Financial Times slams US demands in the TPP

The flaws in the geopolitical case for the TPP

The Financial Times by Alan Beattie March 25, 2015

As the Trans-Pacific Partnership does or doesn’t approach completion, arguments for and against have had another airing, including the contention that the deal is worth doing for foreign policy reasons to enhance the US’s geopolitical standing in Asia.

This is an appealing fall-back for those who don’t like the deal’s content, but is at best one of the weaker arguments in favour. Whether or not agreements help strategic alliances, the intrusive and one-sided nature of pacts negotiated with the US can arouse resentment as well as cooperation.

There is an intuitive appeal to the geopolitical use of trade agreements. But quickly scanning the two main bilateral trade deals the US has signed over the past decade in the region, Australia and South Korea, it is hard to see much strategic impact. In both nations, belief in the US’s economic power and future superpower status have either stagnated or declined over the past decade. Other geopolitical issues, such as America’s ability to serve as a military counterweight to Chinese or North Korean belligerence, are surely far more important.

And rather than blithely assuming that a consenting trade partner is a happy trade partner, the US might also look at whether the content of TPP is conducive to future good relations.

Australia, for example, seems to have been rather bruised by its experience during the negotiation of the US-Australia trade deal. It conceded a fair amount and was asked to give up more – witness the pressure to rewrite the country’s public healthdrugs purchasing scheme at the behest of American Big Pharma. But it had few of its own demands met, including more access to the ludicrously-rigged US sugar and dairy markets. Australia has been surly about the TPP from the beginning, owing something to its previous experience.

The participation of countries in the TPP has less to do with enthusiasm for importing the US economic model than a grudging acceptance that yet more tribute has to be paid in order to retain access to the US market. Negotiating a trade deal with the US is not a particularly pleasant business, and nor is it becoming happier over time. You are essentially presented with a US model agreement that contains a decreasing proportion of actual free trade and an increasing proportion of intellectual property protection, and invited to sign.

It’s not clear that a country’s affection for the US will increase after being required to rewrite its patent and copyright law every few years on a model dictated by, respectively, the Pharmaceutical Research and Manufacturers of America and the Recording Industry Association of America. The US itself does not offer much liberalisation. It is highly unlikely to substantially dismantle its agricultural subsidy and protection regime to allow Australian and New Zealand farmers abundant access to its dairy market or stop its rice subsidies disadvantaging Vietnamese rice exports in world markets. America’s trading partners are thus on a permanent treadmill of enforced policy change in order to keep their trade access to the US.

Meanwhile, Chinese trade deals tend to ask less liberalisation from (and offer less liberalisation to) their negotiating partners. Instead, Beijing presses on with a highly attractive proposition to regional emerging markets: cheap money from the Asian Infrastructure Investment Bank.

On that subject, the declining influence of the World Bank is a cautionary tale. Under American influence structural adjustment programmes in sub-Saharan Africa and elsewhere for years it attempted to forcibly export US-style deregulation using the bank as a lever. It may have made the US powerful; it did not make the US popular.

The eagerness of emerging markets to bypass the World Bank by setting up their own development banks, such as the Corporación Andina de Fomento, is testament to that. The US may have thought that it, through the World Bank, was enthusiastically welcomed. It has discovered that, frequently, it was at best grudgingly tolerated.

At the moment, the US is essentially using its huge domestic market as a tool to remake other economies in its image. It is likely to work for some time to come, given the prize on offer. But Washington should not delude itself that trade deals which inflict political pain on the US’s negotiating partners will necessarily function as durable and positive elements of a wider diplomatic relationship.