Global Trends by Martin Khor

Monday 15 August 2016

TPPA under serious threat

The Trans Pacific Partnership Agreement has become a political football in the US Presidential elections and with the public mood so anti-FTA, this trade deal faces the real possibility of being discarded.

----------------------------------------------------

It was signed in February by the 12 countries that spent five years negotiating it, and was widely expected to come into force within two years, after each country ratifies it.

But now there are growing doubts if the controversial Trans Pacific Partnership Agreement will actually see the light of day.

Ironically, it is the United States, which led the negotiations process, that may in the end be its undoing.

The TPPA has become one of the hottest issues in the US Presidential election process.  Opposing the TPPA is at the centre of Donald Trump’s campaign.

Bernie Sanders championed the anti-TPP cause, saying:  “We shouldn't re-negotiate the TPP. We should kill this unfettered FTA which would cost us nearly half a million jobs.”

Hillary Clinton also came out against the TPPA, a turn-around from her position when she was Secretary of State.

To counter suspicions that she would again switch positions if she becomes President, Clinton stated: “I am against the TPP, and that means before and after the elections.”

They may all be responding to a popular feeling that trade agreements have caused the loss of millions of  manufacturing jobs, stagnation in wages and the unfair distribution of benefits in US society.

Besides the Presidential candidates, two other players will decide the TPPA’s fate:  President Obama and the US Congress.

Obama has been the main advocate for the TPPA, passionately arguing that it will bring economic benefits, raise environmental and labour standards and place the US ahead of China in Asian geo-politics.    

So far, he has not succeeded. Obama must get it ratified by Congress before his term ends, in the lame-duck Congress session after the election on 8 November and before mid-January 2017.

It is doubtful unclear whether there is enough support to even table a lame-duck TPP bill, and if tabled whether it will pass.

Last year, a related fast-track trade authority bill was passed with only slim majorities. Now, with the concrete TPPA before them, and the swing in mood, some who voted for fast track have indicated they won’t vote for TPP.

Most Democrats have indicated they are against TPPA.  They include Clinton’s running mate  for Vice President, Senator Tim Kaine, who had voted for fast track;  House Minority Leader Nancy Pelossi and House Ways & Means Committee Member Sandy Levin said:   “It is now increasingly clear that the TPP agreement will not receive a vote in Congress this year, including in any lame duck session, and if it did, it would fail.”

Congress Republican leaders have also voiced their opposition.  Senate Majority Leader Mitch McConell  said that the presidential campaign had produced a political climate that made it virtually impossible to pass the TPP in the “lame duck” session.  

House Speaker, Republican Paul D. Ryan (R-Wis.) who had helped write the fast-track bill, said he sees no reason to bring TPP to the floor for a vote in the “Lame Duck” session because “we don’t have the votes.”  

Meanwhile, six House Republicans sent a letter to President Obama in early August last week urging him not to try to move TPP in a “Lame Duck”.

Though the picture thus looks grim for Obama, should not be under-estimated.

He said when the elections are over he will be able to convince Congress to vote for TPP. He added many people thought he would be unable to get fast track through Congress, but he was able to prevail.

To win over Congress, Obama will have to respond to those on the right and left who are upset on specific issues such as the term of monopoly for biologic drugs, or the inclusion of  ISDS (investor-state dispute settlement) in  the TPP. 

To pacify them, Obama will have to convince them that what they want will anyway be achieved, even if these are not legally part of the TPP.

He can try to achieve this through bilateral side agreements on specific issues,  or insist that some countries take on extra obligations beyond what is required by the TPP as a condition for obtaining a US certification that they have fulfilled their TPP  obligations.

Obama could theoretically also re-negotiate specific clauses of the TPP in order to appease Congress.  But this option will be unacceptable to the other TPP countries. 

In June, Malaysia rejected any notion of renegotiating the TPPA.  The question of renegotiating the TPPA does not arise even if there are such indications by US presidential candidates, said Tan Sri Dr Rebecca Fatima Sta Maria, then the secretary general of the International Trade and Industry Ministry.

 “If the US does not ratify the TPPA then it will not be implemented,” she said.  The other TPP members would have to resort to a ”different form of cooperation.”

Singapore Prime Minister Lee Hsien Loong, on a recent visit to Washington, dismissed any possibility of reopening parts of the TPP as some Congress members are seeking. “Nobody wants to reopen negotiations,” he said. “We have no prospect of doing better and every chance of having it fall apart.”

In January, Canadian Trade Minister Chrystia Freeland said a renegotiation of the TPP is not possible.

Japan also rejected renegotiations, which it defined as including changing existing side agreements or adding new ones.  This is not going to happen, said Japan's Deputy Chief of Missions Atsuyuki Oike.

What happens if the US Congress does not adopt the TPP during the lame-duck period?  The 12 countries that signed the agreement in February are given 2 years to ratify it.  

Enough countries to account for 85% of the combined GNP of the 12 countries must ratify it for the TPP to come into force.  As the US accounts for over 15% of the combined GNP, a prolonged non-ratification by it would effectively kill the TPPA.

Theoretically, if the TPP is not ratified this year, a new US President can try to get Congress to adopt it in the next year.  But the chances for this happening are very slim.

That’s why the TPP must be passed during the lame duck session.  Or it may have to be discarded, probably forever.  

That would be a dramatic marker of the changing winds in public opinion on the benefits of free trade agreements, at least in the United States, the land that pioneered the modern comprehensive free trade agreements.