The Trans-Pacific Partnership and its Impact on the Developing World

The Trans-Pacific Partnership, otherwise known as the TPP is one of the largest economic deals in recent history. It is a deal made between the pacific nations of the United States, Singapore, Japan, Vietnam, Chile, Brunei, Malaysia, Mexico, Canada, Peru and New Zealand. Under the TPP these countries’ economies will be linked. When combined, the economies contribute to about 40% of the global GDP. This deal has the potential to supersede previous trade agreements such as NAFTA. Tariffs and other barriers to entry will be eliminated in order to promote a fair playing field for competing businesses. In addition to the reduction of trade barriers, the TPP also seeks to regulate the standards of labor, environment, and intellectual property. It should be noted that China is not included among the TPP countries. This is because this deal was made for the purpose of offsetting China’s economic dominance. According to The Diplomat President Obama made a comment highlighting this motive. He stated, “When more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy… We should write the rules.”  This is similar to the creation of the European Union serving the purpose of offsetting the military and economic dominance of the United States and Soviet Union at the end of World War II.

 The Daily Conversation made a video that provides a rough explanation of how the TPP works.

Despite this trade deal being one of the biggest in recent history, there is very little transparency. This has created some apprehension over what the agreement truly entails. Julian Assange, the creator of Wikileaks stated,  “The TPP has developed in secret an unaccountable supranational court for multinationals to sue states. This system is a challenge to parliamentary and judicial sovereignty. Similar tribunals have already been shown to chill the adoption of sane environmental protection, public health and public transport policies.” In other words, the TPP will be strengthening the power of corporations. Corporations will not only be able to sue states, but they will also be able to collect tax payer compensation for their expected future profits. This type of litigation is done through Investor State Dispute Settlements (ISDS) which overrule national court systems. ISDS tribunals introduce a mechanism by which multinational corporations can force governments to pay compensation if the tribunal states that a country’s laws or policies affect the company’s claimed future profits. The hope behind this agreement is that the increased power of multinational corporations will encourage them to invest more and the effects of the TPP will lay the ground work for the Transatlantic Trade and Investment Partnership (TTIP) another agreement between transatlantic countries such as the United States, the EU and those in the western coast of Africa and the eastern coast of South America. These agreements were negotiated outside the World Trade Organization’s scope and have omitted not only China but the other BRIC nations of Brazil, Russia, and India. The question ultimately becomes whether the TPP agreement is more of a win for corporations rather than states especially as apprehension is fueled by the lack of transparency of the agreement despite the fact that the agreement creates more restrictions on copyright measures and changes policy concerning intellectual property. This agreement could be the precursor for a new type of imperialism at the hands of corporate parties.

While the elimination of trade barriers has created one sided benefits in the past, the TPP sets itself apart by facilitating more terms from developing nations. So not only will foreign markets see more American goods, Americans will also be seeing more goods from different countries. This relates to the counter balance of power. Vietnam in particular is a country heavily affected by the TPP. For years it has had a close relationship to China that is based around dependency. With the introduction of the TPP, the Vietnamese demand for more American goods will be met and within 10 years the country’s GDP and exports will increase 11% and 28% respectively. The TPP’s effect on Vietnam is summarized in Bloomberg:

China is Vietnam’s biggest trading partner. As the TPP introduces Vietnam to the American market, its dependence on China will weaken and not only benefit Vietnam but it will also give China less regional dominance. Many of China’s neighbors are members of the TPP and if they all were to benefit economically from this agreement, this could shift the balance of economic power in the future.

The model of the TPP wants to promote a free trade atmosphere but history has shown that such free trade is more for the benefit of stronger developed nations whose industries have fully matured and are ready to compete globally. Heavy trade barriers are what helped America rise in power. This argument was proposed by Alexander Hamilton in his 1790 Report on Manufacturers. Although America is now a global entity, it used to be quite isolationist. During this period, American tariffs on foreign goods were among the highest in the world. The protection of American infant industries ensured they could grow without competition from more efficient European industries. The idea behind it is simple, infants are not yet ready to compete with adults. The tariffs are designed to protect the younger industries as they grow into maturity and are ready to compete. So while market competition can be seen as a benefit, there are two sides to the coin. Countries with highly efficient industries could essentially put younger industries in other countries out of business. When looking at the TPP from the viewpoint of a less developed country, local industries could be in danger.

The TPP is a forerunner to a potential Trans Atlantic partnership. While the TPP helps nations develop closer relations with the other partners, grow economically and break dependency from China, questions are posed on how a Trans Atlantic partnership can facilitate the same type of growth for the Atlantic countries. The Transatlantic Trade and Investment Partnership (TTIP) will involve the United States, the European Union, and nations in Africa, South and Central America, and the Caribbean. America had been the primary trading partner of many of these countries throughout recent history, but when China’s economic power increased, it took America’s place. In Africa in particular, countries face a type of dependency not only on the European Union but also on China to a degree. It will be interesting to see how the TTIP will address these growing economies, especially since the economies of many francophone African countries are heavily influenced and controlled by France. If the TTIP stays true to the same concept of free trade as the TTP, then these countries could finally find a means of having more independence  from both the European Union and China. However there are still underlying dangers in the power corporations have. If corporations are given more litigation power and are able to sue nations, then dependency could simply be traded from nations to corporate entities. Therefore developing nations should be wary, for although these new agreements show promise of development, there are underlying dangers just below the surface.