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.
Big Brother Unleashed? Read… Did the European Court of Justice Just Torpedo the Mother of All US Trade Agreements?
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Hopefully, many countries on the list refuse to ratify the agreement. Personally, I am looking forward to the end of Globalization and an environment where crooked banksters are thrown in jail and politicians actually serve to the benefit of their citizens, and not simply to the whim of their rich and powerful puppet masters.
Call me old fashioned, but why should any of us believe these crooks care about anyone but themselves and their cronies.
Globalization is what gave you cheap oil to fuel your car and cheap electricity to light your house. Globalization gave you King Dollar.
Regardless, there is no turning back. We’re firmly in the post-global age, and the US and other like minded democratic nations of the world will push through TPP, joining the billions of like minded humans against the forces of tyranny (ie. Russia and China).
Hopefully India will come on board.
Of course, changes in globalization are possible. It’s happening right now in Syria. TPP only benefits the 1%.
It’s designed to power GMO food and Alphabet, formerly known as Google, who now owns the alphabet letters for copyright purposes. Those leaders are getting back door $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ to sign TPP.
You think the TPP is ‘democratic’???? And that the U.S. is ‘democratic’ for that matter?
You’re just foolin’ with me yes?
the US isnt democratic and after it hijacked TPP, it made it a lot less democratic also.
Gee nick, what a happy little fellow you are !
It’s hard to know where to start…..or whether to be bothered.
Um, have you actually HAD a look at the emperor’s new clothes ?
Incidentally, WHERE do you live ? Cheap fuel, electricity ? Funny, now you mention it, such inputs were much cheaper BEFORE so called corporatisation….sorry, globilisation.
Bravo Paulo well said.
I say we go back to trade barriers and tariffs. Seemed to work fine in the past, and when looking at the 19th century when there were ample natural trade barriers – such as limited supplies in the gold-rush regions – I don’t see why it wouldn’t work again.
I often read books of the pioneers settling North America 100 to 150 years ago, and I am struck by how much everyone bought local and, although lack of modern technology made life more difficult than today, everyone seemed to have a roof over their heads and a belly full of food. Given the hollowing out of the West to these ridiculous global trade deals, we might be well happy again to buy our lumber from the local sawmill and trade a jug of local milk for a carton of local eggs. Screw Walmart and the rest of the big corporations. Let’s bring back Mom and Pop, and forget about competing with China and Indonesia.
‘The Chinese run an enormous trade surplus with the US…
if anything (interrupted) this trade the Chinese economy would collapse…and the US economy would grind to a halt’
Huh?
Since when is a trade deficit a good thing to be pursued at all costs.
Ya- Walmart needs China but do we need Walmart.
‘Low’ Chinese prices have cost consumers billions, as low quality caught up with them.
A trade deficit isn’t a good thing. No one said it was. What the author said was that the US has become DEPENDENT on Chinese products … see Walmart, iPhone, computers, cars (components)… It would take a long time to switch the supply chain away from China. Until then, no iPhone, probably not many cars, if any, or cars without braking systems… the list is endless.
And yet China exports are down (as are imports). The US is doing just fine.
Regarding iPhone….suppliers such as Foxconn have diversified away from China mainland, to places such as Taiwan, India, and Brazil.
Isn’t globalization beautiful?
You’re looking at this with a sense of humor, and that is good.
Reality is, supply chains on items like the iPhone that is produced by the millions, or for cars, microchips, and a million other things, cannot be shifted overnight.
It would be unthinkable industrial and business chaos in the US if Chinese imports were suddenly stopped. Truly unthinkable.
Car production would grind to a halt. Homebuilders, electricians, and plumbers would run out of supplies and materials. Manufacturing plants would run out of critical parts and shut down, production of agricultural implements and construction machinery would stop, forget buying electronics…
When the TPP was first conceived, it was already too late to “encircle” China. Now it will be completely useless, bar perhaps to help goose some (but far from all) corporate profits for a short time.
A glance at the list of signatory countries reveals some of them have possibly even more to lose than the US by going against Beijing: Japan, Malaysia, Australia and Chile to name but four.
Since the TPP text is apparently covered by the deepest secret (but how can I obey a law if I am not allowed to read that law?) we can only speculate about the full contents but somehow I doubt the US will compensate Japanese industrial robot manufacturers, Chilean copper miners, Malaysian oil palm farmers and Australian iron ore producers for the business they stand to lose.
In a way this is a repetition of what we’ve seen with Russia: the US pressures a country to go against its own interests to boost its own sagging international politics. Only the numbers involved here are on the staggering side: you simply cannot take China out of the equation when you talk about trade. China is not Russia.
To make matters worse such an “encirclement” is causing the relatively small but highly vocal nationalist factions in the Communist Party and the People’s Liberation Army (PLA) to gain strength.
When the US resorts to full blown provocations (like the recent fiasco in the Southern China Sea), they have a field day in reminding everybody how right they are and in subtly hinting the dominant faction is not doing enough to protect China’s national interests.
I’ll close with something closely related. We may say what we want about Vladimir Putin, and with good reasons, but on one count he’s absolutely right: in all his speeches to the foreign press he can’t go a few minutes without dropping the same concept. “We are ready to work together but you have to respect our national interest”. People around the world are taking notice.
That’s a lesson the US, still drunk on the Cold War victory of over two decades ago, hasn’t learned: you can bully/cajole/coopt/threaten foreign governments into putting your own interests ahead of theirs but expect a blowback.
It’s interesting in a twisted, Catch-22 kind of way. Lost business is what the ISDS part of the TPP (as far as we can tell) is all about. If a tribunal found that the terms of the TPP caused an investor in Chile, Malaysia, Brunei maybe, to lose profits, the U.S. might be required to make them whole. The history of the Canada/U.S. Softwood Lumber Dispute shows that the U.S. has its own style of handling tribunal decisions, though.
Exactly. I somehow doubt Uncle Sam would just bow meekly and pay over, tribunal decision or not.
That’s part of the reason I feel the TTP won’t last long.
“the recent fiasco in the western phillipine sea.
It seems you are fully committed to supporting chinas nine dash line of theft. Best you go live there as well.
china will step back in the Western Philippine sea, or the diplomatic war WILL turn into a shooting one. As the other nations involved simply can not afford to let the bullying thief china, take what it wants, when it wants.
chinas imperialist actions make Imperial Japan look “Angelic”.
Do they list local sweat-shops on the Indonesian stock exchange?
My knowledge of TPP is limited, and I get the impression that’s intended. Trying to understand it, my gut reaction to this article is that the concept of “encirclement” is not the deal’s proponents’ preferred term to describe its intended effect. Further, it strikes me as undiplomatic to try force the Chinese market to open by any means.
I have to completely disagree with Wolf. In fact, there is no greater strategic error than the Western economies, led by the USA, allowing China into the WTO.
China has taken the wealth created from western investment and profits from cheaply priced and shabbily made goods to expand its power though out the region and the world. Building islands in the South China Sea, revisiting Japanese wrongs of WWII, and hacking into other countries’ computers, is not the sign of a trading partner. It is the sign of foe.
Wolf wants us to believe that the Western world would collapse if Chinese stuff ceased entering our economies. If Wolf is correct, then our politicians have created a mighty powerful Trojan Horse across the Pacific. But I highly suspect our economies would still function without iphones and other cheap crap. If fact, the existing stock of iphones and parts would last for quite some time.
If Western politicians cared for their countries, then they would encourage local manufacturing of quality, long-lasting stuff to replace the short term crap coming out of China. The logical error, screaming silently in the background, is that up-front price is but a tiny consideration against the long-term value of quality made products.
Finally, without good, long-term jobs that generate added-value, Western economies will grind to a halt. Oh yeah, that is exactly what Western economies are doing.
K
What is now known as TPP started as a simple multilateral trade deal among some South Pacific countries which was hijacked to suit USA interests. The original purpose was not to encircle China.
Frankly, I hope TPP, TTIP and all the rest fail to pass. So what if we don’t trade as much with China? I won’t be buying a car for quite a while. I don’t care if Walmart survives or, not. I don’t shop there. I also don’t care if Volkswagen, GM, or Chrysler survive either. Two should have been left to the bankruptcy court to figure out, the third is a cheater on environmental issues of the 1st order.
IF making things means no profit you stop making things. Simple, right?
While we are at it, consider limiting the lobbyist’s power free-speech. Has that served the taxpayer well?
China is already participating in TPP without formally signing it in two major ways. First Vietnam is a backdoor for China to get involved in the agreement. Many of the major manufacturers in Vietnam are owned by Chinese firms. China has been investing there for two decades. Second, 45 percent of the components in products exported from TPP members can originate from China. So those car parts and shoes have almost half their components coming from China, perhaps more as cheating would not be completely unheard of. So China benefits from the reduced tariffs from this trade agreement without agreeing to the IP and foreign investor protections, currency float or improved safety standards. Great negotiators who get to have their cake and eat it too.
You all forget the US hijacked TPP, it was never, and is not, about encircling china.
It is about developing a pacific rim trading block, to aid the pacific rim nations, just as the EU aids European nations.
As the pacific rim outside the US, was, and is, being shut out, everywhere.