September
2015
RISKS
OF TTIP AND TPP
The
negotiations on the Transatlantic Trade and Investment Partnership
(TTIP) and the Trans-Pacific Partnership (TPP) are changing the system
of world trade. It is important to discuss the negative impacts they
may have on many developing countries.
By
Clara Weinhardt and Fabian Bohnenberger
With TTIP, free trade has entered the public debate in Europe. But
the potential impact on third-party states, particularly on developing
countries, is hardly an issue. This is unfortunate, because TTIP is
set to transform the world trading system – with far-reaching implications
for developing countries.
TTIP is an example of the growing economic regionalisation
of trade that results from comprehensive free-trade agreements between
different world regions. Instead of emphasising tensions between TTIP
and the WTO, public debate should focus more on which developing countries
stand to profit from the so-called “mega-regional” agreements and
which countries are likely to be marginalised.
TTIP is part of the trend towards ever broader market
liberalisation outside the WTO. In some areas, the increased pressure
to liberalise is at odds with development goals. Moreover, negotiations
of mega-regionals outside the WTO further reduce the influence of
the world’s least developed countries. New ideas about trade governance
are needed in order to minimise impacts of this kind. An asymmetric
opening of mega-regionals for developing countries would be a step
in the right direction.
Regionalisation of trade policy
Focusing trade policy on individual regions allows governments
to specifically select or exclude trade partners. The TPP agreement
between the US and 11 Pacific states excludes China, for example.
China, however, is negotiating its own regional free trade agreement
[Regional Comprehensive Economic Partnership (RCEP)]
with 15 Asian and Pacific partners.
In principle, the WTO does not permit discrimination.
Its rules stipulate that a market opening agreed with one of its members
must apply to all of its members. Regional trade agreements are only
compatible with WTO rules if they go beyond WTO agreements. The problem
for developing countries is that they risk to be left behind.
The regionalisation of trade agreements has different
implications for third countries. Countries considered relatively
unimportant in economic or geopolitical terms face significant disadvantages.
Risks are lower for emerging trade powers like Brazil, India and China
(BIC). Because of their economic and political clout, these countries
can enter the competition for regional trade partnerships. Strategically
important regions like Southeast Asia may even be able to benefit
if they manage to play competing trade partners off against one another.
Africa is a different story. To date, no African country
has participated in the negotiation of a mega-regional free trade
agreement. In Latin America and Asia, some countries have taken part,
but there are losers in these continents as well. Bangladesh could
lose market shares: reduced tariffs in US garment markets for Vietnam
in TPP and for US exports to the EU through TTIP could crowd out Bangladeshi
exports in both markets.
Developing countries excluded from mega-regionals are
likely to suffer losses in trade and competitiveness. Should mega-regionals
redirect trade flows, these countries would also have a harder time
accessing capital and technology. Moreover, the influence of many
developing countries is declining because they are not involved in
the negotiations. Only governments that take part in the negotiations
can speak up for their own interests. It is striking, for example,
that neither TTIP nor TPP negotiations address agriculture subsidies
in the EU or the US, even though those subsidies matter very much
to developing countries.
Far-reaching
liberalization
The spread of mega-regionals is putting pressure on developing
countries to liberalise. To comply with WTO rules, these agreements
must go beyond existing multilateral commitments, so they liberalise
trade between partners even further. Since tariffs and quotas have
already been reduced substantially, mega-regionals focus on dismantling
non-tariff barriers to trade – including social and environmental
regulations as well as rules for cross-border services and investments.
Developing countries that do not want to be left behind
are forced to agree to liberalisation in more and more areas covered
in mega-regional agreements. In the past, developing countries joined
forces in the WTO to prevent international rules on matters such as
investments. Comprehensive protection for investors primarily serves
the interests of industrialised countries from which 85% of all related
investor-state complaints originate. For developing countries, which
often struggle to bear the costs of a strict investment protection
regime, blocking investment protection clauses is more difficult in
regional negotiations.
The TPP negotiations already confront developing countries
with many issues that, so far, do not figure prominently at the multilateral
level. Their impact on development varies from case to case. For example,
TPP is supposed to strengthen intellectual property rights, which
could make it harder for developing countries to access affordable
medication. In addition, rules on competition are being negotiated
that would limit state support for corporations. These rules would
have an impact on state-owned enterprises in Vietnam and Malaysia,
though it is unclear what the consequences would be.
TPP also offers the US a bargaining chip to demand compliance
with labour standards: For instance, Vietnam is asked to commit to
a bilaterally negotiated “Labour Action Plan”. Members of the US House
of Representatives are calling for similar agreements on labour standards
with Brunei, Malaysia and Mexico. While strengthening workers’ rights
is a worthwhile goal from a human-rights perspective, many developing
countries see it as a burden that reduces their competitive advantage.
In the WTO context, developing countries have more latitude
to pursue market liberalisation that corresponds to their national
development levels. For example, no African country except for Mauritius
has asked to join the talks on the WTO’s plurilateral Trade in Services
Agreement (TiSA), whereas China, which has a more competitive service
sector, has expressed interest in joining the TiSA talks.
Asymmetric opening
TTIP and other mega-regionals will remain on the agenda
in the coming years. Their members will negotiate a degree of liberalisation
currently unattainable in the WTO. Transnational corporations expect
to benefit from these agreements. They will put pressure on their
governments to promote this far-reaching liberalisation – regardless
of the risks involved for those states that are not willing or able
to follow suit.
Potential consequences must be spelled out more clearly
in the development debate. TTIP and TPP will not just yield economic
benefits; they also represent an attempt by the EU and the USA to
counterbalance the increasing influence of BIC countries. This type
of competition for political and economic spheres of influence is
not in the best interest of marginalised developing countries.
Poverty reduction is not a priority of trade agreements.
Most states are primarily pursuing their own economic interests.
That is true of China too. However, excluding entire trade regions
will harm third countries and can also contribute to political instability.
The frequent call to strengthen the multilateral level should be heeded,
but more must be done in light of the expected expansion of mega-regionals
and their possible consequences.
The international community must discuss new trade
models in order to be able to better respond to current developments.
Simply joining mega-regionals like TTIP is not the best, leave alone
a healthy option for many developing countries. The demands for liberalisation
would be too high. It would be better if these agreements allowed
an asymmetric opening for developing countries. Depending on each
country’s state of development, different accession conditions could
be determined.
As in the WTO context, asymmetric liberalisation would
mean that fewer and less demanding obligations would apply to the
least developed countries in areas such as services, competition and
investments. Such differentiation would keep up with trade development:
because of lower tariffs worldwide, the value of existing trade relationships
has decreased for developing countries in the past decade.
However, simply allowing third countries to join mega-regionals
will not balance out historical inequalities in the world trading
system. A fundamental debate about the goals of global trade policy
is needed – including at the multilateral level. Instead of just targeting
growth, the trade agenda must relate to fighting poverty at global
and national levels. That prosperity is growing for many people worldwide,
after all, does not mean that everyone in marginalised countries will
benefit. – Third World Network Features.
-ends-
About
the authors: Clara Weinhardt is a research associate at the Global
Public Policy Institute in Berlin. cweinhardt@gppi.net.
Fabian Bohnenberger is a research assistant at the same institute.
fbohnenberger@gppi.net
The
above article is reproduced from Development and Cooperation (D+C),
21/08/2015.
When
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