Malaysiakini News

Why are we still chasing the ‘TPPA minus US’ fantasy?

Jomo KS  |  Published:  |  Modified:

COMMENT | The Trans-Pacific Partnership Agreement (TPPA) offered very little benefit to Malaysia in terms of likely export growth. Even the trade growth claims in the government-commissioned pro-TPPA reports were premised on access to the US market, which is no longer on offer with TPP11.

However, onerous aspects of the TPPA, such as enhanced intellectual property rights (IPRs) and investor-state dispute settlement (ISDS) remain, and will undermine the national and public interest.

In more normal circumstances, the TPPA would be dead and buried by now, after President Donald Trump announced US withdrawal immediately after his inauguration early this year. After all, all major US presidential candidates last year had opposed the TPPA. With its demise certain following the election, I stopped writing about it.

However, since January, the Japanese and Australian governments have kept the TPP alive by mooting the notion of TPP11, i.e., minus the US. To be sure, other governments have remained ‘on board’ for reasons of their own. But there is no legal basis for proceeding with the TPPA as the agreement included terms which killed it if either the US or Japan were not on board.

Hence, TPP11 is a different proposition, which is being sold as TPPA minus the US. Powerful negotiating forces are trying to keep all the terms of the TPPA, despite its vastly changed significance without the US.

Much ado about nothing

Early last year, we showed that ostensible trade gains from the TPPA, as claimed by its advocates, were obtained using moot techniques and projections. The supposed gains were paltry, given the long-term horizon under consideration. Even advocates conceded that the TPPA offered very little in terms of additional growth due to trade liberalisation, contrary to media hype.

The US already has free trade agreements with six of the 11 other countries. All 12 TPP members also belong to the World Trade Organisation (WTO), which concluded the ‘single largest trade agreement ever’ more than two decades ago, contrary to the TPPA’s claim to that status.

Trade barriers with the remaining five countries were already very low in most cases, so there was little room left for further trade liberalisation in the TPPA, except in the case of Vietnam, owing to the US war until 1975 and its legacy of punitive legislation.

The model used for trade projections makes unrealistic assumptions, including full employment. Our more realistic modelling suggested that almost 800,000 jobs would be lost over a decade after the implementation of TPPA, with almost half a million in the US alone. There would also be downward pressure on US wages, in turn worsening inequality.

Already, many US manufacturing jobs have been lost to US corporations’ automation and relocation abroad. Thus, while most politically influential US corporations would have done well from the TPPA for other reasons, US workers would generally not. Analyses of the votes for Brexit and Trump last year have seen long overdue criticisms of international economic liberalisation or globalisation.

Favouring foreign investment

To be sure, the TPPA had little to do with trade liberalisation. According to the Peterson Institute of International Economics (PIIE), the purported TPPA gains would mainly come from additional investments, especially foreign direct investment (FDI), due to enhanced investor rights. However, even before Trump’s presidency, such claims were disputed by other analysts, including the US International Trade Commission (ITC).

Much of the purported gains would come from ‘non-trade issues’. Strengthening intellectual property monopolies for powerful transnational corporations (TNCs), such as major pharmaceutical firms, would raise the value of trade through higher prices, not more goods and services. Contrary to the claim that strengthened intellectual property rights would enhance research and development, there is no evidence of increased research or new medicines in recent decades.

The TPPA would have extended patent and other intellectual property protections, raising the prices of protected items, such as pharmaceutical drugs. Medecins Sans Frontieres argued that the TPPA would go down in history as the worst “cause of needless suffering and death” in developing countries.

The available 12-week treatment for Hepatitis C costs RM360,000 in the US; according to the health minister, it currently costs RM30,000-40,000 in Malaysia. Social activist Martin Khor has recently shown how ‘compulsory licencing’ or ‘government use’ provisions can be invoked to quickly achieve this for the half million Hepatitis C victims in the country.

In 2015, American businessman Martin Shkreli raised the price of a drug he had bought the rights to by 6,000 percent, from US$12.50 to US$750! However, as there is no US law against ‘price-gouging’, he could only be convicted last month for financial fraud. Clearly, relying on US laws to protect Malaysian interests would not work.

Easing foreign takeover

FDI was also supposed to go up, thanks to the TPPA’s investor-state dispute settlement provisions. Foreign companies would then be able to sue TPP governments for ostensible loss of profits, including potential future profits, due to policy changes, even if in the national or public interest.

Regulations, already favouring powerful TNCs, would be arbitered by supposedly independent tribunals. This extrajudicial system would supersede national laws and judiciaries, with secret rulings not bound by precedent or subject to appeal.

Thus, rather than trade promotion, the main purpose of the TPPA was to promote more corporate-friendly rules for US TNCs. After all, the 6,350-page deal was negotiated by various working groups, where representatives of major US TNCs drove the agenda and advanced their interests.

The TPPA offers very little of benefit to Malaysia in terms of likely trade growth. Even the pro-TPPA reports commissioned by the government were mainly premised on access to the US market, which is no longer on offer with TPP11. However, onerous aspects of the TPPA, such as enhanced IPRs and ISDS, remain features of TPP11, threatening the national and public interest.

Surprisingly, after over half a year of studied indifference, the trade minister has unexpectedly expressed interest in TPP11. With nothing much to gain in terms of market access with the US out, TPP11 will mainly strengthen Japanese and other TPP11 TNCs. With greater rights for foreign investors, investments – foreign and Malaysian – will be induced to relocate abroad, in Singapore and elsewhere. The growth of the foreign proportion of share ownership over the last decade will accelerate with TPP11.

JOMO KWAME SUNDARAM was an economics professor and Assistant Secretary-General for Economic Development at the United Nations. His viewpoint is entirely his own.

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