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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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THE TPP NEGOTIATION AND ITS FIRST IMPACT ON LATIN AMERICA.
It is a credible possibility, a confusing reality and a mirage at the same time?

by Félix Peña
October 2015

English translation: Isabel Romero Carranza


 

As a credible possibility, the TPP has entered fully into the reality of the contemporary debate on international trade. It has done so through the strategic, offensive or defensive, agendas of multiple stakeholders, be they government, business, political or social sectors. This has obviously been the case of the countries that are part of the TPP. But it is has also happened in other Latin American countries. The Brazilian press has reflected the intensity of the impact that the announcement of October 5 produced in the country. It is an impact that leads to the perception that Brazil, and its companies, might be isolated if they fail to adapt to the new reality of international trade. This reality would be reflected, precisely, by the TPP and the criteria that it would be setting in terms of the scope and the quality of the rules governing international trade.

Being perceived as a credible possibility and as a new -although unclear- reality, the "TPP event" can lead to illusions in international trade relations. These illusions can have both positive and negative effects. They would be positive if they translate into a willingness to reach constructive goals. They would be negative if, on the contrary, they end up arousing passions reflected by contradicting perceptions of an ideological nature.

The TPP and its possible derivations to other mega-preferential agreements, such as the Trans-Atlantic Trade and Investment Partnership (TTIP) between the US and the EU, can lead to a fragmentation of the international trading system, with its ensuing adverse impact on global governance and the national interests of developing countries.

The main concern stems from a situation that is possible to see today. It would result from the cumulative effects of two trends: on the one hand, the proliferation of mega preferential agreements, which in fact work as private clubs and therefore discriminate against non-members; on the other hand, the weakening and irrelevance of the multilateral WTO system. In this regard, the Nairobi Ministerial Conference, to be held in December, takes on greater significance in the light of the eventual enactment of the TPP.

These are two trends that, in their eventual contradiction, need to be regarded in a perspective that transcends the economic and international trade level. They require to be viewed, both by analysts and by protagonists, in terms of their effects on the exhaustion of the world order that emerged at the end of the Second World War, and the attempts to replace it with a new global governance.


The Trans-Pacific Partnership (TTP) was always a possibility, but it has now become a credible one. And as such it is now perceived as part of a reality, albeit an unclear one, at least in the member countries. But it is also so in those countries who are discussing its effects and whether they should follow the same path. The risk is to be deceived by a mirage produced as a result of the need to "sell" the product, i.e.: to convince public opinion -in the member countries and internationally- that the agreement that has been reached, but whose specific contents are still unknown, is opening up a new era for world trade and, therefore, for the development of every countries. Or it can be viewed as the equivalent of evil, highlighting its potential negative effects.

The fact is that the process leading to the TPP has entered a new phase which aims to be definitive, at least in the perspective of those who promote it. On October 5, in Atlanta, the twelve countries participating in the negotiations took a significant step towards the conclusion of the Agreement. These countries are: Australia, Brunei, Canada, Chile, United States, Malaysia, Mexico, Japan, New Zealand, Peru, Singapore and Vietnam. It is estimated that South Korea and Taiwan could be the next to follow suit.

The negotiations which led to the TPP started in 2010, based on the clause of accession of the Trans-Pacific Economic Partnership Agreement-the Pacific 4 or P4-, that had been signed in 2006 by Chile, Brunei Darussalam, New Zealand and Singapore (for the Pacific 4 full text go to https://www.aduana.cl/. View the information from the Government of Chile on the background, contents and scope of the P4, on http://www.sice.oas.org/ and on http://www.direcon.gob.cl/).

But there is still a long way to go in order to reach the ultimate goal, which is the entry into force of the agreement, and the factors that have fueled uncertainty about the final outcome are still present.

First, the phase of finalization of the text agreed in Atlanta must be completed. This is a highly technical and legal step but easy to take, at least from a political point of view. It is estimated that it will be completed in a few weeks. When announcing the conclusion of the negotiation stag, the Ministers of the twelve countries pointed out that "to formalize the outcomes of the agreement, negotiators will continue technical work to prepare a complete text for public release, including the legal review, translation, and drafting and verification of the text". Later on, they added: "we look forward to engaging with stakeholders on the specific features of this agreement and undergoing the domestic processes to put the agreement in place" (see https://ustr.gov/).

Only after having concluded this technical and legal phase each country may begin in-depth discussion on the contents of the agreement, which will then be subject to final approval as per their corresponding constitutional processes. Access to the text is important because we know that, as in any international trade agreement, it will be in the fine print and in the details where the real scope of what is agreed will be fully appreciated. Giving an opinion on a trade agreement without having seen its full text does not seem advisable.

So far, there has not been much transparency regarding what has been negotiated. This is the opinion of some representative institutions of the civil society of the countries participating in the negotiations. The only way through which those who are not part of the negotiations could access information about the agreement, even in the case of some of the most sensitive chapters, such as intellectual property and investment, was WikiLeaks (see https://wikileaks.org/ and https://wikileaks.org/).

The issue of transparency carries more political weight in this final stage of the process of approval of the agreement. This is so precisely because there is a widespread notion that it is not a coincidence that the most relevant texts are still unknown. On the contrary, it is believed that this is due to business interests that want to avoid an open debate on what should be agreed regarding several sensitive issues. Some sectors in the larger countries and especially in the US are often held accountable for the lack of transparency. It should be noted that the countries with the most economic weight, the US and Japan, along with Australia and Canada, account for a high percentage of the 40% of world output that is attributed to all twelve countries together. This fact is relevant when trying to convey through the media the global impact that the agreement would have. Moreover, these are the countries with the greatest weight in each of the main economic indicators of the area covered by the agreement, particularly of those indicators used to highlight its importance and its impact on world trade and the global economy.

Being familiar with the contents of the TPP also becomes important due to the fact that it seeks to go beyond what has been agreed in other multilateral or regional free trade agreements, and especially of what has been agreed within the framework of the WTO. Its WTO plus condition, along with the fact that it aims to be functional to the development of value chains of global scope, is precisely one of the main arguments being used to explain and justify its existence.

Moreover, the dominant story among the most enthusiastic promoters of the TPP indicates that it is only a first step towards a new generation of agreements, among which the following most important would be that being negotiated between the US and the EU. And that this first step is setting the standards for new-generation international commitments on issues such as, among others, intellectual property, investment, regulatory frameworks, government procurement, new technologies, environment and working conditions, which would then be very difficult, if not impossible, to avoid in future agreements (for a summary of the contents of the agreement, see https://ustr.gov/).

What would be at stake, then, is something that transcends the scope of the international trading system per se. It would delve deep into the geopolitical dimension of international trade relations. It would allow us to see clearly who the rule-makers are in the international system. But the redistribution of world power, which was made evident in recent years, does not lead to imagine that those countries endowed with powerful resources would passively accept being left out from the process of creating rules that might affect them. The cases of China and India are just a few examples to consider in this regard. And so far, both countries have been marginalized from the TPP.

In any case, the conclusion of the negotiations of the TPP already has an importance which transcends its member countries. Hence, the relevance of noting that, following the announcement of October 5, the TPP is seen as a credible possibility. As such, it cannot be ignored in the negotiations and the strategy for international trade integration of any country that aspires to compete with its goods, services and investments in global markets (See the article by Simon Evenett listed as Recommended Reading). This also applies in the case of Latin American countries. Three countries of the region are full members of the TPP: Chile, Peru and Mexico. Others countries aspire to be members in the future. In fact, the possibility of joining the TPP has been mentioned in Brazil, in particular among business sectors. Another issue is whether this would be a possibility in the perspective of the TPP member countries.

Also, being perceived as a real possibility and not just a remote one, the issue of the TPP has entered fully into the reality of the contemporary debate on the future of the international trading system. It has done so through the strategic, offensive or defensive, agendas of multiple stakeholders, be they governments, businesses, political or social sectors. This is clear in countries that are part of the TPP. But, it can also be increasingly observed in other Latin American countries. The Brazilian press has reflected the intensity of the impact that the announcement of October 5 produced in the country. It is an impact that leads to the perception that Brazil and its companies might be isolated if they fail to adapt to the new reality of international trade. This reality is reflected precisely by the TPP and the criteria that it would be setting regarding the scope and quality of the rules associated with relevant aspects of international trade.

Being a credible possibility and being perceived as a new -although still unclear- reality, the "TPP event" could lead to illusions in international trade relations. These illusions could have positive and negative effects. They would be positive if they eventually translate into a willingness to reach constructive goals. They would be negative if, on the contrary, they end up arousing passions that translate into perceptions and discussions of an ideological nature. Perhaps the experience gained in recent years with the FTAA negotiations can be useful in this regard. The most emotional and ideological connotations of this experience could even make a reappearance in relation to the TPP.

Going forward, the main concern arises from a situation that is possible to see today and that would result from the cumulative effects of two opposing trends: on the one hand, the proliferation of mega-preferential agreements, which in fact turn into a sort of network of private clubs and, therefore, discriminatory against non-members; on the other hand, the weakening and irrelevance of the multilateral WTO system. In this sense, the results of the December Ministerial Conference of Nairobi take on greater significance, in the light of the eventual enactment of the TPP. These are two trends that, in their eventual contradiction, need to be regarded in a perspective which goes beyond the limited economic and international trade level. On the contrary, they require to be viewed, both by analysts and by protagonists, in terms of their effects on the exhaustion of the world order that emerged at the end of the Second World War, and the attempts to replace it with a new global governance.

In any case, it would seem advisable that the trend towards the proliferation of mega preferential trade agreements, be they regional or interregional, is inserted into the overall framework of a strengthened multilateral trading system. This would involve a lot of political, business and intellectual leadership in order to favor in the multiple fronts the idea of convergence in diversity. It would involve reviewing the ground rules of the multilateral system so as to specifically provide mechanisms that lead to convergence in a context of pluralism.

To this end, two key elements appear to be necessary. One is transparency in the agreements to be negotiated, not only once they have been completed. The other is that of an independent technical arbitration mechanism -a kind of ombudsperson of the WTO- that helps assess the effects of possible deviations and signal roadmaps leading to convergence.


Recommended Reading:


  • Abusada, Roberto; Acevedo, Christóbal; Alchele, Rahel; Felbermayr, Gabriel; Roldán-Pérez, Adriana, "Dimensiones y Efectos Económicos de la Alianza del Pacífico", Ifo - Konrad Adenauer Siftung, Santiago de Chile 2015, en http://www.kas.de/.
  • Banik, Nilanjan, "Development through Connectivity. How to Strengthen India-ASEAN Trade and Commerce", CUTS International, Jaipur, August 2015, en http://www.cuts-citee.org/.
  • Bartesaghi, Ignacio, "Efectos del TPP en Asia-Pacífico y Latinoamérica", en Foreign Affairs Latinoamérica, Vol. 15, Nro.3, Julio-Septiembre 2015, en http://www.fal.itam.mx.
  • Boschi, Renato; Bustelo, Santiago (organizadores), "Brasil e Argentina. Políticas e Trajetórias de Desenvolvimento", E-Papers - CNPq - FAPERJ - INCT/PPED, Rio de Janeiro 2015.
  • Busanello, Horacio, "China El Gran Desafío ¿Conquistador o Socio Estratégico?", Prólogo de Bernardo Kosacoff. Planeta, Buenos Aires 2015.
  • Cardoso, Fernando Henrique, "A Miséria da Política. Crônicas do Lulopetismo e outros Escritos", Civilizaçâo Brasileira, Rio de Janeiro 2015.
  • DaMatta, Roberto, com Vasconcellos, Joâo Gualberto M.; Pandolfi, Ricardo, "Fé em Deus e pé na tábua. Ou como e porque o transito enloquece no Brasil", Editora Rocco, Rio de Janeiro 2010.
  • Eltis, David; Richardson, David, "Atlas of the Transatlantic Slave Trade", Yale University Press, New Haven & London 2010.
  • Evenett, Simon, "What does the TPP deal mean for outsiders", ICTSD-WEF E15, October 2015, en http://e15initiative.org/.
  • Krist, William, "Negotiations for a Trans-Pacific Partnership Agreement", Wilson Center, Program on America and the Global Economy, Washington DC., December 2012, en https://www.wilsoncenter.org/.
  • Laprévote, Francois Charles; Frisch, Sven; Can, Burcu, "Competition Policy Within the Context of Free Trade Agreements", ICTSD-WEF E15 Expert Group on Competition Policy and the Trade System, Think Piece, Geneva, September 2015, en http://el5initiative.org.
  • Milani, Carlos R.S.; Echart Muñoz, Enara; Duarte, Rubens de S; Klein, Magno, "Atlas da Política Externa Brasileira", Eduerj - CLACSO, Rio de Janeiro 2015.
  • Operti Badán, Didier, "Ideas para reformar al Mercosur en lo Institucional", Consejo Uruguayo para las Relaciones Institucionales (CURI), Estudios del CURI, N° 09/15, Montevideo, 22 de septiembre 2015, en: http://curi.org.uy/.
  • Soares Alsina Júnior, Joao Paulo, "Rio-Branco. Grande Estratégia e o Poder Naval", FGV Editora, Rio de Janeiro 2015.
  • Souza Teixeira, Eduardo Ariel; Borges Correa, Silvia (organizadores), "Economia Criativa", Coleçâo Contextos e Pesquisas, ESPM - e-papers, Rio de Janeiro 2015.
  • UNCTAD, "Non-Tariff Measures and Sustainable Development Goals: Direct and Indirect Linkages", UNCTAD, Policy Brief N° 37, Geneva, September 2015, en http://unctad.org/.

Félix Peña Director of the Institute of International Trade at the ICBC Foundation. Director of the Masters Degree in International Trade Relations at Tres de Febrero National University (UNTREF). Member of the Executive Committee of the Argentine Council for International Relations (CARI). Member of the Evian Group Brains Trust. More information.

http://www.felixpena.com.ar | info@felixpena.com.ar


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