Everyone But China?
By Don Quijones, Spain & Mexico, editor at WOLF STREET.
The Trans-Pacific Partnership is not yet fully alive: the agreement has been signed but still needs to be ratified by the governments of its signatory nations. Nonetheless, the corporatocracy’s unborn baby is growing at a startling rate.
Last week, the agreement boasted a grand total of 12 signatories (the United States, Japan, Canada, Mexico, Peru, Chile, Australia, New Zealand, the Philippines, Brunei, Malaysia and Singapore) with a combined population of 800 million people. This week that number rose to 13 after Indonesia’s President Joko Widodo told U.S. President Barack Obama that the country he represents also wants a piece of the action.
“Indonesia is an open economy and with a population of 250 million, we are the largest economy in Southeast Asia. Indonesia intends to join the TPP,” Widodo said on Monday after meeting Obama in the White House.
If Indonesia does sign the agreement, it will bring the combined population of the TPP-bloc to over one billion people, not far off the population of the country the trade agreement was originally devised to encircle and corral — i.e., China (pop: 1.357 billion). The TPP bloc will also represent over 40% of the global economy.
Everyone But China?
The basic proposition behind TPP is disarmingly simple: either China joins or it will be isolated. This isolation would progress: first from its own back yard through the TPP and the Pentagon’s “Asian Pivot,” then from the West (through the TTIP and TISA), and ultimately from the rest of the global economy.
Such isolation could be ruinous, not only for China but the U.S, too. China and the U.S., when it comes to trade, are joined at the hip. China is the US’s most important trading partner. It has an enormous trade surplus with the US. If anything came in between Chinese exports to the US, China’s economy would collapse (and the US economy would grind to a halt).
What the U.S. wants is TPP + China, but ideally on Washington’s terms, meaning the liberalization of its economy and the removal of China’s duties and joint venture and tech transfer requirements. As Politico reports, a central part of Obama’s pitch for the Trans-Pacific Partnership has been that it would prevent China from making the rules in the region. “When more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy.“
The trillion-dollar question: will China play along?
One thing is clear: China’s interventionism and attachment to state capitalism are difficult to reconcile with the West’s “behind-the-border” liberalization program which includes harmonizing safety and technical standards, currencies, national treatment of foreign investors, and the protection of intellectual property. And having had no say in designing the TPP, China may be reluctant to join later.
If China doesn’t join and chooses instead to focus on strengthening and expanding its own regional blocs and alliances — most notably the Shanghai Cooperation Organization — rather than becoming easier and cheaper, global trade could suddenly become much more onerous and more costly, as exclusionary trading blocs and the complex rules that govern them proliferate.
If You Can’t Beat Them…
As for all other countries who are not a) China, or b) among the original signatories of TPP (or for that matter TTIP), they are presented with a stark conundrum: join the club or risk losing access to a very large chunk of international trade. These so-called “third countries” could end up being shut out altogether, not only from the European and North American markets but also the markets of many of their closest regional neighbors.
As such, the pressure on economies like Indonesia — or Turkey and Switzerland — to sign along the dotted line is almost unbearable. Hence the incredible growth potential (and by extension, threat) of trading blocs like TPP and TTIP.
For Indonesia, membership of TPP presents an enormous opportunity to “fully realize its economic potential” — at least according to the UK Guardian. The Jakarta Post begs to differ, pointing out that there is no direct relation between investment treaties and inflow of Foreign Direct Investment.
Otherwise how could a country like Brazil, which has not signed a single investment agreement, attract FDI to the tune of $98 billion in 2014 alone, almost four times the amount invested in Indonesia, a country that has signed over 60 bilateral investment treaties.
As Gus Van Harten, a professor of investment law at the York University of Toronto, tells the Dutch broadcaster VPRO, the new generation of trade pacts like TPP are not about trade. They are about pushing so-called “trade” into all kinds of new domains which touch upon democracy, the courts, and public budgets in a way that a traditional trade agreement doesn’t even come close to doing:
The investment chapters in trade agreements, ISDS (Investor State Dispute Settlements) in particular, are at the heart of that. This is about changing fundamentally the power structures in countries, shifting power from legislatures, governments and courts to foreign investors and a small group of private lawyers who get appointed repeatedly as arbitrators.
Once signed, these investment chapters will throw Indonesia wide open (or at least wider open) to billion-dollar lawsuits from global corporations or investors if they feel that a new law or regulation cost them otherwise expected “future profits.”
By the end of 2013, there had been 568 known investment treaty disputes. In 2013 alone, investors initiated at least 57 ISDS cases, of which 45 were brought by investors from developed countries against developing countries – in other words, giant corporations suing cash-starved nations. This is just one of the many membership fees of joining the Trans-Pacific Partnership. By Don Quijones, Raging Bull-Shit.
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