The US-initiated Trans-Pacific Partnership (TPP), envisioned as a free-trade bloc covering 40 percent of the global economy, has been completely stalled for the time being. While the Philippines is not a founding member of the group, the government has expressed an intense desire to join.
We have written several times how this agreement is not in the best interest of our nation. Based on the latest round of negotiations, many other countries feel the same way.
Trade representatives—numbering 650—from the 12 nations negotiating the TPP, stretching from Japan to Chile, have been meeting in the US to finalize the proposal, and so far are not successful. While a Pacific free-trade bloc may have some advantages, this trade union is not good for us.
Multilateral trading agreements covering many unequal economies are difficult to negotiate and are prone to failure, the European Union (EU) being the prime example. Like the classic political wisdom, the negotiating trading blocs are like two wolves and a lamb voting on what to have for dinner.
The TPP is failing because every nation has an obligation to protect its own interests, and that contradicts the US position to forge an agreement for the “greater good.”
New Zealand, the world’s largest exporter of dairy products, will not agree unless the US, Japan, Canada, and Mexico open their markets to New Zealand exports. Japan and the US have reached an agreement on the free trade of automobiles, but Mexico—the fourth-largest car exporter in the world—wants to protect its industry. Canada supports Mexico’s position. Further, Japan imports car parts from Thailand, currently not a TPP member, which is confusing the issue of whether the car was completely “manufactured” in the TPP zone.
The US wants a 12-year protection on the production of generic drugs, but Australia will accept only five years, and Chile, by virtue of its laws, offers no such protection.
In addition, smaller nations want greater access to the larger markets, but are extremely concerned about provisions that allow multinational (read USA) companies to directly sue foreign governments if those governments pass any law that affects the company’s profitability.
The EU trading bloc is failing because of conditions such as the fact that Greece depends on buying German-manufactured goods, while the Greek economy depends on the nonessential spending of German tourists.
The free-trade bloc of Southeast Asia is going to be successful because—with the exception of Myanmar, Cambodia and Laos—the economies are relatively equal and complementary. Wealthy Singapore is geographically small and depends virtually 100 percent on importing all the food that its people need. Vietnam is a large rice exporter. Thailand builds cars. Indonesia provides minerals. Malaysia and the Philippines export electronic goods but to different markets. The Philippine banking sector is the strongest in the region.
Asean integration will not be a competition between David and Goliath economies as in the TPP. And in the free-trade arena, Goliath always wins.