Features

An Idiot’s Guide To The TPP

Words by: Trilokesh Chanmugam


If we run in similar social media circles you probably understand the ‘Trans-Pacific Partnership Agreement’ as a sign of the coming corporate apocalypse. It’s got something to do with guys in suits doing backroom deals and the systematic exploitation of the working class. It might also involve a new world order, but we’ll leave that kind of talk to people who hoard tins of beans as an insurance policy.

Just yesterday, Minister for Trade and Environment Andrew Robb departed for Atlanta Georgia to talk free trade with a bunch of other powerful people, so it is as important as ever to engage with policy makers and let your opinions be heard.

Here’s the good, the bad, and the ugly:

1 – What’s the TPP?

It’s a free trade agreement currently under negotiation between 12 countries located on the Pacific Rim. The TPP has been described as part of the USA’s plan to realign its trade strategy with a focus toward the economies of Southeast Asia and Oceania. Close to half of all global trade and up to 70% of Australia’s trade flows through the Asia-Pacific region, so it’s a big deal that most of the countries in this area are considering opening up their markets. There are a number of Pacific Rim countries not involved in the partnership, with China being the most notable absentee.

TPP negotiations have been underway since 2008, but a number of contentious aspects have delayed its progress. In June of this year, the US congress granted President Obama “Trade Promotion Authority,” which expedites the approval of any TPP amendments within the United States. There are several points of disagreement between participating nations which continue to cause delays, but it looks like the 12 countries are close to reaching a compromise.

2 – What’s good?

Free trade, in theory, is good for all parties involved. There is a strong rationale for the claim that if you remove protectionist policy, the economic efficiency of all nations participating in trade will improve.

Economic principles support this argument. Since China is super-efficient at producing manufactured goods, and Australia is super-efficient at producing raw materials, it makes sense to export raw materials and import manufactured goods instead of trying to produce both domestically. Comparative advantage means that this rule will apply even if China were more efficient than Australia at producing both raw materials and manufactured goods.

Free trade is also good on the basis that it improves the competitiveness of markets; it gives consumers more options. In Australia, permitting foreign retail giants to enter our market might bust the duopolistic control that companies like Coles and Woolworths have over the supermarket industry.

Policies such as tariffs and subsidies, which protect the domestic market, might help local industries survive, but they contribute to economic inefficiency on the whole.

These are the kind of theoretical arguments which are wielded with stunning effectiveness by corporate lobbies, resulting in an environment where the private sector and the majority of politicians are in favour of free trade agreements such as the TPP.

From DFAT’s overview of the Trans-Pacific Partnership Agreement:

“…We are confident that this agreement will be a model … for other free trade agreements in the future, forging close linkages among our economies, enhancing our competitiveness, benefitting our consumers and supporting the creation and retention of jobs, higher living standards, and the reduction of poverty in our countries.”

3 – What’s bad?

Free trade doesn’t necessarily result in better meals, nicer cars, and bigger TVs for the average consumer. In fact, the opposite may be true, especially in relatively well-to-do countries such as Australia. Giving corporations the power to move more freely between TPP countries will undermine the leverage of trade unions, and contribute toward corporations having the ability to hold governments to ransom through the threat of moving elsewhere.

There’s also the problem of unrestrained capital investment between countries. This is a distortion of the classic picture of international trade (which looks something like country A sends country B one type of goods in exchange for a different type of goods), and results in the type of scenario where the means of production in a country are owned by foreign investors, with all the profits flowing in one direction; normally from the third to the first world. This already happens, but you can bet we’ll see more of it if this agreement passes successfully.

Economic efficiency on the whole may increase as a result of the TPP, but this says nothing about how equitably the money will be distributed, or whether the relative purchasing power of consumers will increase at all.

4 – What’s ugly?

There’s a lot that’s ugly about the TPP agreement, but perhaps the most concerning aspect is the secrecy with which negotiations are being conducted. Transparency is so low it can be likened to peering through a brick wall. Only a handful of people have seen the agreement in its entirety, and the sections that the public do have access to are the result of documents which were secretly released on wikileaks back in 2013

Other ugly aspects of the agreement have activist groups lobbying government in an effort to make the necessary changes before it’s too late, and continue to be points of contention between the negotiating parties. These are not just disagreements about the economic justifications for free trade, they are corollaries of increasing corporate freedom. Here are a few of the most serious sticking points.

Intellectual Property:

The TPP includes a set of minimum conditions which protect patents, trademarks, and copyrights. The biggest push for this section of the TPP comes from the USA, but all participating countries will be required to enforce them once the agreement is signed. Criminal penalties will be imposed for “unintentional infringements on copyright”, and Internet Service Providers will be held accountable for the copyright violations of their clients (those who download movies, music or games). Goodbye internet freedom

Concerns have also been expressed that patent extension will increase the cost of medicines for countries in the developing world, because the USA is set on preserving the power of their pharmaceutical companies.

Australia was opposed to this position and has pushed back against this section of the TPP.

Corporations can sue governments:

Under most free trade agreements, overseas corporations can sue a national government on the basis that a policy causes loss of ‘expected future profits’. This is not the dystopian future, it’s already happening. When Australia implemented its cigarette plain packaging laws, Phillip Morris tobacco company started a lawsuit against the Australian government from a tribunal in Hong Kong; and it was legally able to do so because a 1993 investment agreement with Hong Kong contained provisions for ‘investor/state dispute settlement’. The lawsuit is ongoing, but if Phillip Morris wins the case, Australia will have to renege on its anti-smoking strategy.

You don’t have to be a genius to see that inclusion of these provisions within the TPP will undermine the ability of the Australian government to serve its people.

Environment:

Julian Assange has described the environment chapter of the TPP as “a toothless public relations exercise with no enforcement mechanism.” It still involves too much green-think for Australia and the USA though, as they have both opposed this chapter on the grounds that it adversely affects their industry.

Corporate interests and the environment are generally pitted right against each other; the Trans-Pacific Partnership, which has corporations in a tizzy, can only mean bad things for the Earth.