TPP: What it's about and what impact it will have
- By Eugene Clark & Sam Blay
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E-mail China.org.cn, July 3, 2016
Having percolated behind the scenes for over a decade, the Trans-Pacific Strategic Economic Partnership Agreement (TPP) has been signed though not yet put into effect. The TPP is one of the largest and most significant trade agreements ever contemplated, encompassing, for now, 12 countries and almost 40 percent of the world's GDP, a quarter of the world's trade and almost a billion people. The 12 initial signatories are: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, U.S. and Vietnam.
Putting the TPP into effect
The 12 initial signatory countries are now going through domestic treaty procedures for ratification/implementation. The agreement has, however, faced strong criticisms. These include: It is undemocratic with negotiations largely occurring behind closed doors and excluding participation by key stakeholders such as health advocacy groups, consumers, libraries, Internet service providers and others.
The treaty seems to cater too much to the interests of large corporations. Many critics do not like the power the TPP gives them in regard to their litigation rights against government actions. There is concern that its intellectual property provisions may impede Internet neutrality. Others argue that the TPP loses much of its impact if China and India are not included.
The TPP goes into force 60 days after all original signatories have notified completion of procedures for domestic approval. If this has not occurred within two years of its original signature, it automatically becomes effective 60 days thereafter if at least six of the original signatories, accounting for 85 percent of the combined GDP of the original group, have ratified it.
Importantly, the TPP is not static. Its provisions must be reviewed within three years to deepen liberalization and expand market access. After that, there will be further ongoing reviews every five years.
Among the aims of the TPP are to:
• liberalize trade and promote investment through a broad range of measures:
• reduce tariffs (eventually to zero);
• reduce very significant non-tariff barriers created by domestic regulatory differences and impediments to the trade in goods and services;
• liberalize domestic regulation and administration including promotion of transparency and efforts to combat corruption;
• address structural barriers including those created by government procurement policies, state-owned enterprises, and, potentially, state industrial policies;
• promote development of global supply chains and e-commerce;
• coordinate competition law programs; and
• enhance protection for investment and intellectual property rights.
Significance
For TPP member countries, it is argued that it will open up new market opportunities; facilitate more trade and investment in the Asia-Pacific region; facilitate growth and diversity in goods and services trading; address contemporary trade challenges; establish a model for future trade agreements; and help promote a workable model of global administrative law.
If all goes to plan, this will result in more trade in goods and increased trade in services (e.g. in the financial and education sectors, telecommunications, etc). It will provide increased access to markets in member countries; lead to greater transparency and lead to a more predictable operating environment. There will be greater mobility for business people and more open competition in relation to government procurement and ensuring state-owned enterprises play by the same rules as private sector entities.
Inviting others to the party: Will China join?
Importantly, the TPP allows for other countries to join in future. I understand from contacts within the Australian government that they strongly favor China joining and that country has itself indicated this as a future possibility. Indeed, economically, it makes sense given China is the number two economy in the world, the largest exporter and second largest importer.
Moreover, the major provisions of the TPP are generally consistent with reform trends in China itself. It wants to move from being a labor-intensive, investment-intensive, capital-intensive economy to one that focuses on advanced manufacturing, innovation and services -- the very issues the TPP is meant to address. It seeks to promote the establishment and effective enforcement of clear, transparent, and predictable rules that are also consistent with Chinese regulatory reforms over the past few years and are still ongoing.
A major factor impacting whether China will join the TPP, and when this will happen, will be whether any concessions will be given on the basis that China is arguably still a developing country. The significant worry is that the focus of the Treaty may be skewed for political ends, especially where this makes no economic sense.
The TPP is a "trade" treaty and as long as the focus remains largely on promoting international trade, transparency, better governance, more open markets, etc., it will be a good thing. To the extent that political rather than economic agendas dominate and it is seen primarily as a way of "containing China," the Treaty may result in increasing tensions and restriction on the growth of trade.
Eugene Clark is a columnist with China.org.cn. For more information please visit:
http://www.china.org.cn/opinion/eugeneclark.htm
Prof Sam Blay is from Top Education Institute's Sydney City School of Law.
Opinion articles reflect the views of their authors only, not necessarily those of China.org.cn.
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