Trans-Pacific Partnership Agreement seems doomed

Paul Malone SMH

In just about every country in the world ordinary people feel trade deals rip off their country. 

The belief is so strong in the United States that both presidential nominees, Hillary Clinton and Donald Trump, have expressed opposition to the Trans-Pacific Partnership Agreement signed between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, the United States and Vietnam.

Trump says the TPP is "another disaster done and pushed by special interests who want to rape our country".

Just days after TPP negotiations concluded in October 2015, Clinton said from what she knew as of today "I am not in favour of what I have learnt about it."

She said she was trying to learn about the agreement but was worried about currency manipulation not being part of the deal and pharmaceutical companies getting more benefits than patients and consumers. 

"I don't believe it's going to meet the high bar I have set," she said.

The stance taken by both candidates immediately raises three questions: Will the TPP be ratified by the US Congress? Can the TPP be re-negotiated?  And is there any possibility of going ahead with the agreement without the US?

Australian Trade Minister Steven Ciobo is "cautiously optimistic."

"I'm very hopeful that the lame duck session does afford the opportunity for the US Congress to ratify the TPP," he said earlier this month.

For this to happen President Obama would have to quickly find enough votes in congress to ratify the deal in the period between the November 8 elections and when the term of the newly elected congress and president take effect.

Despite Ciobo's optimism this is most unlikely.

Ciobo and his Canadian counterpart Chrystia Freeland have made it clear that there is no scope for re-negotiation.

It would seem, then, that the TPP is dead.

But there is another possibility – Clinton is elected and changes her mind about ratification.

(Trump is unpredictable but in the unlikely event that he wins there seems little chance that he would proceed with the TPP.)

It is worth observing Clinton has criticised the TPP provisions in relation to pharmaceuticals.  

When the US-Australia Free Trade Agreement was agreed in 2005, Australian critics argued its provisions benefited the big US pharmaceutical companies.

In the TPP negotiations, Australia won concessions, reducing from 12 years to eight years the data exclusivity period the big pharmaceutical companies wanted for patents.

The compromise was seen as a small victory for consumers, unlike the provision on copyright Australia agreed to in the Australia-US FTA.

To benefit among others the Disney film empire, which was due to see its Mickey Mouse rights expire, the Australia-US FTA included a provision to have copyright extended from 50 to 70 years.

Not only did Australia accept this clause in the US agreement, it pushed the US line in its negotiations with other countries in our region, such as Korea.

Since the Australia-US FTA was negotiated, trade between the two countries has grown considerably but the US remains the major beneficiary.

Over the last three years US exports of goods and services to Australia has been 2.3 times the size of ours to them.

In 2015 our exports to the US were worth $22.1 billion but we imported $48.1 billion, leaving a net deficit of $26 billion, up 10 per cent on the previous year.

Around the globe, a major concern with the so-called free-trade agreements is that they are not simply about trade. They also enshrine investment rights, impact on environmental standards, working conditions and even packaging and labelling.

Consumer organisation Choice and others argue that the Australian government should not ratify any international treaty containing an Investor-State Dispute Settlement Mechanism.

The ISDS mechanism gives large corporations a means to challenge and overthrow government regulations requiring ingredient or country of origin labelling, or banning the importation of products that are dangerous.

Much of the criticism of the free-trade treaties is due to the fact not everyone benefits from the deals.

One-time presidential candidate Bernie Sanders put it bluntly when he said, "I do not believe in unfettered free trade. I believe in fair trade which works for the middle class and working families, not just large multinational corporations."

Purist economic theory proclaims the benefits of free flowing capital, labour and goods and services.

But the free flow of capital also enables the rampant tax evasion and avoidance exposed in a number of recent leaks, including the Panama Papers.

The economic theory might show that each and every country in a free-trade agreement benefits from the deal but ordinary people, who lose their jobs as a result, do not cheer when they hear that the rich elite in their country are the winners.

The theory also does not take account of the social impact of mass migration and the backlash that fuels support for Donald Trump and contributed to the Brexit vote.

Even in Australia, conservative economists who said during the mining boom that we should have greater wage flexibility to encourage labour flows have now lost their enthusiasm for migration.

Economist Judith Sloan, for example, who has presented the free trade case for years now, says the number of planned permanent immigrants is too high and should be scaled back immediately to closer to 100,000 a year.

So much for letting the market determine the allocation of resources.

For Clinton or Trump, the economic challenges are not simply how to maintain growth and negotiate new international trade treaties.

The new administration will also have to implement a new deal to better share the proceeds.

A pioneering redistribution involving increased taxation of the rich and a clamp down on tax avoidance and evasion is the win/win the United States and the world needs.