It is hard to report on the Trans-Pacific Partnership (TPP). Information has been kept secret and what is known has either been communicated deliberately by those in favour of the deal or leaked by organisations against it.
Yet the TPP will have an irreversible impact on all economies and cannot be left undiscussed.
After five years of intense negotiation the deal was finally agreed upon last Monday. Twelve nations bordering the Pacific Ocean – Australia, New Zealand, Singapore, Brunei, Vietnam, Malaysia, Japan, Canada, the US, Mexico, Peru and Chile – have agreed to create a near free-trade agreement between their economies.
With a few exceptions, this means that goods, services and capital can flow freely between their markets with low or zero tariffs. Between them these economies represent 40 percent of the world’s gross domestic product (GDP) and the deal will affect 18 000 goods categories.
The deal still needs to be legally ratified by each state involved.
Countries are no longer able to negotiate the terms but they are able to accept or reject the deal as it stands. If all countries accept, the TPP is set to become a reality in early 2016.
Cost benefit
The deal will create freer trade movement between the member states and each economy will be able to specialise in what they do best. The cost of business and trade will come down and markets will be more integrated, leading to higher growth. Trade between the twelve nations will be more stable and predictable, encouraging investment and long-term planning.
But while free trade casts a wide brush of benefits across the whole, individual industries will take a hard knock. The TPP will cause a race to the bottom for wages and production will shift to where costs in that industry are lowest.
The US’s automotive industry will give way to Japan’s and New Zealand’s dairy industry will impose on that of Canada.
Secrecy
Most of the controversy around the TPP is that negotiations have been shrouded in secrecy. Large multi-national companies have been involved in negotiating the terms of the deal but the public and most levels of government have not been allowed to view the content of what is being discussed.
A few details of the deal have been leaked, primarily by WikiLeaks, and provide an anecdotal albeit unconfirmed glimpse into what it may contain.
International law
Of all the elements seen, the one to cause the most public outcry has been the proposal to establish an international court for the TPP that will enforce investor-state dispute settlements (ISDS). ISDS allows multi-national corporations to sue the country they are investing in for any actions that threaten that firm’s return on their investment.
Previous cases include British American Tobacco suing Australia for banning cigarette advertising, Vattenfall suing Germany for phasing out nuclear energy and Veolia suing Egypt for increasing the minimum wage.
ISDS is not new and has been popular since the late 1990s. What is unclear is whether the TPP will simply adopt existing practices and the speculated growth of multi-national corporations control over sovereign states is unfounded, or whether the TPP introduces a new and more sinister form of ISDS control.
What next?
Free-trade agreements have a complicated track record but on the whole they do result in net benefits to the overall standards of living in the countries involved at the cost of certain industries.
However, most trade agreements don’t happen behind strictly closed doors and if the TPP is promoting a perverse centralisation of power then the benefits will only be felt by a few.
The details of the TPP will be made publically available for 90 days before the final decision needs to be made.
* Pierre Heistein is the convener of UCT’s Applied Economics for Smart Decision Making course. Follow him on LinkedIn /in/pierreheistein.
** The views expressed here do not necessarily reflect those of Independent Media.
BUSINESS REPORT