TPP and TTIP: new challenges for China and Europe

Since 2013, when negotiations began, the Transatlantic Trade and Investment Pact, or TTIP, has been hotly debated by the informed European public. Much less known, logically, is the Trans-Pacific Partnership (TPP) which, after more than five years of negotiations, was signed on 5 October in Atlanta, Georgia, by the US itself, Japan and ten other countries bordering the Pacific, with the significant absence of China.

But this Treaty is also in the interests of the Asian giant, very much so, and should be taken into account by the EU. In the case of China, because this agreement tends to distance it from its neighbours and regional partners; and in the case of Europe, the TPP concerns it indirectly, due to its potential impact and its relations with the TTIP.

At the same time, the proposed trade and economic agreement between Europe and the United States is not only an important and very controversial topic for both players, but also, to a lesser extent, for China, which relies upon Europe as its main trading partner. A global trade system dominated by a TPP – if this is effectively ratified by the main players – and a TTIP, if eventually signed (both orchestrated by the United States), could well mean a Europe relegated to playing second fiddle in the great competition of the 21st century: the waning superpower against the rising one, and China would no doubt prefer to have a more independent Europe among its partners. So the TPP and the TTIP can be seen as the two arms of a pincer movement to stem the rise of China and preserve America as the dominant power, through greater subordination of its Asian and European partners.

A global trade system dominated by a TPP – if this is effectively ratified by the main players – and a TTIP, if eventually signed (both orchestrated by the United States), could well mean a Europe relegated to playing second fiddle in the great competition of the 21st century.

In particular, the Trans-Pacific Partnership provides for extensive trade liberalisation between its twelve members: the US, Canada, Mexico, Peru, Chile, Australia, New Zealand, Japan, Malaysia, Singapore, Vietnam and Brunei. These countries represent about 40% of world GDP and are, of course, very different in terms of size, levels of development and standard of living, as well as political and economic regimes.

Logically, wide ranging opposition groups are making their voices heard, not only on the expected impact of busier trade, but also on many other controversial issues such as pharmaceutical patents, working and environmental conditions, and especially the protection of investments. In the United States, right and left alike have been firing some sharp criticism, and economists like Joseph Stiglitz warn, as do unions and environmental groups, that the agreement essentially serves only a few large companies, who will benefit, says these groups, from exorbitant powers thanks to the mechanism for resolving disputes which will put their millionaire lawyers on the spot, while everyone else will suffer. Among the critics are particularly the trade unions, who are announcing possible relocations; the environmentalists, who fear further contamination; and Doctors Without Borders, who envisage more expensive drugs.

Barack Obama, however, who is celebrating the agreement as a new type of arrangement to strengthen ties with Asian countries on a progressive basis, from the social and environmental point of view, hopes to approve the TPP in Congress through a coalition of pro-business Democrats and moderate Republicans. This approval would go fairly far in crowning his presidency, together with the nuclear deal with Iran and the restoration of relations with Cuba, besides bringing off the US’s promised strategic reorientation from Atlantic to Pacific coast.

Paul Krugman, a look-warm opponent of these free trade agreements, as he defines himself, concludes from the negative reactions of the pharmaceutical industry, the tobacco industry, and the Republicans in general, that in the end the TPP cannot be so bad, given the extension of pharmaceutical patent protection, which is shorter than what is required by the industry; and the exclusion of tobacco companies from the dispute settlement system, which would avoid actions like the ones Philip Morris was involved in, against anti-smoking measures in Uruguay and Australia; and the provisions concerning working conditions, which are further-reaching than expected. But it still remains to be seen what the agreement will really mean in practical terms after its implementation, negotiated in a very non-transparent fashion and still unknown in terms of detail.

For China and Europe, the main question is how the agreement could affect their own ties with TPP partner countries like Japan and Mexico, and how the system will actually work in resolving disputes between litigant countries and companies. China has numerous free trade agreements of its own with countries in the TPP and is currently negotiating a trilateral trade pact with Japan and South Korea, but Europe is relatively absent in the region. It remains to be seen whether the general trend continues, as stated by El País on the signing of the TPP: “The Pacific is fast coming the centre of the world economy”.  It is also still unclear whether this really will affect the rise of China, which now has greater weight than the US in terms of trade balances in the region, and which, with its China Development Bank and its Export-Import Bank of China, already provides more loans to the region that the World Bank and the Asian Development Bank put together, according to a recent analysis by the Inter-American Dialogue.

China has numerous free trade agreements of its own with countries in the TPP and is currently negotiating a trilateral trade pact with Japan and South Korea, but Europe is relatively absent in the region.

For Obama this is a question of preventing any further loss of US presence in Asia, as well stopping China from writing the basic rules of the global economy. But China itself is approaching its own social and environmental standards, with regulations on state enterprises and patents etc. Despite their criticism of the TTP, now somewhat watered down, its own membership someday cannot be ruled out, as the Japanese Prime Minister says he would like. In fact, like the WTO, in 2001, approaching the TPP could be a catalyst for Chinese domestic reforms.

In any case, before a new push to move forward with the TTIP, which one would expect from the US after signing the PPT, Europe has an interest in seriously reflecting on the real advantages and disadvantages for the various stakeholders in an agreement of this type, and the consequences which the proposed TTIP could bring. The dominant ideology behind these agreements could also be questioned, especially; an ideology which preaches extreme globalization, ignoring its social and environmental costs. It is precisely in Asia where these costs are often clearly excessive, coupled with the country’s gigantic economic progress, albeit downplayed. This is also true, certainly to a much lesser extent, for Europe. According to its supporters, the TTIP would bring growth and jobs, and would now be even more urgent, due to the very signing of the TPP, however in objective terms, its arguments are unconvincing. The TTIP threatens, rather, to significantly strengthen the already explosive tensions within the EU, by favouring certain countries over others, and weakening many of its social and environmental standards, despite the Volkswagen scandal, which would seem to indicate the contrary. It would also most probably weaken Europe’s position in the world, by putting it directly against China, with which it will certainly be preferable to seek friendly, flexible and balanced agreements.

 

 

Analyst on European and international affairs, author of several books including Europa y la globalización (Buenos Aires, 1998), visiting lecturer at the University of Buenos Aires and former public servant at the European Commission.

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