Reasons to Doubt Trans-Pacific Partnership Expansion

♠ Posted by Emmanuel in at 9/24/2013 09:29:00 AM
There is an excellent compilation at the Financial Times as to why few expect a "high-quality" agreement to emerge from ongoing TPP negotiations. That is, one with few loopholes and opt-outs for different participants. Given the highly diverse interests of the twelve nations looking to expand this agreement--they range widely in levels of development, size and so on--it is thus unlikely that an agreement that pleases all will be concluded in the next few months. Or, an agreement may be struck, but one which features a bevy of loopholes and opt-outs catering to the special interests of each nation.

At any rate, here are four reasons to be pessimistic
  1. The TPP seeks much stricter protection of intellectual property than many want. Poorer countries fear that such provisions will make it more difficult for them to use cheaper generic drugs, potentially denying their populations access to life-saving medicines. More generally, strict enforcement of IP is judged to favour advanced countries at the expense of poor ones, which have traditionally absorbed technological advances through copying. To enforce IP rights in too draconian a manner is, say opponents, a victory for protectionism, not for free trade.
  2. The agreement seeks to regulate the role of state-owned enterprises, so that they do not enjoy unfair access to licences, contracts or state finance. This is seen as an assault on the sort of state capitalism in countries such as China. It is difficult, however, to see how meaningful rules could be imposed on Vietnam, a TPP member, where SOEs are used by senior Communist party officials as a cash cow for favoured projects and sometimes as personal piggy banks. Even Japan, where the Post Office is in state hands, and the US, which has Fannie Mae and Freddie Mac, may fall foul of some provisions. Temasek, the Singaporean sovereign wealth fund, is believed to be concerned that new rules could affect the performance of some of the companies in which it has invested. Malaysia’s bumiputra policies, which favour ethnic Malays in the awarding of state contracts, may also run counter to the TPP.
  3. The TPP calls for a controversial investor-state dispute settlement that would, theoretically, allow companies to sue governments if they believed they were being treated unfairly. Australia has argued that this would weaken sovereign power in favour of multinationals. Anti-fracking activists say such a mechanism would allow oil companies to sue local authorities for imposing strict environmental guidelines. Canada has raised concerns that cigarette companies could use the provisions to take governments to court over anti-tobacco regulations. In Malaysia, Anwar Ibrahim, the opposition leader, has characterised the TPP as an attempt by the US “to impose its brand of economic model” on unwilling countries. 
  4. As in every trade negotiation, each country is seeking exceptions for sensitive industries. Japan was allowed to join talks on the basis that it would drop its age-old agricultural protectionism. Yet when Japanese negotiators turned up to talks in Brunei in July, they sought exceptions for “five sacred” agricultural commodities: rice, wheat, beef, dairy products and sugar. Japan is by no means alone. Canada (and the US) want protection for their dairy industry in the face of strong potential competition from New Zealand. Vietnam wants an exception for its textile industry so that it can enjoy tariff-free access to the US while continuing to use yarn made in non-TPP countries, especially China. The sugar lobby is particularly vocal in the US. “There are a lot of areas where the US wants everyone else to change, but doesn’t want to change much itself,” says Jeff Schott at the Peterson Institute.
I've already mentioned agriculture before which I believe will ultimately prove to be the largest stumbling block. However, something unmentioned is the eccentric but enduring American complaint about the US auto industry's lack of access to the Japanese market despite producing unsuitable cars for use there [1, 2].