Divisiveness of the Trans-Pacific Partnership
Although the full text of the Trans-Pacific Partnership (TPP) has yet to be publicly released, the recently announced trade pact among 12 nations in the Asia-Pacific has already caused shockwaves around the world.
On multiple fronts, the trade deal is fundamentally divisive and problematic even though it promises to deliver long-term growth and benefits for its members, which cover 40% of the global economy. For Thailand, missing out on the TPP is less of a problem than not having a clear trade policy to begin with.
First, in the broadest frame of global trade liberalisation, the TPP is divisive because it diverts attention and energy from the World Trade Organisation's (WTO) Doha Round. Indeed, the TPP may well become the final straw that breaks the back of a world trading system underpinning global economic growth for much of the past seven decades.
The proliferation of preferential trade agreements in bilateral, regional and pluri-lateral forms has already undermined the WTO. Now, the TPP will only entice more economies to take trade matters into their own hands and opt for less than multilateral solutions. The next major WTO meeting in Kenya in December will be indicative of the fate of the world trading system. If it ends up limping along into collapse, the WTO's demise will be partly attributable to the TPP.
Second, the TPP is divisive within virtually all countries that have joined it and those that have not. For its 12 trans-Pacific members -- the United States, Canada, Mexico, Peru, Chile, Australia, New Zealand, Brunei, Singapore, Malaysia, Vietnam and Japan -- the TPP is likely to generate vociferous debates and add to social divisions that already exist.
In the US, for example, the TPP is poised to be a major presidential campaign issue next year, as Hillary Clinton has backed away from it to ensure her Democratic Party's nomination. Wellington saw street protests earlier this year against the data exclusivity on biologic drugs. Chile, which has a bilateral FTA with China, will see a heated ratification process. TPP countries that are authoritarian, such as Vietnam, can ratify trade agreements at will but only at the expense of civil society participation. Moreover, it is not easy to imagine how Vietnam will comply with the TPP's stringent labour and environmental standards.
For countries outside the TPP, whether to join or not will be contentious. Some stakeholders in Thailand, for example, have suggested the Thai government should take part. Yet this is a moot point. Thailand has not had a clear trade policy direction since a decade ago when it went all out for bilateral FTAs. The backlash against the FTA drive since then has polarised Thailand and empowered anti-FTA civil society groups.
The TPP, if Thailand were able to become involved, would feel and smell very much like the aborted Thai-US FTA negotiations of the early 2000s under the Thaksin Shinawatra administration that held great liberalisation promise but was hounded by vested interests and a top-down lack of transparency. For many countries excluded from the TPP, such as Thailand and even China, it may now be too little, too late to get in.
Third, the TPP will further divide economies into preferential trade blocs. Incentives to accelerate the Regional Comprehensive Economic Partnership among Asean members along with China, South Korea, Japan, Australia, New Zealand and India will grow and intensify. The China-led RCEP and the US-driven TPP would then worsen the superpower rivalry between Washington and Beijing to the detriment of regional stability.
Fourth, Asean itself will be further divided by the TPP. Four of 10 Asean economies are in, the others not. Vietnam and Malaysia are likely to see trade-creation benefits in major industries, such as automobile, apparel and electronics at the expense of Thailand. Brunei is too small to be too significant, and Singapore is too much of a free-trading nation already to benefit that much more. Vietnam and Malaysia are key and the trade-creation and trade-diversion effects vis-a-vis other Asean partners may sap Asean coherence and momentum in terms of the Asean Community and its economic-community pillar.
Overall, the TPP poses myriad risks and challenges for both those that are in and out and for the global trading system. And ratification processes among TPP members are not a done deal. No member economy is expected to reject the deal, which would bring down the entire agreement. But all members are likely to face polarisation and divisions in a time-consuming fashion before ratification and actual implementation.
To be sure, the announced agreement is WTO-plus. For example, it covers not just trade in goods, government procurement and intellectual property but also the digital economy and the role of state-owned enterprises. Regrettably, these should have been struck at the multilateral level within the WTO, however arduous the process has been. Abandoning multilateral avenues to global cooperation will see the world degenerating into a self-help logic that acts as another centrifugal force tearing apart the global economy that was set up seven decades ago.
Thitinan Pongsudhirak is associate professor and director of the Institute of Security and International Studies, Faculty of Political Science, Chulalongkorn University.
An associate professor at Chulalongkorn University
An associate professor and director of the Institute of Security and International Studies at Chulalongkorn University’s Faculty of Political Science, with more than 25 years of university service. He earned his MA from The Johns Hopkins School of Advanced International Studies and PhD from the London School of Economics where he was awarded the UK’s top dissertation prize in 2002.