CONTROVERSIES SURROUNDING TPPA

The TPPA is generally recognized as one of the biggest trade deals in history. It involves 12 Pacific Rim nations – United States, Canada, Peru, Chile, Mexico, Australia, New Zealand, Japan, Malaysia, Singapore, Brunei, and Vietnam. These twelve economies account for 40 % of global GDP at US $ 28 trillion, and for about 26% of world trade (Isidore, 2015). Some of the countries involved in negotiating the TPPA, such as Australia, Singapore and Canada, already have trade agreements with the US. This ambitious trade agreement is intended to remove both tariff and non-tariff barriers to trade, to standardize regulations, and to implement common shared standards for foreign investment protection,intellectual property and related things.

Negotiations for the TPP deal have been ongoing for over 5 years and seem to be nearing agreement. However, there are several challenging issues that remain unresolved to date. Since the countries involved include advanced high income, middle income and developing economies, the TPP will involve major restructuring and reforms for some of the countries involved. Some of these issues are very sensitive for the negotiating partners and may require high level governmental decision making to reach consensus. As can be expected, these countries are encountering difficult and complex negotiating dynamics. As an example, the US is negotiating market access for goods and services with some countries that it does not have an existing FTA with, such as Brunei, Malaysia, Vietnam and New Zealand (Ferguson, 2015). Added to all this is resistance from the public, fierce advocacy from interested groups and widespread media coverage that often breeds confusion and more chaos. Some of the prominent controversies are examined below.

Disproportionate Benefits

Of prime importance that the forecast doesn’t look as good for some nations as for others. Opponents in smaller countries are convinced that big nations such as the US will benefit in a disproportionately high manner. Among Asian countries, economists believe that more protected economies will benefit more from liberalization. Along this thinking, Japan and Vietnam will gain the most among Asian countries. Vietnam is predicted to gain in every sector because of stimulus form external competition. On the contrary, economists predict that fee market economies will gain the least, relative to the country’s GDP. Australia, New Zealand and Singapore will thus gain little relative to their higher GDP. However, the exception would be competitive businesses who would gain from the increased export opportunities. In addition, the TPPA is a supply side program. Critics ask the important question of why not address the demand side also. If demand is not addressed, will we be facing the problem of inflation and its aftermath?

Regulatory Rigor

The TPP proposes a standard and uniform ruleset for state owned enterprises, intellectual property rights and labor and environmental standards, which is far more wide-reaching and rigorous than the WTO. This will be a big change for countries and businesses therein operating under looser set of rules, and will be followed by regulatory hurdles and hoops they have to clear. Internal businesses within affected countries stoutly protest such regulations, which if implemented, may be so hard for them to clear that they may be run out of business. Additionally, US economists argue that cluttering up the agreement with harsh and extensive rules about labor, greenery, and currencies will dilute the benefits of the pact (The Economist, 2015). Another facet is that if the TPPA rules were implemented, it will take considerable time, effort and money to implement such wide-sweeping rules. Some economists calculate a period of at least 10 years for full implementation.

Intellectual Property

Negotiations about Intellectual Property (IP) rights seem particularly complicated, since the countries involved have widely differing standards. The standards being negotiated are in general intended to be more rigorous than comparable ones in the WTO. Importantly, decisions made on IP rights have considerable potential to affect key market access issues on industries in which IP plays an important role.

Secrecy of Negotiations

The apparent lack of transparency is a major source of concern for the stakeholders and the public. After five years of secrecy, and yielding to global pressure, the TPPA administrators finally released the text of the pact. However, with the release, it is now feared that TPPA plan will allow for more internet censorship, and more internet policing globally (Sutton, 2015).

Effect on Job Growth and Individual Businesses

NPR reported on October 5th, 2015, that Michael Froman, the United States Trade Representative, said that “(the Trans-Pacific Partnership Agreement) will support jobs, drive sustainable growth, foster inclusive development and promote innovation across the Asia-Pacific region”. However, critics of the TPPA argue that jobs will be lost as many companies go out of business in the face of the more rigorous regulatory and IP standards. At the same time, proponents of the TPPA argue on the principle of “creative destruction” – that although many jobs will be lost, there will be more high-paying jobs in the import-export sector, better quality of goods and services etc. Thus, they say, the net effect for the countries will be national gains.

Latha Rajan

MBA Candidate 2016

 

1. Chris Isidore, C. October 6, 2015, CNNMoney. The controversial TPP trade deal in two minutes.http://money.cnn.com/2015/10/05/news/economy/trans-pacific-partnership-tpp-two-
minutes/

2. Hufbauer, G. 2 April 2016 Deutsche Welle (DW), Germany. http://www.dw.com/en/the-pros-
and-cons-of-the-trans-pacific-partnership-pact/a-18597149

3. Ferguson, F. I et al, March 2015. TheTrans-PacificPartnership(TPP) Negotiations and Issuesfor Congress. Congressional Research Service. https://www.fas.org/sgp/crs/row/R42694.pdf

4. The pros and cons of the Trans-Pacific Partnership pact. Interview with economist Gary Hufbauer http://www.dw.com/en/the-pros-and-cons-of-the-trans-pacific-partnership-pact/a-18597149

5. The Economist The politics of trade. 25 April, 2015. Fighting the secret plot to make the world richer. http://www.economist.com/news/united-states/21649613-america-inches-towards-big-
trade-deal-asia-barack-obama-faces-showdown

6. Sutton, M, 2015. Hundreds of Tech Companies to Congress: TPP and Fast Track Harms Digital Innovation and Users’ Rights. Electronic Frontier Foundation https://www.eff.org/deeplinks/2015/05/hundreds-tech-companies-congress-tpp-and-fast-track-harms-digital-innovation-and