April 6, 2013 · 2 Comments
The Trans-Pacific Partnership (TPP) is a complex multinational regional agreement, previously known as the P4, that was created to facilitate economic relations between Brunei, Chile, New Zealand and Singapore.
The TPP entered into force in 2006 and since then, the potential economic coverage of this free trade area has enlarged considerably. Currently, Australia, Canada, Colombia, Costa Rica, Japan, Laos, Malaysia, Mexico, The Philippines, South Korea, Taiwan, Thailand, the US and Vietnam are negotiating entrance terms.
This partnership between Asian and American countries will not only enhance trade, investments and facilitate innovation, but it will also impact economic growth and development whilst creating jobs. Being a full regional agreement, the negotiation rounds tackle topics that go beyond economic issues, including competition policies, capacity building, cross-border services and customs procedures, intellectual property, environment, government procurement, labour and legal regulations in its agenda.
Actually, the TPP aims to go beyond existing trade agreements, such as the Asia-Pacific Economic Co-operation (APEC) and The Association of Southeast Asian Nations (ASEAN), and create a single market so as to widen their reach. To have an idea of the objectives, APEC currently has a population of over 650 million people, a U$31,491 per capita income in 2011 and a combined Gross Domestic Product (GDP) of over U$2o trillion, representing 30% of global GDP, where the member-countries export – on average – U$4.4 trillion in goods and services every year, consequently representing 30% of global exports.
Thus, this single market would alter international trade flows significantly. This wide scope is likely to have implications to trade flows in America and Asia as a whole, and alter the “Asia Pivot” significantly. As far as US-Chinese relations are concerned, at the same time as the TPP has been designed to become a key source of sustained growth by guaranteeing new markets for American products, and assist in the US economic recovery, it could also become a tool for containing and undermining Chinese economic power in the Asia-Pacific region.
By providing these strategic partners with incentives to concentrate on trade relations amongst each other, the TPP is likely to diminish the dependence of certain countries on Chinese goods. It is worth noticing that in times of tensions between China and Japan over the Sensaku Islands and between China, Thailand, The Philippines, Vietnam etc, and over navigation in the South China Sea, having a tool to diminish Chinese economic power in the region and the diversification of partners could represent a preferable foreign policy approach for these countries.
On the Latin American side of the TPP, since the last decade, Brazil has been investing massively toward infrastructure programs designed to integrate the region and to facilitate the transport of goods and services among its neighbours. Regional integration is a priority in Brazilian foreign policy agenda. By providing promising trade alternatives in a wider Financial Trade Agreement (FTA), the TPP could also represent a challenge for Brazil, as its neighbours still receive a considerable portion of Brazilian exports, which represent an important tool for economic growth. Furthermore, having other partners to assist in the regional development could also diminish Brazil’s role as the regional paymaster.
This agreement is being designed to incorporate topics that are highly criticised for benefiting large corporations and conglomerates, which would open procurement contracts to businesses operating in any of the member-countries. The TPP is an important partnership because it can upgrade existing trade pacts, whilst taking into account the new challenges FTAs face in the international commercial arena.
Although the countries participating believe that the TPP would highly benefit the negotiating parties, they do not see eye-to-eye when it comes to priority policies and the specific terms of each topic being tackled, as they are likely to have to change domestic policies and practices in order to adapt to the agreed terms.
Since the negotiations to enlarge the P4 started, 16 rounds of discussion have taken place, with the next one will taking place next month in Peru. There is a lot of criticism regarding these discussion rounds, which have been described as lacking public participation, governmental processes and transparency due to the fact that the negotiating proposals have not yet been made public.
Although the agreement is ambitious in its agenda, its success will depend on its ability to go beyond negotiations. The TPP is a promising new approach for international trade with a wide economic and political agenda to facilitate not only interstate trade, but also trade relations among companies and private parties.
Ironically, complex multilateral trade agreements that involve long and comprehensive processes represent an important tool in overcoming systemic challenges, economic and political barriers to goods and services. However, the difficulties in achieving agreed terms to create the conditions for their effective implementation are still a challenge – the uniqueness of the TPP is actually the reason why its implementation is taking so long.
All in all, these time-consuming negotiations provide space for the development of alternative deals that could maintain the status quo. Whilst challenges are not overcome and the implementation terms are not achieved, the parties continue to engage in economic relations through existing channels, thereby not representing a threat to existing bilateral and multilateral FTAs and regional integration groups.
Photo credit: Gobierno de Chile via Flickr