The Trans-Pacific Partnership As A Lynchpin Of Us Anti-China Strategy
- Jane Kelsey
Reflections on the implications for the TPPA of the November 2011 APEC leaders' meeting in Honolulu.
The “Obama Doctrine*
The real agenda behind the proposed Trans-Pacific Partnership Agreement (TPPA) came into the open at the November 2011 annual Asia Pacific Economic Cooperation (APEC) Leaders' Summit in Honolulu. As we have always assumed, the driver has very little to do with commercial gain and everything to do with revival of US geopolitical and strategic influence in the Asian region to counter the ascent of China. 1 The US aims to isolate and subordinate China in part through constructing a region-wide legal regime that serves the interests of, and is enforceable by, the US and its corporations - and in the TPPA context, what the US wants is ultimately what counts.
The TPPA is one limb of a multi-faceted strategy. For a meeting of APEC member “economies*, US foreign and security policy had a tellingly central role. The fiction that APEC is a community of “economies*, not states, has long served as a fig leaf to avoid the “three Chinas* diplomatic quandary* and to exclude incompatible social, indigenous, human rights and environmental obligations and constituencies. By contrast, economic and geo-strategic policies have been viewed as indivisible since East Timor dominated the APEC agenda in Auckland in 1999 and even more so post-9/11. *The “three Chinas* are China, Taiwan and Hong Kong. Ed.
US Secretary of State Hillary Clinton's speech to the East-West Centre during APEC week expanded on a piece in the November 2011 issue of Foreign Policy magazine that set out six pillars for “America's Pacific Century*: “strengthening our bilateral security alliances; deepening our working relationships with emerging powers; engaging with regional multilateral institutions; expanding trade and investment; forging a broad-based military presence; and advancing democracy and human rights.2* Security and economic challenges that currently confront the Asia Pacific “demand America's leadership*.
This “leadership responsibility* is reflected in what Clinton's spokesperson at APEC termed “a substantial pivot in our foreign policy, as we responsibly draw down our commitments in Afghanistan and Iraq and focus more consequentially on our efforts in the Asia Pacific region.3* US national security and defence officials depicted the US role as “the anchor of stability in the region*, committed to “managing the relationship with China, economically and militarily*. 4 The US aims to employ the TPPA as the economic limb of “American statecraft* over the next decades to “lock in a substantially increased investment - economic, strategic and otherwise* in the Asia Pacific region through “a more mature security and economic architecture that will promote security, prosperity, and universal values*. 5
The synergy between the TPPA and US military realignment towards the region, dubbed the new “Obama Doctrine*, was a central theme at the Moana Nui counter-meeting held at the University of Hawaii's Hawaiian Studies Centre. Speakers from Okinawa, Guahan (Guam) and South Korea told how the history and renewed expansion of US military dominance has displaced indigenous and local communities, destroyed self-sufficient resource-rich economies, created toxic environments for human health and ecosystems, and caused a litany of human rights violations. Local resistances and international peace movements are proving impotent against a resurgent US imperialism. Obama underscored this remilitarisation of the region in his post-APEC November 2011 visit to Australia where he announced a boost to US troops stationed there and more active military exercises in nearby Singapore and the Philippines. Clinton went from APEC to strategic meetings in the Philippines and Thailand, and then to South Korea.
Once the TPPA is understood within this broader context, the People's Republic of China emerges as the principal US target. Throughout the APEC week US officials and corporate heads indulged in overt, provocative and patronising China bashing. According to Obama's advisers, during the bilateral meeting with China's President Hu Jintao he “made it very clear that the American people and the American business community were growing increasingly impatient and frustrated with the state of change in the China economic policy and the evolution of the US-China economic relationship.6*
Obama's rhetoric pitted US superiority against Chinese recalcitrance. In his own words: “I've been very frank with Chinese leaders, though, in saying that the American people across the board - Left, Right and centre - believe in trade, believe in competition. We think we've got the best workers in the world. We think we've got the best universities, the best entrepreneurs, the best free market. We're ready to go out there and compete with anybody. But there is a concern across the political spectrum that the playing field is not level right now.7* China had failed to show the same sense of “responsible leadership* as the US had tried to do. Obama continued, without any apparent sense of irony: “I mean, we try to set up rules that are universal, that everybody can follow, and then we play by those rules. And then we compete fiercely. But we don't try to game the system.*
Setting up US-defined “universal* rules is precisely what the TPPA aims to do. As Obama's spokesperson explained after the TPPA Leaders' Meeting, “the President talked about establishing international norms that would be good for the United States, good for Asia, good for the international trading system - good for any country in dealing with issues like innovation and the discipline of State-owned enterprises, creating a competitive and level playing field.8* And above all, creating international norms that would be good for resurrecting US strategic and economic hegemony.
The joint press briefing by US officials and chief executive officers (CEOs) continued in that vein.9 Asked about how to reconcile the interests of US corporations in China and US nationalist concerns about the value of the Chinese yuan, the Google CEO said: “If you look at the view of America in Asia, we're still the best - we have excellent Hollywood films and things like that - but we're fundamentally the best area for research and new innovation for the industries that they care about. So a simple model is that America invents the technology; it's initially commercialised in places like Korea and Taiwan, and then it's globalised at scale in these vast manufacturing caverns of China. That's a simplification, but it's roughly correct. So they need what we're doing. We obviously need access to their products, and they help monetise our debt and things like that. … So it's in the interests of all of our countries to have these free trade agreements, it's in their interest, too. I think in many ways, America's best export is its companies, because when we operate in their countries, we operate by American rules. We treat women on an equal basis. We have free expression rules, and so forth and so on. So there's many, many reasons why free trade is, in fact, a very good export for America. Of course [they see that].That's why they're all clamouring for it. Now, at some point, they may become sufficiently confident, arrogant, or what have you, that they'll decide that's not true, in which case we'll have a different problem. But today, they all want it, and I hear it every day*.
Chinese officials clearly understood the US agenda and the intended role for the TPPA. In late September 2011, China's Ambassador to the World Trade Organisation (WTO) said diplomatically they had “no objections to the TPP* and were waiting to see whether there was a possibility that China might be involved in the discussions.10 Speaking immediately before the APEC Summit, a senior Chinese official more sharply criticised US goals as “too ambitious* and called for a balance between the TPPA and “other paths to achieve multilateral and regional trade liberalisation*.11 The TPPA negotiations should be “open*; China had not been invited to participate.
It was abundantly clear during the APEC week that the plan to morph TPPA into a free trade area of the Asia Pacific by signing other countries up to the negotiations - or more accurately, up to a done deal, as discussed below - does not include China. The Deputy National Security Adviser for International Economic Affairs, Mike Froman, who is Obama's point man for the TPPA, was asked explicitly whether the US envisions China at some point joining the TPPA or sees it more as a counterweight. He described the proposed agreement as “an open platform for those countries who can credibly achieve a level of openness and ambition that we expect of all TPP partners. … Countries that are able to achieve that level of ambition and are willing to address the major trade issues that they may have with other partners can aspire to join and begin consultations with other countries to join.12* In US eyes, China inherently fails that test.
While China is not welcome at the TPPA table, it is the ultimate target of every US proposal in this “new generation, 21st Century agreement*. Aside from a market-based currency (which is difficult to bring directly within the agreement), the US ambitions for TPPA regulation include stricter protection for intellectual property rights, “indigenous innovation*, anti-competitive State-owned enterprises, enforcement, removal of rules that are “unjustified and overly burdensome*, “regulatory coherence*, “regulatory convergence* and “good regulatory practice*.
The APEC Stocktake
The “gold standard* sought from the initial agreement is all about setting precedents among the like-minded nine TPPA countries that other Asia Pacific countries will sign on to and China will adopt or be isolated by. In addition to the higher level strategic objectives, these new rules would have commercial spinoffs for those who dictate the terms, principally the US corporations. It was not surprising to hear the CEO of Johnson & Johnson declare US business was “very happy with the TPP* and that “all aspects have been very, very positive* 13. Any commercial gains for the other, peripheral TPPA members - such as Fonterra - will be strongly resisted and incidental. Domestic downsides, such as undermining Pharmac, stopping stricter laws on foreign investment, mining operations or tobacco, or preventing a tax on hot money flows, are mere collateral damage.
A much-anticipated “outline* of the TPPA (the substitute for the original plan to have a final text by the 2011 APEC Leaders' Summit) turned into a deluge of documents released after the political leaders of the nine participating states met at the start of the APEC Leaders' meeting.14 The most detailed was an Outlines document released by the US Trade Representative (USTR), which hailed the TPPA as a “landmark, 21st Century trade agreement* setting a new standard for global trade, incorporating next generation issues to boost competitiveness. As a “single undertaking* to cover all key trade and trade-related areas it would provide comprehensive market access; be a fully regional agreement to facilitate production and supply chains; and address crosscutting issues of regulatory coherence, competitiveness and business facilitation, small and medium enterprises, and development. A “living agreement*, it would be regularly reviewed and other countries would be encouraged to join.
2012 Is The Deadline
The sum of documents added little to what spectators to the secret negotiations have already gleaned from leaks, analyses of official speeches and corporate statements, and interrogation of officials. But they do give rise to four interesting observations. First, known areas of conflict that go to the fundamentals of the US position and achievability of a final agreement, such as restrictions on market access to the US for agriculture, rules of origin for textiles, rules on intellectual property and medical products, and inclusion of an investor-State dispute mechanism, were invisible to those who were not aware of the subtext. Clearly, they want to play down the significant obstacles.
Second, the Trade Ministers' Report to Leaders - the only document emanating from all the parties - made no reference to several US priorities, such as State-owned enterprises (SOEs) or environmental goods and services, which feature prominently in the other statements scripted by the US hosts and speeches to US business. “Disciplines* on “anti-competitive SOEs* are a US priority directed at China; but the precedent also has serious implications for Vietnam, Malaysia, Brunei and Singapore, and depending on the text, for present and future SOEs in New Zealand. Vietnam flatly rejected the US proposal at the October TPPA round in Lima.15
Third, very few areas of legal text were identified as “close to consensus* or where parties had “substantially concluded general provisions* or “agreed on almost all core elements*. Progress on the remaining list of areas was variously described as “significant progress on text*, “text will*, “text should*, “discussing elements for a chapter*, “substantial progress on provisions*, “progress on disciplines*, “agreed to establish principles and obligations*, “agreed to have a common set*, “proposals include*, “considering new proposals*, “special obligations under discussion*, “will contain new commitments*, “considering new initiatives*.
All three points feed into a fourth crucial observation: there was no new deadline in the formal texts, but numerous oral statement of political commitment to complete negotiations in 2012. Presumably this double play was deliberate. The Trade Ministers' Report to Leaders implicitly downplayed expectations. It said the negotiations were complex and time consuming, but their framework would provide “structure and momentum to a successful conclusion*. The US-issued documents said new meetings would be scheduled in December 2011 for 2012. It was only the various briefings with individual ministers and officials that disclosed the goal to complete the legal text in 2012, with as much progress as possible on schedules and other specifics.16 The Malaysian Prime Minister went furthest, reporting agreement on an “ambitious but achievable* July 2012 deadline, subject to “the few key operative words include being flexible, realistic in taking into account our domestic requirements, different levels of development and different levels of domestic priorities* 17. According to Froman, that meant trying to finish a legal text for ministers to review by the mid-year APEC Trade Ministers' Meeting, presumably in Russia which is the APEC Chair for 2012.
It seems there are only four rounds of TPPA negotiations pencilled in before then. A partial round (meaning no “stakeholder* presence) was held in Malaysia in December 2011, a full round in Melbourne in early March, and further rounds in Brunei and New Zealand by mid-year. Given the current state of play, a legal text by 2012 would seem to require complete capitulation to US demands or the US sacrificing some of its more extreme and controversial commercial objectives, weakening the precedent it needs to achieve the bigger game plan. It would also skew the sequencing of trade-offs in a process where in theory “nothing is agreed until everything is agreed* in US favour. Specifically, completing the “legal text* requires certain disputes to be resolved, including intellectual property (pharmacy and Internet), while the schedules setting out commitments (such as access to agricultural markets) would be left until later.
This process is complex enough when the US is dealing with relatively small, compliant and inconsequential players. There is a tension between expanding the critical mass of countries involved in the negotiations and keeping the conflicts to a minimum. Those who indicated an interest in joining (to date the Japanese, Canadian and Mexican governments) have been put on a “parallel track* of consultations about their participation; these will not be completed, if at all, to enable their participation before mid-2012. Matters already agreed between the existing nine will not be reopened.
New Zealand's Trade Minister Tim Groser described the 2012 target as “totally achievable*. Acclaiming the momentum achieved in Honolulu, Groser said the lesson from past negotiations, including the paralysed WTO Doha Round, was that more time makes agreements more difficult to achieve rather than less difficult 18. The media failed to ask Groser why that might be so. Basically, the more debate there is about negotiations and their implications, the more reservations governments tend to have about taking positions they might have adopted under political pressure and without balanced analysis. From a free trade perspective, this is a problem caused by protectionist interests and “political market failure*, i.e. democracy.
This analysis raises three pivotal questions about the execution of the US strategy. Do the existing eight negotiating parties share the US's geopolitical and commercial objectives sufficiently strongly to conclude a deal? Can negotiations for a “gold standard* agreement between the US and APEC's less significant economies become attractive enough to other Asian countries to pose a potent counterforce to China? Does this grand plan have any chance of meeting a 2012 target, or is it more likely to collapse under its own weight and, in the face of mounting opposition, go the way of the Doha Round, the Free Trade Area of the Americas, the Multilateral Agreement on Investment and numerous US Free Trade Agreements (FTAs)?
Commitment Of Existing TPPA Parties
The TPPA is intended to serve the overriding strategic objective of the Obama Administration through the establishment of a US-driven normative legal regime. At one level, the motivations of the other eight parties to the TPPA negotiations are irrelevant. This is a US-centred strategy and the US Administration and the Congress will determine its final terms. However, achieving a deal requires cooperation and consent from Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam.
There is a strong degree of active support for US foreign policy goals among the existing TPPA parties. Most are US military allies. The Australia US FTA was widely seen as a “reward* for the Howard government's support for US wars in Afghanistan and Iraq (perversely, given the FTA's lack of positive net returns). The intimate security alliance with the US continues under Labor; Prime Minister Gillard was the first foreign leader to be invited to address the annual Veteran's Day event during APEC in Honolulu, and Obama announced more US troops will be stationed in Australia during his visit post-APEC.
Singapore's longstanding support for US military presence in the region includes a naval base at Changi, viewed as the US Navy's “gateway* to South-East Asia. Post-Pinochet Chile has been a staunch US ally in Latin America. Malaysia has regularly conducted joint training with the US, hosting jungle field exercises, which increased after 9/11. Brunei has a similar defence cooperation arrangement. Despite Vietnam's historical fight against US imperialism, it has strategic concerns with China on its border.
Yet the position of the Association of South East Asian Nations (ASEAN) members is complicated by their strong relationship with China through ASEAN-plus three,19 ASEAN-plus six 20 and the China-ASEAN free trade area. The US may have inveigled its way into the East Asian Summit, but these arrangements are substantial vehicles for East Asian integration that is led by the emerging Asian economies, especially China. China has publicly challenged the lack of balance in the US focus on the TPPA during APEC in Honolulu. These tensions flowed through to the East Asian Summit in Bali, Indonesia, on 19 November 2011, in which the US and Russia participated for the first time, where China also objected to US plans to raise the South China Sea issue.21 The US strategy assumes the TPPA would take precedence over these other arrangements, if not overtly in terms of allegiances, then practically as an enforceable legal regime with which parties will be made to comply. The US military alliance with Peru is less certain since the election of President Humala earlier in 2011. But despite his Leftist credentials, Humala recently called for stronger cooperation with the US-led anti-narcotics strategy, which is widely viewed as a front for counter-Leftist incursions into Latin America.
New Zealand's position is also awkward, given successive Governments' formal (if not actual)22 independent foreign policy, and long-term popular antipathy to US militarism. While our highly placed politicians and defence forces may be eager to restore a full military alliance, it is inconceivable they would pitch an argument for the TPPA on foreign policy and security lines. New Zealand's politicians and trade officials are also reportedly to be extremely uncomfortable with the rabid anti-China rhetoric they have encountered on visits to the US. It is not realistic to expect that even countries with strong US ties will back off the long-term strategic goal if the short-term economic and political costs of a TPPA are too high.
An economic rationale should be easier to sell, as this is purportedly a “free trade agreement*. The problem is there is no obvious economic gain from the TPPA, except for the US corporations. Most of the nine parties are already highly liberalised with an interlocking network of free trade deals among themselves.23 With Congress having an effective veto over any US concessions, they can expect nothing meaningful in return. The lack of concrete commercial gains from more intensive regional economic integration sits alongside the economic and social cost of further concessions to US corporate interests.
Australia, Chile, Peru and Singapore already have FTAs with the US. A TPPA means the US will renew demands they resisted in these earlier agreements, alongside new “behind the border* restrictions on what governments can do. The political price may be too high. Peru's Humala was elected on a promise to renegotiate existing FTAs, not enter new ones. Drug prices have risen, not fallen as was promised under the Peru-US FTA. Obama has abandoned the “May 2007* compromise, meaning additional demands and further price hikes for medicines under a TPPA.24 US-based mining company Renco is currently suing Peru's government using the investor-State powers in the US FTA.
Australian governments have long championed the idea of a Free Trade Area of the Asia Pacific, producing an APEC guide to negotiating FTAs. But the pro-market Australian Productivity Commission recently poured cold water on the claimed benefits from bilateral and regional free trade deals, especially the Australia US FTA, and urged a refocus on the paralysed WTO negotiations.25 The Labor government has drawn red lines in areas that directly confront core US aspirations. Its rejection of investor-State dispute powers, which were excluded from the bilateral FTA, has hardened since US tobacco transnational Philip Morris launched an investment treaty case against Australia's plain packaging tobacco law. Threats to erode the Pharmaceutical Benefits Scheme also pose significant obstacles to US demands for the TPPA.26 Chile has used anti-terrorism laws to quell indigenous resistance to resource grabs that followed the US Chile FTA.27 A recent wave of dissent from student-led protests could broaden to opposition to a TPPA as part of the international “occupy* movement.
Malaysia, Vietnam, Brunei and New Zealand do not have US FTAs and therefore face the most extensive demands. Malaysia will be required to adopt the rules on government procurement, rice tariffs, indigenous preferences and medicine prices that sunk the previous bilateral negotiations with the US. Vietnam will add new obligations to the far-reaching WTO accession package signed in 2006, which it is struggling to implement. The US textile lobby is demanding uniform rules of origin that could ruin Vietnam's garment industry. Along with the other three ASEAN parties, Vietnam faces crippling new US demands on SOEs, as well as politically sensitive labour and environment rules.
What About New Zealand?
A free trade deal with the US has been the holy grail for successive National and Labour governments, despite the Australian experience. The constant refrain from Prime Minister Key and Trade Minister Groser is that New Zealand will not enter a deal that is not good for the country. Yet Wikileaks revealed the lead negotiator has few expectations of commercial gain and saw the need to “manage down* expectations of an “el dorado*.28 Unlike other FTAs, the trade ministry has not projected massive economic benefits from a TPPA. Indeed, Groser has (rightly) expressed deep scepticism of econometric projections.29
Originally, the anticipated benefits were framed in terms of market access to US markets, especially for dairy. However, the US has manipulated the negotiating process to remove that prospect from the table, replicating the approach it took to remove sugar from the negotiations in the Australia US FTA. More recently, Fonterra and other exporters have projected commercial gains from streamlining supply chains and “regulatory coherence* as justifying the deal.
The real benefits, Groser insists, are the future extension of the “gold standard* deal to Japan, Korea and others. He claims personal credit for the nine-party talks as the culmination of a step by step strategy to build an APEC-wide free trade agreement over almost three decades.30 Starting with the Australia New Zealand Closer Economic Relations Trade Agreement in the 1980s, New Zealand then signed FTAs with Singapore (2001), Thailand (2005), Chile, Singapore and Brunei (2005), China (2008), Malaysia (2010), ASEAN with Australia (2020) and Hong Kong, China (2011).
Groser claims to have positioned New Zealand with a foot in each camp. New Zealand has a uniquely advantaged position as the only OECD country with an FTA with China providing guaranteed access to its markets. However, that claim only holds true if a TPPA is actually concluded, given that most of the other parties already have FTAs with the US. It also assumes that China continues to view New Zealand as benevolent, even when it aligns with the US's anti-China strategy. If China decides to cut New Zealand loose, it can do so at minimal cost to itself and New Zealand will have no realistic redress under the FTA.
Domestically, the Government will find it hard to rely simply on hypothetical future benefits from future regional integration and Groser's “vision* to justify making unpopular concessions to US corporate demands. Both the National and Labour parties, as free trade evangelists, have been downplaying the wide range of potentially negative impacts, honing in on carefully worded promises to protect drug buying agency Pharmac. The increasing critical attention paid to the TPPA meeting suggests that may not prove adequate.31
Building A Critical Mass: Japan And More
The next question is what other APEC countries might join, why and on what terms? Even if the eight non-US parties can agree to a “gold standard* TPPA, they comprise a tiny proportion of trade and investment on a regional and global scale. They need to get other APEC, and especially ASEAN, countries to climb on board a US-led vehicle to create a credible critical mass. The more countries that do, the more isolated China becomes in its own region.
A new momentum seized the TPPA talks during APEC in Honolulu. That effect is one of APEC's main purposes - political leaders need to show they are decisive and make headlines. The US as host made a crucial difference. With the White House drafting the “consensus* documents and issuing its own statements, it was inevitable the main US showpiece would seem to be propelled forward. At such a carefully choreographed event, few searching questions would be asked.
The high drama centred on whether Japan's Prime Minister Noda would announce his Government planned to join the negotiations. Staunch resistance within the Diet, and his own party, saw an initial press conference canned and Japan's main corporate lobby, the Keidanren, expressed concern. When the announcement came it drew a lukewarm welcome from the other parties, who said Japan would have to prove it was worthy before gaining a seat at the table.
Noda took a high risk decision. Half the members of the Diet are opposed to Japan's participation in a TPPA. Some MPs are opposed as a matter of principle, defending sovereignty and self-sufficiency in the face of US recolonisation and safeguarding their relationship with China. Others are concerned about their prospects for re-election if they abandon their constituencies, especially farming communities. A third rationale is all about timing: the Government's priority should be on post-disaster reconstruction. Many of these politicians are from Noda's Democratic Party of Japan. There is potential for a split and for the Government to be ousted at or before the next election. Most in the opposition Liberal Democratic Party have opposed participation, but it is notoriously pragmatic.
Outside the Diet, the debate has gone beyond agriculture to the risks a TPPA would pose to Japan's national health insurance system, the suspended privatisation of the delivery, bank and insurance arms of Japan Post; strict food standards, including restrictions on imports US beef introduced in response to “mad cow* (bovine spongiform encephalopathy - BSE) disease; and more. Parallel to these commercial and social interests is the concern that a deeper commitment to US foreign policy objectives will heighten tensions with China. Japanese opposition to US imperialism should not be underestimated. The backtracking on the closure of the Okinawa base, which is the staging ground for US troops in the region, in favour of its relocation within the island remains deeply unpopular. Foreign policy arguments can be expected to intensify once the TPPA is seen as the economic limb of America's anti-China strategy.
Rubbing Salt Into Japan's Wound
Given this history, and the fact Japan's involvement would give the TPPA a critical mass that it currently lacks, the response from the existing TPPA parties is puzzling. Far from welcoming Noda's risk taking, they rubbed salt into his wound by laying down a process that deprives Japan of any effective input into the negotiations. Before being accepted as a negotiating party, Japan needs to engage in bilateral talks with each of the existing parties, satisfy them (and their domestic constituencies) and then secure consensus support of all nine. There are strong echoes of the process for countries to accede to the WTO, where there is no real negotiation and entry to the club requires a pre-commitment to obligations that go beyond the terms of the existing agreement.
As the list of demands on Japan piled up, Noda's officials sought to downplay US depictions of what Japan had promised. Obama said Noda agreed “to put all goods, as well as services, on the negotiating table*. Japanese officials said he merely said he would enter talks to find out the terms of participation. The US refused to change the official transcript. Some speculate Japan was selling different lines to national and international audiences.32 But it was an inauspicious start to “consultations* and suggests a fraught and drawn out process ahead.
The details of the “consultation* process unfolded through a series of media briefings, “scrums* and “gaggles* (official description). Although not formally required to do so, the Obama Administration will pursue a 90 day consultation process with the Congress, which is dominated by corporate lobbyists, and “extensive consultations with “stakeholders*, code for big business and probably the major unions. Already the shopping list for pre-commitments, if not down payments, is extensive. Members of Congress have already flagged agriculture, insurance, drugs and medical devices as market access barriers to US firms in Japan.33 Some called for opening of Japan's automobile markets to US exports as a pre-condition to participation. The American Automotive Policy Council, representing the big car firms, preferred Japan to accede to a completed deal.34 The beef industry talked of removing restrictions on access for US beef. One US insurance firm operating in the US made it clear to me that it was untenable for Japan to join a “WTO-plus* TPP negotiation while the operations of Japan Post Bank and Japan Post Insurance allegedly breached its basic WTO obligations.
The demands are not limited to the corporations. The US Steelworkers Union issued a statement saying “an agreement that includes Japan must have provisions to ensure true reciprocity is achieved, not just by lowering tariffs, but through real market access as well as elimination of non-tariff barriers. And, it must address the challenges many Japanese exports will pose to American manufacturers. Other potential future participants in the TPP must know that the status quo approach is no longer acceptable*.35 Paradoxically, the conservative Japanese trade union body Rengo supports the TPPA, believing it will bring manufacturing jobs to Japan; the public sector based union group Zendoren is strongly opposed.
The US is not the only negotiating party making demands on Japan. New Zealand and Australia have consistently said Japan must meet their high TPPA standards. At the time of the 2010 APEC Leaders' Summit in Yokohama New Zealand Prime Minister John Key said Japan could only enter the talks on New Zealand's terms.36 The Wikileaks cable reported New Zealand's chief negotiator saying in December 2010 that if the “initial members can reach the ‘gold standard' on the TPP, it will ‘put the squeeze' on Japan, Korea and others, which is when the ‘real payoff' will come in the long term.*37 They will want to ensure the US does not make side deals and trade-offs that conveniently justify its own exemptions for sugar and dairy.
Sidelining Japan Onto the Parallel Track
What role will Japan play in the actual negotiations? If the time frame indicated in Honolulu of a legal text by mid-2012 was achieved, Japan could expect to remain on a “parallel track* for the entire negotiations. According to US Deputy National Security Adviser for International Economic Affairs, Mike Froman, “the TPP partners would continue to work to flesh out the details of the agreement and to work aggressively towards that objective, and at the same time and in parallel, launch consultations with countries like Japan, who have expressed interest in potentially joining TPP to see whether they are prepared to achieve a level of ambition consistent with TPP and address the outstanding trade issues. For example, the U.S. agriculture services and manufacturing sectors, including on tariff measures and the manufacturing sectors. So we expect those to go along parallel tracks, and we'll try to make progress on both sides.*38
In other words, Japan would not become involved until the agreement was basically completed aside from negotiating the schedules. Having promised to make major concessions to get a seat at the negotiating table, they would become takers of a deal they had no opportunity to shape. The parallel track is a clever defensive move that avoids the risk that countries with more defensive approaches would slow down and complicate the process. Froman made it clear that the existing parties “don't want the expressions of interest of potential new members to either delay or dilute the path we're on*.39 Tim Groser said, equally bluntly, that countries on the “parallel* track “will not play any part in the negotiations for the foreseeable future while the existing nine parties consolidate what has been achieved*.40
Why would Japan want to buy into this? Strong commercial interests believe a TPPA would increase their access to US markets, despite scepticism that the US will open its doors in areas of importance to Japan. An equally strong rationale is that an externally enforceable TPPA could provide a backdoor way to force domestic liberalisation and deregulation. The experience of the on-and-off-again Australian Japan negotiations suggests selling the more extensive TPPA to the Japanese nation will be prolonged, complex and likely to fail.
Why governments would seek to join a process in which they have no say is equally pertinent for Canada and Mexico, two latecomers who unexpectedly announced plans to join the TPP party on the final day of the APEC meeting. Both are already parties to the North American Free Trade Agreement (NAFTA) with the US, and may fear others will secure deeper relations with the US than they agreed back in 1993. Canada was told in 2010 by the US and New Zealand that it was not welcome because it could not meet the standard expected of TPPA parties. The main barrier was Canada's production quotas and price support systems for its dairy and poultry industries. At APEC Canada's Prime Minister said it was willing “to put all issues on the table*; Canada would also “seek to defend and promote our specific interests in every single sector of the economy*, including its supply management system.41
That raises crucial questions about the kind of exceptions that might be allowed, for whom, and how those excluded from the initial negotiations can influence that outcome. When USTR Ron Kirk discussed Canada's intention at APEC he mentioned removing its agricultural protections, and accepting (NAFTA-plus US-defined) rules for intellectual property (including the public medical scheme), services, investment, and domestic regulation. Some commentators suggest that Obama convinced Harper to seek “consultations* so Japan was not the only player on the parallel track and may have promised to recognise Canada's areas of sensitivity.42 Harper may assume the recognition that all countries, including the US, have sensitivities means that Canada will be able to retain some protection. But that contradicts the rhetoric of the TPPA that all trade barriers will be removed, with its unspoken American exceptionalism that would allow the US to maintain the agricultural protections in its existing FTAs. With no seat at the table Canada, like Japan, would have to accept the architecture and terms that the nine have agreed. They have no guarantees whatsoever. Embarking down that path would be hugely unpopular. Canada has a very organised domestic opposition to such deals. So can a TPPA become attractive enough to other Asian countries to pose a potent counterforce to China? That is seriously doubtful, even if China does not push back.
Will The TPPA Collapse?
There is a litany of reasons why this strategy seems doomed to fail. Yet if it proceeds rapidly under the current veil of obsessive secrecy, a deal among the original nine is not inconceivable. Whether others might join this gold standard fait accompli seems much less likely. As noted previously, concluding the TPPA would require capitulation to US demands by the other eight parties or US compromises to make it more attractive to current and future parties, but which would undermine its value as an ‘international norm* to assert against China.
A reality check identifies three further, inter-connected impediments to achieving the “gold standard* TPPA. The first is the time frame. Given the known state of play, the idea of a completed legal text by mid-2012 seems fanciful. Even once a formal text is sorted, there are vast schedules to be drafted, analysed, contested and finalised. Some parties are inexperienced in aspects of these, especially the negative list approach* to services and investment. The sequencing would not work either, as the hard political questions require trade-offs between the legal text, such as intellectual property or investor-State dispute settlement, and schedules dealing with, say, agricultural market access or textiles. Assuming a deal was eventually struck, each country has its own constitutional requirements for approval and ratification, including the passage of any new legislation required to comply with new obligations. Unless a multi-party agreement has legal effect when only some parties have ratified, it can languish for years before coming into force. But would that be desirable, especially if the holdout was the US? *Negative list approach = where countries must state explicitly what is not covered, rather than what is. Ed.
The second impediment is US politics. 2012 is the Presidential election. Suggestions Obama might be so emboldened by the passage of the Colombia, Panama and Korea FTAs as to take the risk of campaigning for this “new generation, 21st Century FTA* ignores the lack of Democratic Party support for those deals. The “no* votes of House Democrats - 82.3% for Colombia, 67.6% for Korea, 60.6% for Panama 43 -- all are higher than the 60.6% House Democrats' opposition to NAFTA. During the 2008 election campaign Obama promised to renegotiate numerous aspects of NAFTA and the US model bilateral investment treaty (BIT).44 Instead, the TPPA promises NAFTA+, USFTA+, the unaltered 2004 BIT, and removal of the May 2007 compromises in the Colombia and Panama FTAs that the Democrats forced on President Bush. Moreover, the President has no Trade Promotion Authority, meaning the Congress could unpick the deal. Some commentators are asking why other governments would make commitments in a political context of such uncertainty, not knowing who might be the President or control the Congress, and which of their carefully constructed compromises and trade-offs might be unravelled from what they thought was a done deal.45
China Won't Take It Lying Down
Third, China is unlikely to take the US strategy lying down. Immediately after Obama announced more troops and intensified military activities in the Asia Pacific the Australian reported the warning in an editorial in China's State-run Global Times that: “Any country which chooses to be a pawn in the US chess game will lose the opportunity to benefit from China's economy. … China has more resources to oppose the US ambition of dominating the region than US has to fulfil it.*46
These diverse tensions increase the prospects that the TPPA negotiations will collapse under their own weight. Hence the significance of Groser's observation that more time makes agreements more difficult to achieve rather than less difficult.47 Rapid closed-door negotiations allow deals to be made with maximum hype and minimum scrutiny. The extreme secrecy surrounding the TPPA negotiations is a retreat from the gradual and hard-fought disclosure of draft texts and background documents achieved in the WTO, the Free Trade Area of the Americas (FTAA), the Multilateral Agreement on Investment (MAI), and the Anti-Counterfeiting Trade Agreement. Indeed, the TPPA has taken secrecy to a new level, with a Memorandum of Understanding among the parties that none of these documents will be released until four years after the negotiations are concluded or collapse. Despite requests, even that document has not been released.
The more debate, the more pressure on governments and the TPPA parties collectively to release information, the more leaks, the more informed analysis of implications, the more cross-country collaboration, the more pressure on political parties to take a position, and the more mobilisations of diverse affected sectors and local communities - the more chance the TPPA will go the way of the Doha Round, its Latin American equivalent the FTAA, the precursor investment agreement the MAI and numerous US FTAs. The scene is now set for a battle royal.
Jane Kelsey (ed.) “No Ordinary Deal. Unmasking the Trans-Pacific Partnership Free Trade and Investment Agreement*, Bridget Williams Books, Wellington; Allen & Unwin, Sydney, 2010
www.keionline.org (intellectual property)
1. For a detailed analysis of the perceived security agenda at the time the TPPA negotiations began see Paul Buchanan, “Security Implications of the TPPA* in Jane Kelsey (ed) “No Ordinary Deal. Unmasking the Trans-Pacific Partnership Free Trade and Investment Agreement*, Bridget Williams Books, Wellington; Allen & Unwin, Sydney, 2010. This was reviewed by Jeremy Agar in Watchdog 125, December 2010, http://www.converge.org.nz/watchdog/25/11.htm. Ed.
2. Hillary Rodham Clinton, Secretary of State, “America's Pacific Century*, East-West Center, Honolulu, 10 /11/11
3. Background briefing, Senior State Department Official, “Readout of Secretary Clinton's Bilateral Meetings with Chinese, Japanese, and Australian Foreign Ministers at APEC*, Honolulu, 11/11/11
4. Press Briefing by Deputy National Security Advisor Ben Rhodes and Admiral Robert Willard, US Pacific Command, Honolulu, 13/11/11
5. Secretary of State Hillary Clinton, Post-APEC Ministerial Meetings Press Briefing', Honolulu, 11/11/11
6. Press Briefing by Press Secretary Jay Carney, Deputy National Security Advisor for Strategic Communications Ben Rhodes, Deputy National Security Advisor for International Economic Affairs Mike Froman, and National Security Council Senior Director Daniel Russel, Honolulu, 12/11/11
7. News Conference by President Obama, Honolulu, 13/11/11
8. Press Briefing by Press Secretary Jay Carney et al, Honolulu, 12/11/11
9. Press briefing by Principal Deputy Press Secretary John Earnest and Bill Weldon, CEO of Johnston & Johnston, Rich Lavin, CEO for Caterpillar, and Eric Schmidt, CEO for Google, 12/11/11
10. “Official says China Open to TPP Negotiations*, 29/9/11 http://www.sccwto.net/webpages/WebMessageAction_viewIndex1.action?menuid=e36db09f-3dbc-4f2d-b815-46aa90d25174&id=ac2e2ba6-a8e0-4b7f-abf6-c472d4095100
11. “China Criticizes US Agenda for APEC Summit*, Wall Street Journal, 8/11/11
12. Press Briefing by Press Secretary Jay Carney et al, Honolulu, 12/11/11
13. Press briefing by Principal Deputy Press Secretary John Earnest and Bill Weldon, et al, Honolulu, 12/11/11
14. “Trans-Pacific Partnership (TPP) Trade Ministers' Report to Leaders, Endorsed by TPP Leaders, November 12, 2011*; The White House, Office of the Press Secretary, “Trans-Pacific Partnership Leaders Statement*, 12/11/11; Office of the United States Trade Representative, “Enhancing Trade and Investment, Supporting Jobs, Economic Growth and Development: Outlines of the Trans-Pacific Partnership Agreement*; The White House, Office of the Press Secretary, “Fact Sheet: The United States in the Trans-Pacific Partnership*, 12/11/11.
15. Vietnam Rejects US Push on State Firms in Trade Talks*, Reuters, 30/10/11, http://www.tuoitrenews.vn/cmlink/tuoitrenews/business/vietnam-rejects-us-push-on-state-firms-in-trade-talks-1.49713
16. Press Gaggle by Deputy National Security Advisor for International Economic Affairs Mike Froman, 12/11/11, www.whitehouse.gov/the-press-office/2011/11/12/press-gaggle-deputy-national-security-advisor-international-economic-aff
18. Radio NZ Morning Report, “Trade Minister says NZ has ‘huge' influence on TPP*, 14/11/11
19. China, Japan and South Korea
20. Australia, China, India, Japan, South Korea and New Zealand
21. “East Asia not US Playground*, China Daily, 19/11/11 http://www.chinadaily.com.cn/opinion/2011-11/19/content_14123237.htm
22. Documented in Nicky Hager's book “Other People's Wars*, Craig Potton Publishing, Wellington, 2011 (see Jeremy Agar's review elsewhere in this issue. Ed.).
23. See Jane Kelsey, “Introduction* in Kelsey (ed.) “No Ordinary Deal*.
24. “A briefing memo on the impact of the US proposal to the Trans-Pacific Partnership on access to medicines in Peru*, Public Citizen, Washington, 22/10/11, http://www.citizenstrade.org/ctc/wp-content/uploads/2011/10/TransPacific_PCmemo.pdf
25. Australian Productivity Commission, “Bilateral and Regional Trade Agreements*, Research Report, November 2010.
26. AFTINET, “Trade Pacific Partnership Agreement*, http://aftinet.org.au/cms/trans-pacific-partnership-agreement/trans-pacific-partnership-agreement
27. José Aylwin, “The TPPA and Indigenous Peoples: Lessons From Latin America*, in Kelsey (ed.) “No Ordinary Deal*
29. Tim Groser, “The Trans-Pacific Partnership: State of Play*, 15/6/11, http://www.beehive.govt.nz/speech/trans-pacific-partnership-state-play
30. Radio NZ Morning Report, “Trade Minister says NZ has ‘huge' influence on TPP*, 14/11/11
32. “The Nelson Report*, Samuels International Associates, 17/11/11
33. In a letter to the USTR dated 8/11/11, reported in Inside US Trade, 11/11/11
34. “Prospect of Japan Joining TPP Sparks Auto Demands, Raises Questions*, Inside US Trade, 11/11/11
35. “USW Statement on President Obama's Progress Report at Nine-Nation Trans-Pacific Partnership (TPP) Talks*, 12/11/11
36. “Key's Sun Rises in Japan*, New Zealand Herald, 20/11/10
38. Press Briefing by Press Secretary Jay Carney, Deputy National Security Advisor for Strategic Communications Ben Rhodes, Deputy National Security Advisor for International Economic Affairs Mike Froman, and National Security Council Senior Director Daniel Russel, Honolulu, 12/11/11
39. “Congress, Administration To Consult on Possible Japan TPP Participation*, Inside US Trade, 18/11/11
40. Radio NZ Morning Report, 14/11/11
41. “Canada's Renewed Interest in Joining TPP Seen as Response to Japan*, Inside US Trade, 18/11/11.
42. “Ottawa feels compelled to join Trans-Pacific Partnership talks as signs grow that broad multi-country deal could eclipse NAFTA in importance*, Globe and Mail, 14/11/11
43. Lori Wallach, “Job-Killing Trade Deals Pass Congress Amidst Record Democratic Opposition*, Huffington Post, 13/10/11, http://www.huffingtonpost.com/lori-wallach/obama-free-trade-agreements_b_1008113.html
44. Lori Wallach, “US Politics and the TPPA*, in Kelsey (ed.) “No Ordinary Deal*, pp.54-55
45. “The Nelson Report*, Samuels International Associates, 15/11/11
46. Reported in The Australian, 18/11/11, see http://www.islandsbusiness.com/news/index_dynamic/containerNameToReplace=MiddleMiddle/focusModuleID=130/focusContentID=26229/tableName=mediaRelease/overideSkinName=newsArticle-full.tpl
47. Radio NZ Morning Report, “Trade Minister says NZ has ‘huge' influence on TPP*, 14 /11/11