to challenge food inspections and food-safety laws. Existing national food-safety laws can all be challenged. It will be harder to ban GMOs or require labeling.
Human Rights – The term “human rights” does not appear in the entire text of the TPP. In Brunei, LGBT individuals and single mothers can continue to be stoned to death under Sharia law. Malaysia will likely continue to be one of the world’s worst offenders of human rights. Human rights in other countries may decline as laws are challenged for impeding foreign corporate profits.
TPP Expansion – The TPP is a disease that may continue to spread. Any nation in the Asia-Pacific Economic Cooperation (APEC) bloc can join and nations in other regions can join with the approval of TPP members.
The TPP was sold to member nations as a way to counter China, yet China can join, and enjoy the privileges that TPP provides. Many in China perceive the U.S. as the enemy, and the TPP provides the mechanism for Chinese companies to launch economic, social and political attacks against the United States.
The TPP gives China and any other wealthy entity the ability to influence the U.S., Canada or any other TPP country from within.
China must be taken seriously. For many Chinese, the country’s bible is Sun Tzu’s “The Art of War.” Long-term China expert Michael Pillsbury claims that at the deepest levels the nation is secretly engaged in what he calls the “100-Year Marathon”, a program to dominate the world by 2050. Based on China’s belligerence in the South China Sea and its ongoing cyber war against the rest of the world, it is possible that many in China have a long-term agenda of global domination. It is unreasonable to assume that China wouldn’t use the TPP Trojan Horse to its advantage.
The Really Ugly
The worst aspect of the TPP by far is chapter 28, the one for dispute resolution that TPP proponents pretend doesn’t exist - https://ustr.gov/sites/default/files/TPP-Final-Text-Dispute-Settlement.pdf
Under chapter 28, a business, or other party, can raise a dispute for almost any reason if it feels that its profits were or could possibly be negatively impacted. These types of cases are already part of other trade agreements and are often referred to as “Investor-State Dispute Settlement,” or ISDS.
ISDS cases include TransCanada Corporation suing the U.S. under NAFTA for $15 billion in damages for Obama’s denial of the Keystone XL pipeline, Egypt being sued by a French company for raising its minimum wage, the Czech Republic being sued by a Dutch Bank for not bailing out a bank it had a stake in and the Swedish company Vattenfall suing Germany for billions for its decision to phase out nuclear power.
An ISDS can violate national sovereignty and eliminate the right of a nation to make and enforce its own laws or to govern responsibly. Under existing U.S. pacts, trade-agreement tribunals have already ordered that more than $3.6 billion in taxpayers’ money be given to foreign corporations, and more than $49 billion is pending. Once the TPP is ratified, this could increase exponentially and possibly bankrupt cities, counties and even states and other government agencies. There is no provision for a losing party to evade paying penalties by filing bankruptcy.
Chapter 28 gives the complaining party the choice of forum for the dispute resolution. The complaining party may choose the three person Panel prescribed by the TPP or another forum such as the one prescribed by the World Trade Organization.
If the forum chosen is the three person Panel then each of the disputing parties chooses one member of the panel and must agree on the third, or one is chosen for them from a roster. The three person panel reviews the evidence and witness testimony, makes a determination and imposes penalties. There is no provision for an appeal. The panelists are not required to be attorneys or experts but merely to “have expertise or experience relevant to the subject matter of the dispute.” What this really means is that once a nation ratifies the agreement, it ceases to be a real democracy and loses the ability to create and impose laws for the benefit of its citizens without running the risk of being sued by a foreign corporation and ruled against by a tribunal. On one level, the citizens of every nation that ratifies the agreement will become subjects of transnational corporations and the panels that make rulings on disputes. However, most citizens won’t know that they have lost their sovereignty until a worst-case scenario impacts their own community.
Contrary to the claim of some TPP opponents, the panels do not necessarily operate in secret. The agreement states “A Party that is not a disputing Party and that considers it has an interest in the matter before the panel shall, on delivery of a written notice to the disputing Parties, be entitled to attend all hearings, make written submissions, present views orally to the panel, and receive written submissions of the disputing Parties.” However, unless the public is informed of a dispute by one of the parties, most people won’t have any idea that there is a dispute and threat of penalties.
Ratification in North America
In the U.S., ratification of the TPP could be delayed until after the November presidential elections, or not. Most of the candidates have expressed opposition to the trade agreement, but then few of them are expected to keep any of their campaign promises, nor are they required to. What they say about the TPP before the election is irrelevant.
U.S. Trade Representative Michael Froman says that the current administration is doing everything in its power to move the deal forward and he is confident the deal will get the necessary support in Congress.
One of the Canadian Liberals’ campaign promises was to have meaningful dialogue with Canadians on the impacts that the TPP will have on Canada. Yet the dialogue so far has been far from meaningful. Most of the public consultations are carefully orchestrated to prevent any meaningful dialogue. They are often announced at the last minute and conducted in ways that prevent any expressions of opposition. So far, the Liberal Party in Canada is railroading TPP ratification and apparently cares nothing about public opinion.
Mexico’s Secretary of the Economy, Illdefonso Guajardo, claims that his country will vote on the TPP before the end of 2016.
Together, we the people can stop the TPP.
Copyright: North America Procurement Council, Inc. PBC