TPP : The Never-To-Be-Ended Story

Does even Barack Obama want a fight over the TPP?
by Gordon Campbell

Pressing the pause button on the Trans Pacific Partnership deal is a sensible thing for the Labour Party to do, for at least two reasons. One, far more needs to revealed about the deal’s contents before any sane opposition party should approve such a deal, blindfolded. To do otherwise would be to give John Key and Tim Groser a blank cheque, and insulate them from any subsequent criticism for foolish or damaging provisions that they agree to oblige this country to recognise. Secondly, a wait and see’ approach makes good sense because the TPP deal is still sitting in Never Never Land. Why would Labour invite an internal fight over something that may never happen – or even if the TPP advocates do get lucky, not until 2015 ?

True, a few cock-eyed optimists still think that a meaningful deal can be done by year’s end, 2013. If victory gets declared by then, you can bet it will a bracketed with qualifiers, ‘let’s fix this up later’ deal festooned with exemptions and provisional market entry terms timed to kick in around 2025, or sometime beyond. Werewolf and most other TPP observers remain deeply sceptical that any substantive deal can be done by the time we’re singing Auld Lang Syne (sign?) on New Year’s Eve, 2013. Still, John Key’s New Zealand and Tony Abbott’s Australia keep on saying it can be done. With that in mind, and for this month’s edition, Werewolf decided to start with a whip around of how some of the other countries involved were feeling about the TPP . Answer : not very good. For instance :

Chile. Chile will hold an election on November 17. By a country mile, the Presidential front-runner is former President and former senior UN bureaucrat, Michelle Bachelet. She is not as keen on the TPP as the current Chilean President, Sebastian Pinera. In late October, Bachelet released her foreign policy document – it is in Spanish, and is available here. Roughly speaking, the Google translation of the relevant passage in Bachelet’s foreign policy statement on the TPP goes like this :

We are concerned about the urgency to negotiate the Trans-Pacific Partnership (TPP) agreement. To ensure the best interests of Chile we need to do a thorough review of its scope and
implications. to prevent a questionable interpretation of our country’s priority areas that may arise in this agreement if it is badly handled, and which could become an indirect renegotiation of our FTA with the U.S, weakening already established agreements in intellectual property, pharmaceutical purchases, public services and investments, or lead to the installation of new standards in the financial sector. “

So the Chilean government almost certain to be elected on November 17 – and if there’s a run-off, it will be even later – aims to carry out a “thorough review of its scope and implications “ before signing up to a TPP trade pact that Bachelet suspects will, in fact, worsen the key conditions of Chile’s existing trade agreement with the US. Again, that doesn’t sound like something that Chile is ready to sign off and tie in red ribbon barely a month later.

Malaysia. Within the TPP talks, Malaysia has been in battle with the US negotiators over Malaysia’s desire to retain the right to regulate the sale of tobacco, to protect the general health and wellbeing of its citizens. Big Tobacco opposes an exemption, and has had some success in pressuring President Barack Obama to take a more hardline position. Werewolf devoted an entire article to this fracas in its last issue.

Domestically, the current UMNO government in Malaysia – which narrowly won re-election earlier this year – is taking heat over the TPP from both the opposition and from former President Mathathir Mohamad – although, to be fair, Mahathir has become a spent force in UMNO party politicking in recent weeks.

The government’s current strategy ? It has pledged to do an extensive cost benefit analysis of the TPP, publish the figures, and hold a public debate about the TPP, before having a further debate about the final form of the deal in Parliament, and a vote on its contents. Contrast that with the situation here in New Zealand. When it comes to the TPP at least, they seem pretty keen on this open democracy notion in Malaysia!

Here’s the money quote from the 23 October issue of Malaysia’s Business Times.

We will not sign the agreement by the end of the year, and will allow the public to use the cost-benefit analysis as a basis for discussion. The Parliament will have a chance to debate on it.”

Which raises the question : What part of “We will not sign the [TPP] agreement by the end of the year” does John Key not understand ? Oh, and Malaysia remains mindful that there are still outstanding issues to be resolved on government procurement, intellectual property rights, the environment, state-owned enterprises and labour.

On October 25, Tokyo’s authoritative Yomiuri Shumbun newspaper carried a story about a pessimistic Asian Development Bank analysis of the current state of the TPP

The Trans-Pacific Partnership trade pact risks collapsing and producing a series of bilateral deals if the 12 nations involved cannot reach agreement on concessions sought by some, the Asian Development Bank said in a report.
From late August onwards, everyone has emerged from the flurries of meetings between chief negotiators, trade ministers and political leaders claiming that “ significant progress” is being made towards a resolution by year’s end. But not so, evidently :
Reports that the most recent round of negotiations made “very little progress” highlight the difficulties faced in finding common ground on the more difficult issues, the Manila-based lender [ie the Asian Development Bank ] said Thursday.
And that deadlock would be because….
Japan’s defense of its farming industry, Malaysia’s proposal to keep tobacco control measures out of the deal, and the impact of currency manipulation on markets are among issues impeding progress on the accord that the U.S. calls the cornerstone of its economic policy in the region.
Oh sure, the political leaders from the nations participating in the TPP keep saying that negotiating nations are still aiming to complete the talks this year. The Asian Development Bank however is raising the prospect of an imminent collapse of the TPP into a series of bilateral deals, with the US and Japan already pursuing that fallback option :
“The secrecy surrounding the negotiations makes it difficult to assess progress, but—from what is known—there is the risk of degenerating into a series of loosely tied bilateral deals,” the ADB said. Indications are that the two largest TPP members—the U.S. and Japan—are proceeding along bilateral lines, threatening the demanding single-undertaking approach the TPP is supposed to adopt.”

These are only a few of the storm clouds hovering over the TPP. All the more reason for the Labour Party here to hang fire, and to wait and see what – if anything – emerges from this bunfight that has implications for New Zealand. Although our mainstream media have a blind spot on this issue, National is actually the party that faces a political problem with the TPP. That’s because the texts of the TPP that have surfaced to date contain provisions that the vast majority of New Zealanders would reject. The list of likely objections would not be limited either, to the exposure of this country to investor /state dispute resolution tribunals and the extra costs the TPP may impose on Pharmac.

The threat to Pharmac however, is real. If the recently completed EU/ Canada trade deal is anything to go by, we could well be seeing a two year extension of patented pharmaceuticals on the TPP table. Obviously, such a provision would create delays in Pharmac getting access to generics, with cost repercussions. How can National possibly sell this situation to the public – especially if, as also seems likely, New Zealand will gain in return only conditional ‘phased in over a decade’ access to Asian agricultural markets. Calling this losing hand the inevitable cost of free trade won’t cut the mustard – given that many TPP provisions have nothing whatsoever to do with free trade, and have more to do with the inhibition of trade – mainly, for the purposes of commercial exploitation by US business lobbies.

Even if the TPP does miss its scheduled date of completion by year’s end, some people would say, – hey, that’s no big deal. Better a good deal eventually, with all the details in place right ? Prime Minister John Key keeps on saying so. The problem with that view is that US domestic political realities next year mean that a ‘no deal by year’s end 2013’ almost certainly means no deal gets ratified well into 2015 at the very earliest. And that timeframe would increase the likelihood of no TPP deal at all, as US attention wanders off in the direction of the Big Kahuna that is the looming EU/US Trans-Atlantic trade deal. Not only the US would lose interest. Since the TPP deal is like herding cats, some of the smaller cats may well have wandered off in all directions by 2015. If, for example, Japanese Prime Minister Shinzo Abe’s famed “three arrows” of economic reform have failed to work their magic, his ruling LDP will be even less able than it is now to get even its own party to support the deal, let alone the Japanese public, let alone the farm lobby.

In brief, here’s Abe’s problem : to be TPP compliant, Japan needs to reach a 95% tariff free situation. Try as it might pre-Bali. Japan was stuck around 93.5%. Here’s where it gets tough. To make significant progress, it looks as though Japan will need to carve into its five “ trade sanctuary” areas – dairy, rice, wheat, beef and pork, beef sugar and farm products used as sweeteners, such as sugar cane. Problem being, the LDP pledged in February that it would not touch the five sanctuary areas. Regardless, Abe and his minions have been busily scouring the 586 product items within the five “sanctuary” categories, to find those items least likely to be affected if their protective tariffs were abolished. Basically, Abe has been hoping he can retain the fiction of a tariff sanctuary for the five main categories as a whole, even while he whittles away at the tariff levels for some items within them. Understandably, the farm lobby has become enraged. So have dissident sections of the LDP. Spooked, Abe’s team have begun looking at other areas, to see if it can find tariff lines not vulnerable to imports, and/or areas not so likely to ignite such fierce opposition from the farmers, and from within the LDP ranks. Over the last month, the LDP has been zig-zagging back towards making appeasement noises to the farm lobby.

The likely result, especially as time goes by ? Political deadlock. To get it across the TPP finishing line, Japan would have to be given bracketed-out and phased-in exemptions that would erode the value of the TPP to New Zealand and Canada in particular, thereby undermining our rationale for making concessions in other realms of the deal.

The US Has Its Own Problems As always, any evaluation of the TPP has to begin, and end with the United States. The US has driven the deal from the outset, and will be the main beneficiary of its provisions, if a deal ever gets signed. Moreover, it was the US who put the TPP on hold in 2009, and it is the US that has been cracking the whip on getting a deal completed by year’s end 2013, to suit Barack Obama’s domestic political agenda for 2014. Nor everyone – outside or inside the US – is willing to fall readily into line.

Even if everyone did fall into line – say, if Vietnam flagged its demands for access to protected US footwear and apparel markets in return for opening up its SOEs to competition, if Malaysia forgot about regulating tobacco, if Australia forgot about its desire for the access to protected US sugar markets that was previously denied in its FTA with the US, and if New Zealand caved in on Pharmac ….even then, the TPP tooth fairy may not arrive.

Ask yourself. Could the Obama administration get such a deal through Congress ? More to the point, does Obama really want to risk a divisive fight within its own ranks in 2014 over the TPP ? Does he want to give the Republicans a unifying issue whereby the Tea Partiers in their ranks could readily re-cast themselves as the saviours of US jobs and the guardians of US autonomy against those faceless TPP investor-state trade tribunals that want to snatch away from Congress its God-given right to make laws, as decreed under the US Constitution by the Founding Fathers? Possibly, Obama won’t want to invite that fight. Not when the Democrats, if they remain united, have such an excellent chance of winning control of Congress in the mid terms next year.

Therefore, the Obama administration has two options, neither of them particularly pleasant. Yes, the US might go hell for leather to achieve by year’s end the so-called ‘fast track” authority aka Trade Promotion Authority, or TPA. TPA powers would enable the Obama administration to negotiate a TPP deal that would limit Congress to merely a sudden death vote to (a) approve it or (b) dump the TPP, in its entirety. Then again, a more cautious Obama might flag TPA, and let Congress haggle over the TPP deal line by line, and basically re-write it. In which case, the leaders of other TPP participating countries would be left watching angrily from the sidelines as the deal that they expended their own political capital to get passed, is given a ‘death by a thousand cuts’ treatment by the US Congress. For this and related reasons, Presidents normally want to have TPA powers : and Congress, long before there was a Tea Party, has always been notoriously reluctant to grant them. George W. Bush got TPA in 2004 by a narrow squeak three vote margin. Bill Clinton sought it twice in the 1990s and failed to get it, both times. Is Obama likely to succeed ? Is he even seriously trying to lobby for it ?

Here’s where it gets complicated. Yes, there is some bipartisan sentiment in favour of granting the President TPA powers, and lobby groups such as the US Manufacturers Association have argued publicly for Congress to do so. On the Democrats side though, there is a complicating factor. Something called Trade Adjustment Assistance (TAA) is set to expire on December 31 in its current form, unless renewed. The TAA is a US transitional assistance programme for workers displaced by trade pacts. If the TAA is not renewed this year, it will revert to a 2002 form that excludes service workers, and will then expire entirely a year later. A sizeable bloc of Democratic legislators have tried to make renewal of TAA their price for supporting a TPA bill, and for supporting the TPP. The Republicans meanwhile, have made it crystal clear that they oppose the linkage of TAA to any TPA bill, let alone to the TPP. So before you get into trade unions aggrieved about outsourcing to countries that have inferior labour and environmental standards… have the problem that the Obama administration’s lukewarm interest in renewing TAA protections for US workers is already souring the atmosphere within the ranks of the Democratic Party.

As yet there is no TPA bill before the House either, or any sign of it. As mentioned above, a fight over the TPA would throw a lifeline to Tea Partiers recently bruised by the recent shutdown /debt ceiling fiasco. As also mentioned, it would enable them to be recast as defenders of the Constitution against the creeping statism of Barack Obama and those of his communist minions who allegedly run the investor/state dispute resolution tribunals in Geneva, on behalf of transnationals.

Finally…if that wasn’t a bad enough outlook for the TPP, it needs also to be said that another sizeable bloc of influential US legislators want currency manipulation measures included in this deal. Basically, they want to target the way that Japan (and ultimately China if it ever should join the TPP) manipulate their currencies to further their trade interests. All countries – with the virtuous exception perhaps, of New Zealand – do it. Currency fiddling serves to make a country’s exports cheaper and more competitive than the goods produced by others… such as honest and hard working Americans. This is in fact, one reason why Toyota is currently creaming it, at the expense of General Motors – and without having to go to the trouble of actually boosting its sales. It is why Sony is recovering to profit – also without creating new products, and without a boost in its sales performance. To rub salt in the American wounds, Japan is bragging about it. Both the Toyota and Sony examples are being cited in the Japanese press to illustrate the miracles being wrought by Abe-nomics, and the Abe government has been keen to publicise its success in weakening the yen.

Now, ask yourself…are red-blooded American business lobbies supposed to stand by and let that happen ? Why not use the TPP, the champions of Corporate America have been telling US legislators, to stop such practices in their tracks ? So far, Obama and his Trade Representative Michael Froman aren’t buying into this particular argument. They want to keep the currency issue right off the TPP agenda – mainly because it would enrage the Asian/ Latin American participants and sink the TPP entirely. For now, Obama is hoping that the currency manipulation issue can be handled bilaterally between the US and Japan. Besides, if it was ever adopted, such an issue might well boomerang back against the US, given that the Federal Reserve would not escape unscathed from any encounter with rules that had genuine teeth, and enforcement clout.

Conclusion : Obama could have already decided that he would lose what would be a rushed and bruising fight for TPA powers by year’s end. Without TPA, the chances of passing a TPP deal next year look …..well, lets just say, very challenging. By year’s end, New Zealand would at best be signing a half-baked TPP so compromised and riddled with exemptions and delayed implementation as to make it virtually to decipher what, if anything, such a deal might mean for us. Like everyone else, the Labour Party response to the TPP could well end up being….huh ? What is this thing ?