The U.S. Wants Back in the TPP?

April 2, 2018

Asia is moving on without America when it comes to trade — and could be better off for it.

by Keith Johnson

The U.S. Wants Back in the TPP? Good Luck With That.

With the U.S. bailing out, the remaining 11 countries forged ahead and signed a revised Pacific trade pact in Santiago, Chile, Mar. 8, 2018. (Claudio Reyes/AFP/Getty Images)

More than a year after withdrawing from a big Asia-Pacific trade pact, the Trump administration keeps talking about rejoining it on its own terms. But the Asia-Pacific countries that were eager a year ago to hold the door open for the United States are now busy building their own trading order — without Washington at all.

The United States will consider re-entry to the Trans-Pacific Partnership once Washington accomplishes its goals on other trading relationships, U.S. Treasury Secretary Steven Mnuchin (pic above) said while on an official visit to Chile. Hey, get real Asia is not waiting for you to make up your mind.

Treasury Secretary Steven Mnuchin is the latest Trump administration official to talk up the prospect of returning to the Trans-Pacific Partnership, the sprawling trade deal that was the centerpiece of the Obama administration’s pivot to Asia and the first target of U.S. President Donald Trump’s demolition job.

Earlier this month, speaking in Chile, Mnuchin said Washington would “definitely” be open to rejoining the pact — once all the administration’s other trade deals were taken care of, and provided the trade accord could be rewritten to be more beneficial to the United States. (U.S. trade officials declined to say what those revised conditions might be.)

And Larry Kudlow, a former television commentator who was named Trump’s top economic adviser, said this month that the United States could lead a “trade coalition of the willing” to counter China’s trade heft and abuses — almost the very definition of the TPP that Trump walked away from early in his presidency.

But that ship seems to have sailed. The remaining 11 countries from the original TPP signed a slightly slimmed-down version of the accord earlier this month in Chile, suspending a score of controversial provisions that the United States had insisted upon. Member countries are already in the process of ratifying the deal, which could go into effect early next year.

Many of the member states shudder at the idea of re-opening contentious, yearslong negotiations just to try to coax the United States back into the club.

Many of the member states shudder at the idea of re-opening contentious, yearslong negotiations just to try to coax the United States back into the club.

Chile’s outgoing president said last month that Washington would have to take the revised deal as is if it wanted back in. And a top Canadian trade official said the United States would get no special treatment if it wanted to rejoin. Even Japan, which wants the United States back in, warns Washington against renegotiating the whole thing.

“Is there a chance in hell anyone wants to reopen the thing to get the U.S. back in? Not under a Trump administration,” says Mike Callaghan, a former Australian Treasury official and economic advisor to the prime minister, now at the Lowy Institute, a Sydney-based think tank.

That’s partly because many countries in the Asia-Pacific region are already inking new, ambitious trade deals left and right even as the Trump administration struggles to tweak existing pacts such as the North American Free Trade Agreement and the free trade deal with South Korea.

Japan, Australia, and New Zealand are close to signing free trade deals this year with the European Union. Canada just did the same, and Mexico is close to its own deal with the EU, while Southeast Asian nations hope to sign their own EU deal. Singapore, meanwhile, is inking trade pacts with a bevy of Latin American countries.

But domestic politics also play a big part in the reluctance to open up the Trans-Pacific Partnership all over again. Countries such as Japan, Australia, and Vietnam first had to sell their publics on the original deal — which included a lot of unpopular provisions Washington insisted on — only to see the pact’s sponsor back out early last year. Then they had to salvage an 11-member pact during another year of tough negotiations that only concluded at the beginning of this year.

“They’ve designed a deal they are determined to put into effect,” says Wendy Cutler, who spent three decades as a U.S. trade negotiator, including leading talks on the TPP. “They’ve gone through two traumatic episodes. There’s not much stomach for more,” says Cutler, now vice president of the Asia Society Policy Institute.

The revised TPP — now formally known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership — is smaller and leaner than the original accord. Without the United States, it covers only between 13 and 18 percent of the global economy, rather than 40 percent. That will mean smaller trade benefits for everybody.

But the new TPP is also an easier pill for many Asia-Pacific nations to swallow, which should make ratification and longer-term support easier to secure. 

But the new TPP is also an easier pill for many Asia-Pacific nations to swallow, which should make ratification and longer-term support easier to secure.

Gone for now are 22 provisions that U.S. negotiators had insisted on but that were unpopular with potential partners. Those included protections for pharmaceuticals, longer patents and extended copyrights, and some extra protections for corporations against national governments.“Almost by definition, the suspended parts cover topics that were controversial to the TPP-11 members, otherwise they would not have been suspended,” Callaghan says.

And the revised pact is also open to new members — and not just the eventual return of the United States. Countries such as South Korea, Thailand, the Philippines, Indonesia, and Taiwan have all toyed with joining the revised TPP, as have Colombia and even the United Kingdom. (Chile’s new president, Sebastián Piñera, even resuscitated the notion that China could eventually join the pact, though Beijing would have to slash tariffs, open up its markets, and boost its labor and environmental standards.)

The open nature of the new accord is important, because member countries could see even greater benefits from new arrivals than they could have seen in the original 12-nation deal with the United States on board. The Peterson Institute for International Economics estimated that a TPP-16 that included Indonesia, South Korea, Thailand, Taiwan, and the Philippines could offer $486 billion in benefits for member countries, compared with $465 billion from the original deal.

“From an economic point of view, a TPP-16 would be better for them than the original TPP,” Cutler says.

“From an economic point of view, a TPP-16 would be better for them than the original TPP,” Cutler says.

Of course, several key countries — including Japan and Vietnam — don’t have a separate free trade deal with the United States. Roping Washington back into a sprawling Asian trade pact would be an easier lift than trying to sign separate bilateral trade deals and would also bring greater economic benefits, the Peterson Institute found. Former Japanese economic officials tell Foreign Policy they expect the administration of Prime Minister Shinzo Abe is trying to find some way to convince the Trump administration to re-embrace the deal.

For other countries, like Australia, joining the TPP alongside the United States in the first place, or coaxing Washington back in, is not ultimately about trade; Canberra already has a free trade pact with the United States. Rather, Callaghan says, it’s about making sure the United States stays engaged in the Asia-Pacific region as China flexes its economic and military might.

“For Australia, the driving force behind the TPP was not so much access to the U.S. market as locking the U.S. into the Asian region,” he says.

For Cutler, who saw previous Congresses and presidents change their minds on trade pacts they once vilified, the mere fact that Trump administration officials keep talking about rejoining the TPP is encouraging. U.S. presence in the pact would advance many of the administration’s professed goals, she says, from prying open Asian markets to pushing back against China’s heft. And ratifying a big trade deal would only require one bruising battle with Congress, while a series of bilateral trade deals will mean going back to the Hill again and again.

“It’s important that the United States makes positive signals, compared with a year ago,” Cutler says. “Over time, they might come to understand the value” in the trade pact.

Keith Johnson is Foreign Policy’s global geoeconomics correspondent. @KFJ_FP

CPTPP is good for Malaysia

March 22, 2018

https://www.thestar.com.my/opinion/letters/2018/03/21/cptpp-will-be-good-for-malaysia/

Malaysia’s MITI Minister Dato’Mustap Mohamed

THE Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the rebranded TPPA, was finally signed by 11 countries on March 8.

The pact had earlier raised anxiety among certain parties that it would jeopardise Malaysia’s sovereignty and undermine the well-being of its citizens. But if we look at the bigger picture, the pact will benefit the country in the long run because our economy depends largely on trade activities.

According to Moody’s last week, Malaysia would be the biggest winner from the deal as the CPTPP covers a market of nearly 500 million despite the absence of the United States.

This fact was reinforced by the Peterson Institute for International Economics’ (PIIE) research, which showed that the CPTPP would benefit palm oil, rubber and electronics exporters like Malaysia with export access to new markets including Canada, Peru and Mexico.

Looking at current data by the Malaysia External Trade Develop­ment Corporation (Matrade), Malaysia’s dependence on trade is undeniable, recording RM935.39bil in exports last year and RM838.14bil in imports. Malaysia enjoyed a trade surplus of RM97.28bil.

The electrical and electronics sector remains the top exporter accounting for 36.7% while palm oil products stood at 5.8%. Malaysia is also currently the largest producer of gloves, controlling almost 65% of the world market.

In view of this, the CPTPP will encourage existing manufacturers to expand as it provides access to new or untapped markets. It will indirectly reduce our reliance on the US market as well.

Ahmad Shahir Abdul AzizUniversiti Sains Malaysia

READ: http://www.ipsnews.net/2018/02/model-trade-deal-con –by Dr Kwame Jomo Sundaram

ASEAN’s renewed centrality

March 14, 2018

Author: Editorial Board, East Asia Forum

http://www.eastasiaforum.org/2018/03/12/aseans-renewed-centrality/

US President Trump fired the first shots in what could become a global trade war this week with the imposition of 25 per cent tariffs on imports of steel and 10 per cent tariffs on aluminium. The action, taken under the national security provisions of US trade law (Section 232), risks provoking tit-for-tat retaliation by trading partners who, unlike Canada, Mexico and Australia, aren’t able to negotiate exemption from its impact, and corrosion of the WTO rules-based trading system.

Cambodian Prime Minister Samdech Tech Hun Sen

The White House announcement throws the international trade rulebook out the window. If the Trump administration’s imposition of these tariffs on a flimsy national security pretext does not outright flout the rules of the WTO, then it at least flouts its widely shared norms.

The response from the European Commission was to ‘do the same stupid things to respond to stupid things’ — promising retaliatory tariffs on a range of US exports into Europe, from Harley-Davidson motor bikes to bourbon whiskey. The tariff imposts also launched a process in which trading partners like Australia successfully begged exemption on various grounds both sound and spurious, all of which are nonetheless in clear violation of the understanding that trade will be conducted under internationally agreed rules, not ad hoc bilateral deals.

That’s the beginning of the rot; it may be a short-term tactical victory for countries like Australia, but it is certainly not effective strategic play.

What happens now?

US commentators reckon that a challenge of the Trump tariffs before a WTO dispute panel is a no-win game. If the European Union takes the United States to the WTO (as it has promised to do) and loses under Article XXI, which allows trade restrictions on national security grounds, the ruling will open countries to restrict imports however they choose on ‘national security grounds’. If the United States loses, it will surely reject the ruling, rendering the WTO dispute process effectively dead.

The strategic objective is to keep the WTO system alive in the face of this potentially mortal threat. The United States is playing itself out of the system. Learning to live without the United States as a rules- and norms-enforcer won’t be easy, but it is the only response that will protect the system and avoid the large-scale economic cost and dangerous political consequences of an escalating trade war.

The strategic response to the Trump trade threat is more important to Asia than to any other major centre of international trade. Asia’s prosperity and political stability depends critically on its integration into the global economy through the rules-based trading system. The global trading system has underpinned the growth of Asian interdependence, Asia’s economic prosperity and its political security.

China, in particular, is in Trump’s cross hairs as ‘the cause of US trade deficits because of its violation of trade rules’. But China is also a crucial stakeholder in the rules-based system through its largely faithful observance of the protocols of its accession to the WTO in 2001 and the huge trade in Asia and around the world that has been built on that.

Locking in China’s entrenchment to the WTO system — and resisting the temptation to take retaliatory actions in the face of Mr Trump’s trade antics — is thus a major element in the system’s defence.

As China and the United States stare each other down with a potentially devastating trade war on the horizon, it may seem strange to turn to ASEAN, but it has a central role in the collective response to Asia’s present predicament.

ASEAN centrality has been an organising platform for Asian economic policy cooperation over the past half century, as explained in the issue of East Asia Forum Quarterly ‘ASEAN Matters‘ released today.

The retreat of the United States from leading the global order and the reversal of its pivot to Asia; the rise of China with its aggressive stance on the South China Sea and its infrastructure development ‘carrot’ in the Belt and Road Initiative; a putative ‘Quad’ configuration of Indo-Pacific power around the US, India, Japan and Australia; and the hot spot in North Korea all present challenges to ASEAN’s central role in the region.

ASEAN leadership in the negotiation of the Regional Comprehensive Economic Partnership (RCEP) in East Asia renews its centrality in Asia’s response to the present uncertainties.

RCEP includes not only the ten ASEAN economies but also Japan, South Korea, China, India, Australia and New Zealand. It is a coalition of countries with the economic weight to deliver a powerful message to the world. Without movement in ASEAN, RCEP is unable to go anywhere. The signing of the Trans-Pacific Partnership agreement without the United States (TPP-11) in Chile last week was a start in defence of the global trading system. But the TPP-11 is not systemically important enough to make the difference. RCEP is.

The threat to security in our region is now much more about the dangers to the multilateral trading system than anything else, despite the still unfinished business on the Korean peninsula.

The Australia–ASEAN summit next weekend is a singularly important opportunity for setting out joint interests on the economic dimensions of regional security and ASEAN’s role in achieving them. ASEAN, with Indonesia at its core, is a regional enterprise with a distinctly global outlook and objectives. A declaration from the Sydney summit that commits to elevating the momentum in RCEP will help cement a broader coalition of Asian economies, including China, Japan, South Korea and India, to holding firm on the international trading system. It will also ensure ASEAN’s continuing centrality in economic cooperation across the region.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

The latest edition of East Asia Forum Quarterly, ‘ASEAN matters’, is available to read here.

Trans-Pacific Partnership (CPTPP): Japan-led Pacific Rim Countries Desperate to appease Trump

March 9, 2018

by Jomo Kwame Sundaram

http://www.ipsnews.net/2018/03/japan-led-pacific-rim-countries-desperate-embrace-trump/

Dr. Jomo Kwame Sundaram  seen with Khazanah Nasional Berhad’s Tan Sri Azman Mokhtar

The grandiose sounding Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will be signed in Santiago de Chile today, 8 March. Instead of doing something to advance the condition of women on International Women’s Day, trade representatives from 11 Pacific rim countries will sign the CPTPP, which some critics argue will further set back the progress of humanity, including women who hold up ‘half the sky’.

In fact, the resulting 6500 page agreement has, so far, only been used by Obama’s United States Trade Representative (USTR) to derail the already protracted Doha ‘Development’ Round negotiations under the auspices of the World Trade Organization (WTO), e.g., by ‘lame-duck’ USTR Michael Froman at the WTO ministerial in Nairobi in December 2016.

In January last year, newly elected US President Donald Trump withdrew from TPP, effectively killing the agreement. Since then, Japan has worked hard to keep it alive, with discreet help from Australia and others. Apparently, they hope to draw the US back in order to check China’s growing influence in the region while delaying other regional trade negotiations such as the Regional Comprehensive Economic Partnership (RCEP).

After signing it, at least six countries must ratify the CPTPP for the deal to come into effect. Even before signing, governments have announced plans to drag their feet, indicating they are signing under duress. Incredibly, no details of the new agreement were supposed to be released until after the signing, and few consultations have been held by the signing governments despite promises to do so.

Bad deal not improved by reheating

To make the case for the TPP, its advocates greatly exaggerated its negligible trade benefits. US government studies — by the Department of Agriculture’s Economic Research Service and the International Trade Council — projected very modest gains, even with the US in.

Despite the US absence from the CPTPP, its proponents have not hesitated to make even more exaggerated claims about supposed benefits. With already negligible trade gains from the original TPP, purported gains from the CPTPP without the US are even more paltry. Not surprisingly, the TPP11 have become even more desperate for US participation to maintain their original fictitious claims.

The old claim that trade liberalization lifts all boats is increasingly rejected in favour of more nuanced recognition that its costs may be as much as its benefits, and distributed very unevenly. Such recognition has enabled better understanding of the Brexit referendum outcome and Trump’s election following a campaign in which all major candidates were opposed to the TPP.

CPTPP losses, costs and risks are almost as great as with the TPP while actual gains are even more trivial. Meanwhile, CPTPP citizens must surely wonder why their governments are proceeding so secretively without public consultation or even the fig leaf of credible cost-benefit or other analyses.

Seducing Trump

Japan’s Prime Minister Abe appeasing US President Donald Trump

Minor amendments have been made to the original TPP agreement, largely drafted by US corporations during the Obama presidency. But the new CPTPP Preamble can only guide its interpretation, and does not replace problematic TPP provisions. Some TPP11 countries have secured ‘side letters’, exempting them from some of its provisions.

Meanwhile, several onerous provisions have been suspended, including some of those extending the scope and duration of pharmaceutical patents. Well over a thousand provisions remain, most not even challenged by the CPTPP negotiators. The 22 suspended provisions can easily be restored if the US chooses to rejoin the TPP.

At his World Economic Forum charm offensive at Davos in January, Trump stated that he “would do TPP if we were able to make a substantially better deal” despite his anti-TPP presidential campaign and post-election rhetoric. No one can be sure what he means anymore, especially following his more recent declarations celebrating trade warfare.

US positions in the ongoing North American Free Trade Area (NAFTA) re-negotiations suggest his administration will demand stronger intellectual property rights, especially pharmaceutical patent protection; this can be easily accommodated by the TPP11 by reinstating suspended TPP provisions.

However, in light of the new USTR’s pronouncements, it is likely that the White House will insist on removing ISDS provisions from the TPP to be consistent with Trump’s ‘sovereigntist’ approach of putting ‘America first’. Or worse, ISDS provisions may not be reciprocal, i.e., US corporations abroad can use ISDS, but TPP11 investors cannot make such claims against the US government.

 

National Security in a Post-American Economic Order

March 3, 2018

By Editorial Board, East Asia Forum

http://www.eastasiaforum.org/2018/02/26/national-security-in-a-post-american-economic-order

After the Second World War, the United States and its allies built a global, rules-based economic order. These days, there is much spruiking about the global rules based order and how it is at the core of the national security interests of liberal democracies. Less well understood is that the rules that matter most for global security are the economic rules of which America, seventy years ago, was the primary architect. This order, combined with comprehensive military power, was the American world order.

There are, of course, many other rules and institutions that govern non-economic affairs under the United Nations framework, such as nuclear non-proliferation, chemical warfare and the right of passage through the seas. None of them is so comprehensive or so entrenched in the management of behaviour between states as those of the rules-based economic order. None are so critical to economic prosperity, which under their aegis has seen hundreds of millions of people lifted out of poverty and the establishment of a confident basis upon which to engage in large-scale trade and economic exchange. None is so important to political security through the alleviation of the incentive to military conflict and political aggrandisement. The post-war economic regime opened the opportunity for even the smallest and poorest countries to realise their national potential without the fear of economic coercion by powerful neighbours.

The rules-based economic order redefined the global system for all those who signed on to it. It contrasts markedly from the world of empire and conflict that defined the system before the war. There is still conflict and chaos outside the global economic order. But even in the presence of that conflict, the American economic order has underpinned the expansion of global prosperity and security.

In a brutally objective analysis in the March/April issue of Foreign Affairs, Adam Posen concludes that that order is today under threat from US President Donald Trump. Trump ‘has rejected the idea that the world’s economies all benefit when they play by the rules. Instead, he has decided that putting “America first” means withdrawing from supposedly bad deals, on which he believes the system is based’.

America hasn’t been dudded by the current system: it has reaped massive benefits, though it may not have distributed the gains terribly well. In reality, the United States supplies by itself only two essential aspects of the economic order: it extends an umbrella of security guarantees and nuclear deterrence for US allies, and its military ensures free navigation of the seas and airspace for commerce subject to some rules that are largely set by the United States.

While Trump has so far failed to follow through on his most destructive policy ideas, Posen says the damage from those he has effectuated has already begun to show. ‘His administration has hobbled the World Trade Organization (WTO), encouraged China and other autocratic regimes to lean on their smaller neighbours for economic loyalty, undercut agreements on tax evasion and climate change, and pushed even major US allies to negotiate free-trade and cross-border investment deals without the United States’.

There is no binary choice between security and economic interests for countries trying to manage the uncertainties of the post-American economic order, Gordon de Brouwer reminds us in our lead essay this week. The challenge is complex, risky and high-stakes. Australia, he points out , with its deep alliance ties with the United States and its huge economic and political partnership with China, has much at stake in correctly framing the complex and risky choices that it has to make in this new environment.

‘The idea that Australia can opt for security with the United States by winding down its economic relationship with China does not bear scrutiny. This move would make Australia weaker (a strong economy is a bulwark for security), it would lessen Australia’s ability to influence China’s engagement and interests, and it would increase the likelihood of conflict with China. Similarly, the idea that Australia can pursue its economic interests with China by opting out of its security relationship with the United States is not on the table’.

De Brouwer makes the point that in Australia ‘too often, “strategic policy” is used exclusively to define security interests, with economic interests treated as an add-on. Economic interests sound unstrategic and are dismissed in the US–China debate as just the pursuit of business’. Far from it, as Posen makes clear. Economic engagement is an ‘essential element in building national wealth and power as well as in reinforcing and habituating a rules-based and market-oriented international order. Defining and implementing strategic policy inclusively as the fulcrum of security and economic interests broadens the range of strategic options available to policymakers’, says de Brouwer.

The economic and the security elements of government are central to strategic interests. This is true not only in the Asian region but also globally. In Asia, Australia (which supplies over 60 per cent of the externally procured input into East Asia’s steel industry and a quarter of non-oil imported industrial resources to the region’s top industrial powers) plays a crucial role in this complex global economic and political security system. It was not always the case that Japan, South Korea or China had the inclination or the confidence to depend on free international markets to deliver strategic raw materials to their heavy industries in this way or on this scale. That confidence, and the mutual confidence of traders around the world in globalisation, was built within the framework of collective commitment to the WTO rules-based trade regime.

As Posen says, this regime is best seen as a ‘club that promotes a common set of beliefs to which its members broadly adhere: the ability to export to, import from, and invest in markets around the world’. Neither military power nor alliance structures are sufficient to protect this system.

The top strategic priority in Asia and around the world today is to protect a global economic order that is under threat. This is particularly so for Asian nations — including China — which are locked into the club and which (because of their scarce resources) are more dependent on integration into the global economy than are other countries. Declaring a position against Trump on the multilateral system at APEC in Vietnam and a commitment to concluding the Trans-Pacific Partnership despite the United States’ withdrawal were the first two important steps. Pulling off the negotiation of an ambitious Regional Comprehensive Economic Partnership in East Asia needs to be the next.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

Model Trade Deal Con

February 27, 2018

By Jomo Kwame Sundaram

http://www.ipsnews.net/2018/02/model-trade-deal-con/

In early 2016, the Trans-Pacific Partnership (TPP) Agreement — involving twelve countries on the Pacific Ocean rim, including the USA — was signed in New Zealand. Right after his inauguration in January 2017, newly elected US President Donald Trump withdrew from the TPP, effectively killing the agreement as its terms require the participation of both the US and Japan.

 

On 8 March 2018, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will be signed in the presence of outgoing Chilean President Michelle Bachelet. After that, six countries must ratify the deal for it to take effect.

 

Twenty-two of the original TPP provisions will be ‘suspended’, leaving over a thousand others intact. The 22 provisions have only been suspended, apparently to enable Washington to easily re-embrace the essentially US-drafted 6500-page TPP Agreement.

The CPTPP will include several changes to the TPP, but will otherwise incorporate it. Besides the investment agreement, several onerous intellectual property and other provisions will be suspended. Some ‘side letters’ can exempt some TPP11 countries on some matters. But otherwise, many of the most onerous TPP provisions remain.

The TPP11 countries are likely to give in to US demands. With very modest prospective trade gains from the original TPP, US withdrawal has made the gains from the CPTPP even more paltry, making the TPP11 desperate for US participation. For Japan’s government and some others, the TPP will draw the US back into a stronger anti-China regional coalition.

The CPTPP Preamble can guide interpretation of, but not contradict, let alone override problematic TPP provisions. Meanwhile, some countries will remove all their tariffs on products from other CPTPP parties while others, such as Japan and Canada, will not.

Taking the widely criticized secrecy of such negotiations to a new extreme, no details of the ‘zombie agreement’ will be released until after its signing. Despite promises to “engage with various stakeholders to get their views and feedback”, most signatory governments have not conducted inclusive public consultations about the new agreement.

Already, TPP11 proponents have resumed chanting the mantra that the US-drafted TPP is a ‘model trade deal for the 21st century’, seemingly oblivious of global economic transformations of recent decades and their implications.

Privileging foreign investment

Meanwhile, CPTPP privileging of foreign investment from TPP11 countries may well perversely encourage businesses to incorporate abroad as they will be better able to make demands on the government than they can currently do as nationals.

The CPTPP enables non-TPP11 firms with branches in TPP11 countries to use it to their advantage, e.g., investor-state dispute settlement (ISDS) provisions will allow investors from other TPP11 countries to sue the host government, in a special international tribunal, for unlimited compensation and compound interest.

Critics say the text of the revised Trans-Pacific Partnership and the opaqueness around the process show little has changed in the agreement since the Conservatives negotiated the original deal eventually signed by the Liberals in 2016. –-New Coke, old Coke, new CPTPP, old TPP. 

 

As firms incorporated in other TPP11 countries may also enjoy lower taxes and other incentives, the recent trends of greater outward than inward FDI may well accelerate. China, India and other emerging market economies are already struggling to cope with such ‘roundtrip’ FDI through offshore tax havens, and there is little reason to believe smaller TPP11 developing countries will fare better.

Lower interest rates abroad in recent years due to unconventional monetary policies, such as ‘quantitative easing’, have enabled highly leveraged foreign portfolio investors to increase their ownership of the corporate sector in many emerging market economies.

Capital account liberalization has enabled net capital outflows despite sometimes inducing temporary episodes of massive inflows into emerging market economies. With greater external vulnerability the inevitable consequence, when such portfolio investment inflows are inevitably reversed, capital account management measures may be needed, but disallowed by the CPTPP.

Begging for US participation

In their efforts to justify it, CPTPP proponents have again greatly exaggerated trade benefits while ignoring the two US government studies — by the Department of Agriculture’s Economic Research Service and the International Trade Council – both projecting very modest gains from the TPP, despite including the US then.

After the ‘Brexit’ referendum and Trump’s election in 2016, the mixed consequences of trade liberalization are increasingly recognized, replacing the naive claim that globalization would lift all boats. Nevertheless, CPTPP advocates still dismiss research doubting the problematic assumptions of the modelling projections they rely on.

Meanwhile, US President Trump has already announced that he “would do TPP if we were able to make a substantially better deal”. Judging by his administration’s new demands in the ongoing North American Free Trade Area (NAFTA) renegotiations, this would presumably involve even stronger pharmaceutical patent protection and greater US corporate control of international e-commerce.

The TPP11 countries are likely to give in to US demands. With very modest prospective trade gains from the original TPP, US withdrawal has made the gains from the CPTPP even more paltry, making the TPP11 desperate for US participation. For Japan’s government and some others, the TPP will draw the US back into a stronger anti-China regional coalition.

Hence, the TPP11 are so keen to bring the US back into the TPP that they are likely to accede to Trump administration demands. By joining the TPP on revised terms, ostensibly ‘putting America first’, Trump can thus ‘prove’ that he is a much better negotiator than his predecessors, especially Obama.