Trans-Pacific Partnership (TPP) was an initiative on global trade and investment announced by President George W. Bush in February - 2008 and diligently promoted by President Barak Obama and finally reached an agreement on October 5, 2015, after 7 years of negotiation among the twelve partners. The historical origin of TPP started from a Trans-Pacific Strategic Economic Partnership (P-3) in 2002, by Chile, Singapore and New Zealand, later with Brunei joined in 2005 (P-4) with an agreement concluded in 2006. The proliferation of regional and bilateral trade-related agreements in Asia Pacific without the U.S., prompted her to make a smart move to join the deferred financial services and investment negotiation in P-4 and took charge of the negotiation by expanding its scope by inviting Australia, Peru and Vietnam in 2008, Malaysia in 2010, Canada and Mexico in 2012 and finally Japan this year. This was a long bumpy process finally concluded on 10/5/2015, but it illustrated the determination of the U.S. through her trade representatives, Ron Kirk (2009-2013) and Michael Froman (2013-present) with Demetrios Marantis and Miriam Sapiro acting in between.
The TPP negotiation was conducted in secrecy hence the American people hardly understood its significance. With no details, even political analysts cannot make crisp comments other than treating TPP as a part of the U.S. 'Pivot' or 'Rebalance' Asoa Pacific geopolitical strategy. However, from leaks to organic media, serious controversy surrounding the TPP negotiation issues evolved. Opponents in member partner countries were concerned with TPP's impact on their economic development. Oppositions surfaced in the U.S. among global health professionals, Internet freedom activists, environmentalists, labor organizations and some political figures questioning TPP’s long-range impact on American interests. However, Obama has offered a few reasons to call TPPA as a "21st Century Agreement".
From basic capitalism point of view, TPPA moves the world closer to a free market, free capital and free trade economy. The U.S. as the most advanced developed nation stands to gain benefits from such a playbook. TPPA is a big win for global corporations and money institutions from getting market access, protecting IP assets, safeguarding investments and minimizing the interference from national governments and maximizing the outreach of global enterprises and investors. However, from developing nations' point of view, TPPA may hinder member countries to protect their national interests, for example on protecting their farmers and their small farm industry or in building a national auto industry. These types of issues are the reason for TPP to take such a long time to conclude an agreement among 12 partners. (Each had numerous cases to resolve, such as importing rice and automobile to Japan, exporting dairy product from New Zealand to other countries, extending patent and copy right lives in partner countries, and settling investment disputes by arbitration bypassing member partner's court system). On 11/5/2015, a copy of the secret agreement is released for legal review and a final text is expected to be available next year. Then it would allow two years for the member partners to ratify the agreement. In the U.S., it is still a question whether the Congress will ratify TPPA smoothly without opposition.
The U.S. successfully concluded TPPA taking a leader's role. In this process, South Korea was invited but she declined to join with her own reasons and China was excluded. South Korea and China had concluded their own bilateral trade agreement recently; one can understand why S. Korea may want to excuse herself from TPP to protect her domestic economy and her trade with China. China together with South Korea represents a significant portion of the AP economy. Being the second largest economy in the world, China has been cultivating bilateral trade agreements with many countries. Would TPPA work effectively without these two large economies? This is a trillion dollar question deserving an analysis. In the following, we shall examine the real significance of TPPA in light of the fact that China is not a member of TPP:
A. Market Access - China is one of the largest markets in the world, excluding China in TPP makes no sense. China’s absence in TPP will weaken the effectiveness of TPPA in opening markets to the 12 trading partners. China holds the key to develop bilateral trade agreements with each of the 12 TPP members even including the U.S.
B. Tariff on Goods - TPP defines 'good of origin' limiting non-originating material to 10% to qualify application of TPP tariff rules. However, the value of good may include all values contributed to a good including processing, packaging, shipping, etc. Hence, the computation may be complex. Critic of TPP claims that China as a material supplier can still avoid tariff even including 60% of material cost into a TPP.
C. Intellectual Property Rights - TPP made strides beyond the Trade Related Aspects of Intellectual Property Rights (TRIPS) of WTO on copyright protection, removing obligation of Internet Service Provider (ISP) for monitoring content and protecting trade secrets from theft. A key impact is that member partners cannot exclude state-owned enterprise from IP rights enforcement under TPPA.
D. Investment Disputes - The TPP used a 'negative list basis' to deal with investment issues, a clever approach to let every partner member to provide an objection list for debate and consideration. Anything not in the list will be then covered by the investment rules. The big win in the chapter of investors is the adoption of an arbitration process for settling investment disputes through International Center for Settlement of Investment Disputes (ICSID) bypassing member partner's court system.
The U.S. Government claims credit for the above main features of TPPA. However, this TPPA's triumph for capitalism does raise concern about the power of global enterprises outweighing that of national government. TPPA gives the US corporations advantages in doing businesses in Asia Pacific countries, but it also allows foreign entities to challenge the U.S. in areas of public health, environment, agriculture, labor practices, etc. The ICSID arbitration, not like court system, is a self-serving enterprise itself likely to favor a global investor in a dispute case. Is it a good thing when a foreign investor can challenge the government action of protecting labor, consumer, public health, global development and small businesses outside of a court system?
Many organizations have issued concerns against TPPA: 1. Bad for workers, forced to compete with foreign low-cost workers (CWA), 2. TPPA is a wish list for powerful special interest groups and international corporations; death to Free Speech and Open Internet. (Fight for the Future) 3. Dismantling public health safeguard and restricting access to price-lowering generic drugs. (Doctors without Border) 4. TPPA's environmental chapter is weaker than the agreement achieved by President Obama with China. (Environmental Workers). On intellectual properties, TPPA is regarded as favoring IP owners more than IP users; government may be prohibited to examine the source code even the issue could be affecting public safety.
The exclusion of other AP countries (populated India and fast rising China) is definitely a failure of TPP. As China is aggressively developing her own strategy in trade and investment through bilateral negotiations and proposing grand schemes of "One Road and One Route" (trade routes) with ideas of promoting more transparent and integrated digital and online trade platforms (processes and procedures) and physical infrastructure (facilities for transport and distribution) as well as creating new investment vehicles such as Asian Infrastructure Investment Bank (AIIB) supported by 57 founding members, the TPPA may be a little too limited (in members and scope), too selfish (capitalistic with little socialistic consideration) and too near-sighted (profit-minded with no vision) to be really called “the 21st Century Agreement”.
The TPP negotiation was conducted in secrecy hence the American people hardly understood its significance. With no details, even political analysts cannot make crisp comments other than treating TPP as a part of the U.S. 'Pivot' or 'Rebalance' Asoa Pacific geopolitical strategy. However, from leaks to organic media, serious controversy surrounding the TPP negotiation issues evolved. Opponents in member partner countries were concerned with TPP's impact on their economic development. Oppositions surfaced in the U.S. among global health professionals, Internet freedom activists, environmentalists, labor organizations and some political figures questioning TPP’s long-range impact on American interests. However, Obama has offered a few reasons to call TPPA as a "21st Century Agreement".
From basic capitalism point of view, TPPA moves the world closer to a free market, free capital and free trade economy. The U.S. as the most advanced developed nation stands to gain benefits from such a playbook. TPPA is a big win for global corporations and money institutions from getting market access, protecting IP assets, safeguarding investments and minimizing the interference from national governments and maximizing the outreach of global enterprises and investors. However, from developing nations' point of view, TPPA may hinder member countries to protect their national interests, for example on protecting their farmers and their small farm industry or in building a national auto industry. These types of issues are the reason for TPP to take such a long time to conclude an agreement among 12 partners. (Each had numerous cases to resolve, such as importing rice and automobile to Japan, exporting dairy product from New Zealand to other countries, extending patent and copy right lives in partner countries, and settling investment disputes by arbitration bypassing member partner's court system). On 11/5/2015, a copy of the secret agreement is released for legal review and a final text is expected to be available next year. Then it would allow two years for the member partners to ratify the agreement. In the U.S., it is still a question whether the Congress will ratify TPPA smoothly without opposition.
The U.S. successfully concluded TPPA taking a leader's role. In this process, South Korea was invited but she declined to join with her own reasons and China was excluded. South Korea and China had concluded their own bilateral trade agreement recently; one can understand why S. Korea may want to excuse herself from TPP to protect her domestic economy and her trade with China. China together with South Korea represents a significant portion of the AP economy. Being the second largest economy in the world, China has been cultivating bilateral trade agreements with many countries. Would TPPA work effectively without these two large economies? This is a trillion dollar question deserving an analysis. In the following, we shall examine the real significance of TPPA in light of the fact that China is not a member of TPP:
A. Market Access - China is one of the largest markets in the world, excluding China in TPP makes no sense. China’s absence in TPP will weaken the effectiveness of TPPA in opening markets to the 12 trading partners. China holds the key to develop bilateral trade agreements with each of the 12 TPP members even including the U.S.
B. Tariff on Goods - TPP defines 'good of origin' limiting non-originating material to 10% to qualify application of TPP tariff rules. However, the value of good may include all values contributed to a good including processing, packaging, shipping, etc. Hence, the computation may be complex. Critic of TPP claims that China as a material supplier can still avoid tariff even including 60% of material cost into a TPP.
C. Intellectual Property Rights - TPP made strides beyond the Trade Related Aspects of Intellectual Property Rights (TRIPS) of WTO on copyright protection, removing obligation of Internet Service Provider (ISP) for monitoring content and protecting trade secrets from theft. A key impact is that member partners cannot exclude state-owned enterprise from IP rights enforcement under TPPA.
D. Investment Disputes - The TPP used a 'negative list basis' to deal with investment issues, a clever approach to let every partner member to provide an objection list for debate and consideration. Anything not in the list will be then covered by the investment rules. The big win in the chapter of investors is the adoption of an arbitration process for settling investment disputes through International Center for Settlement of Investment Disputes (ICSID) bypassing member partner's court system.
The U.S. Government claims credit for the above main features of TPPA. However, this TPPA's triumph for capitalism does raise concern about the power of global enterprises outweighing that of national government. TPPA gives the US corporations advantages in doing businesses in Asia Pacific countries, but it also allows foreign entities to challenge the U.S. in areas of public health, environment, agriculture, labor practices, etc. The ICSID arbitration, not like court system, is a self-serving enterprise itself likely to favor a global investor in a dispute case. Is it a good thing when a foreign investor can challenge the government action of protecting labor, consumer, public health, global development and small businesses outside of a court system?
Many organizations have issued concerns against TPPA: 1. Bad for workers, forced to compete with foreign low-cost workers (CWA), 2. TPPA is a wish list for powerful special interest groups and international corporations; death to Free Speech and Open Internet. (Fight for the Future) 3. Dismantling public health safeguard and restricting access to price-lowering generic drugs. (Doctors without Border) 4. TPPA's environmental chapter is weaker than the agreement achieved by President Obama with China. (Environmental Workers). On intellectual properties, TPPA is regarded as favoring IP owners more than IP users; government may be prohibited to examine the source code even the issue could be affecting public safety.
The exclusion of other AP countries (populated India and fast rising China) is definitely a failure of TPP. As China is aggressively developing her own strategy in trade and investment through bilateral negotiations and proposing grand schemes of "One Road and One Route" (trade routes) with ideas of promoting more transparent and integrated digital and online trade platforms (processes and procedures) and physical infrastructure (facilities for transport and distribution) as well as creating new investment vehicles such as Asian Infrastructure Investment Bank (AIIB) supported by 57 founding members, the TPPA may be a little too limited (in members and scope), too selfish (capitalistic with little socialistic consideration) and too near-sighted (profit-minded with no vision) to be really called “the 21st Century Agreement”.
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