The end of the big trade deals nears

The end of the big trade deals nears

The website of the US Trade Representative still lauds the Trans Pacific Partnership (TPP), but now requires urgent updating.
The website of the US Trade Representative still lauds the Trans Pacific Partnership (TPP), but now requires urgent updating.

US president-elect Donald Trump announced yesterday that he will cancel the Trans-Pacific Partnership trade deal on his first day in office (Jan 20). That will kill the TPP off for all 12 countries that agreed on it just over a year ago: as Japan's Prime Minister Shinzo Abe said, the TPP would be meaningless without the involvement of the US. But then, it was pretty meaningless even with US involvement.

Japan and the US were the only two really big economic players in the TPP deal. All 10 other partners -- Canada, Mexico, Peru and Chile on the eastern side of the Pacific, and Vietnam, Singapore, Brunei, Malaysia, Australia, and New Zealand on the western side -- have a total population scarcely bigger than that of the US alone.

It was really just an attempt to create a Pacific trading bloc that excluded China, thereby preserving what was left of the traditional US and Japanese domination of the region's trade. For just that reason, the other big trading economies of the region, Indonesia, the Philippines and South Korea, stayed out of it. They preferred to play the giants off against one another.

Chinese influence and trade in Southeast Asia may grow modestly as a result of the TPP's cancellation, but no profound transfer of power or wealth will ensue. There were no big tariff cuts coming as a result of the TPP anyway, because actual taxes on international trade were already low. The real focus was on removing so-called "non-tariff barriers".

Gwynne Dyer is an independent journalist whose articles are published in 45 countries.

The classic example of a non-tariff barrier was Japan's attempt in the 1980s to ban imports of foreign-made skis on the grounds that Japanese snow was "unique". A great deal of detailed haggling in the TPP talks went into breaking down thousands of similar barriers to trade, but any country that wants to keep those gains can just incorporate the same deals into bilateral trade treaties with other ex-TPP members.

Not many jobs would have been gained or lost, in the US or elsewhere, if the TPP had gone into effect. The same is true for the US-European Union equivalent of the TPP, the Transatlantic Trade and Investment Partnership (TTIP), which was dead in the water even before Mr Trump was elected. Donald Quixote has been attacking windmills, not dragons, because the great free-trading spree of 1990-2008 was already coming to an end.

It was not working-class American voters who killed the TTIP. It was mainly European consumers who didn't want hormone-laden US beef, US-grown GM foods, and chlorine-washed American chickens on their supermarket shelves.

To be fair, European left-wingers also played a role in mobilising opposition to the deal, by raising the (probably correct) suspicion that the "Investor-State Dispute Settlement" process (ISDS) in the proposed treaty was designed to cripple the ability of European governments to impose high safety standards in health and environmental issues.

Most of the jobs that moved from developed to developing countries (or often, in the US case, just from Rust Belt states to Sun Belt states where wages were lower and unions were weak or non-existent) left long ago. In recent years eight US jobs have been lost to automation for every one that "went abroad".

Most economic strategies, including both protectionism and free trade, conform to the law of diminishing returns. The same goes for political strategies, but they tend to lag even further behind the realities. That's why the old white working class in the US still feel compelled to "fight" free trade -- and why even Hillary Clinton, once an advocate of the TPP, was obliged to turn against it .

When she made that U-turn, Reince Priebus, chairman of the Republican National Committee, mocked her as "a case study in political expediency". He has been appointed as Mr Trump's chief of staff. But the cross-party consensus on this does not make it the right tune.

The truth is that these now aborted free-trade deals were merely the finishing touches on an edifice whose basic structure was completed more than a decade ago. Those who had devoted their lives to building that edifice simply kept on doing what they were good at doing. And all the while technological change was conspiring to make them irrelevant.

Cultural lag being what it is, the last battles in this long war -- probably between the US and its Nafta partners, Canada and Mexico, and between the US and China -- are yet to be fought. We may be entering the next decade before the political process anywhere seriously engages with the reality of automation. But reality always wins in the end.

Gwynne Dyer

Independent journalist

Gwynne Dyer is an independent journalist whose articles are published in 45 countries. His new book is 'Growing Pains: The Future of Democracy (and Work)'.

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