TPP - A Trans-Pacific Ploy?

Posted: 31st July 2016

By: Sharon Ho

The trans-pacific partnership agreement (TPP) endeavours to, through the establishment of a freer and more transparent trading environment, provide new market access opportunities for Australian exporters as well as investors. This is especially useful to Australia because, according to DFAT, 34% of Australian exports in 2014 were to the TPP countries.

Source: http://dfat.gov.au/trade/agreements/tpp/Pages/trans-pacific-partnership-agreement-tpp.aspx

However, it is wrong to assume that the TPP’s effects on the Australian economy are wholly positive, as it is fraught with controversy. Whilst Australia’s trade minister is adamant that the subsequent tariff cuts will deliver material gains for our exporters across the board and place downwards pressure on the cost of imported goods, it has been denigrated by the public for being driven by big businesses, pharmaceuticals and tobacco.

Cure for trade relations, poison for public health interests

The availability of generic medicines in a particular country is largely dependent on an intricate structure of national rules and regulations that govern patents and other intellectual property rights. Trade pacts such as the TPP may affect such regulations, making it difficult for many nations to balance public health interests with intellectual property demands when negotiating trade agreements.

As the TPP represents an attempt to impose IP standards in a trade agreement with developing countries, it will provide large pharmaceuticals with the power to bring about unreasonable rises in medicine prices, which will thus limit consumers’ access to generic drugs. This is particularly problematic for developing countries participating in the TPP, as it may deny many of access to HIV, tuberculosis and cancer drugs.

This raises the question: Is the TPP a cure for the construction of trade barriers, or a spider that sits stealthily on the web of business representatives? Hiding under the guise of “facilitating world economic growth”, it slowly, insidiously approaching ordinary citizens, waiting to ensnare them with an onslaught of high medicine prices.

Environmental Concerns

The words climate change are like Voldemort in Harry Potter, it’s a taboo phrase in the Trans-Pacific Partnership

- Dr Rimmer, Law Professor at QUT

Whilst the TPP has set rules in regards to conservation challenges such as wildfire trade, the profits-first mentality associated with these rules are too vague and weak to be enforced. In fact, the environmental chapter is so vague that it fails to mention the phrase “climate change”.

Thus, it appears that the TPP’s attempt to fuel trade relations between countries will in fact be toxic for the environment, as it expands corporate privilege by offering rights to thousands of corporations, especially large polluters. In particular, companies such as the JX Nippon Oil & Energy Corporation from Japan and BHP Billiton Ltd from Australia, both of which have significant investments in oil and gas, will be empowered to challenge prevailing climate and energy policies as a result of the TPP. Further, the TPP would require the US Department of Energy to approve liquefied natural gas exports to countries in the agreement, which in consequence will lead to more natural gas exports and climate-disrupting emissions.

Whilst this lack of environmental initiative appears to be confined to TPP nations, it appears that the partnership has the potential to infect the world with its toxic, environmental apathy. This is because other nations may perceive their conduct as representative of a modern approach to environmental issues, and may mimic their behaviour.

Source: https://campaigns.350.org/petitions/say-no-to-corporate-power-grabs-reject-the-trans-pacific-partnership

Is the TPP unfair to developed nations?

According to the World Bank, the total effect of the TPP on US GDP (gross domestic product) and Australian GDP after 15 years will be 0.38% and 0.6% respectively. This, when compared to the estimated increase of over 8% in the GDPs of developing countries such as Vietnam and Malaysia suggests that developed countries have little to gain from the TPP. Furthermore, the economic dislocation and movement of manufacturing offshore that will arise because of the TPP may harm the economies of developed nations by aggravating unemployment levels. In light of Australia’s high unemployment rate of 5.8% (June 2016, Australian Bureau of Statistics), it is clear that any further aggravation of its unemployment rate will have extremely negative ramifications on Australia’s low growth rate of 3.1% (May 31, Australian Bureau of Statistics).

For developing nations, the TPP may be perceived as a saviour, a provider of employment as export volumes rise. For developed nations however, the TPP may be regarded as no more than a thief that steals jobs from citizens for another country’s benefit.

Table 1: Effect of the TPP on GDP of different nations

Source: Source: https://economics.rabobank.com/publications/2015/september/mare-liberum-enhancing-trade-across-two-oceans-with-tpp-and-ttip/

It’s not all Doom and Gloom with the TPP

Although it is clear that there are a plethora of issues surrounding the TPP, it is important to remember that policy makers had many benefits in mind when making the decision to create such a policy.

By facilitating the exchange of goods across global boundaries and promoting the sharing of intellectual property and foreign investment, the TPP allows different economies to establish comparative advantages in certain sectors, and use the TPP to complement this.

Furthermore, by excluding China from the TPP, it is likely that the agreement will pressure China to adhere to the raised regulatory rules and standards that have occurred as a result of the agreement of China’s trading partners. Consequently, China may be encouraged to abandon the anti-competitive stance witnessed in its enforcement of anti-trust laws. If pressure is not exerted on China to rectify its anti-competitive behaviour, it is unlikely that exporters can access the Chinese market, which comprises of 1.382 billion people as of 2016 (United Nations). It is evident that, countries may not currently be growing to their full potential due to their inability to capitalise on the Chinese market because of its regulations.

Figure 1: China's population growth

Source: http://www.worldometers.info/world-population/china-population/

The Verdict?

The controversy surrounding the TPP is multifarious and complex, meaning that it is impossible to simply conclude whether it is beneficial or detrimental to world economic growth. With these different debates in mind, what are your thoughts on the TPP? Is it the cure to the construction of trade barriers by participating countries, or a Toxic Political Ploy that will trade profits over people?