Once finalised, it will be the largest trade bloc in the Asia Pacific region and could become even larger once Canada and Mexico join the discussions. Japan and the Republic of Korea could also follow suit.
The TPP is an ambitious trade agreement covering several issues, including trade in goods, tariffs and services, cross-border investment, rules on intellectual property rights (IPR), environmental and labour standards, and technical barriers to trade. The agreement is also trying to make regulatory systems in member countries as compatible with each other as possible. The 14th round of negotiations included government procurement, trade and investment in innovative products and services, particularly digital technologies.
The US is pushing the agreement because it considers the Asia Pacific to be the biggest source of economic gains for its industries. Greater trade integration of American companies with Asia Pacific economies will create new jobs in the US and increase export earnings. The TPP, prepared and implemented in line with US industry business interests, will create a favourable atmosphere for the American economy’s long-term recovery.
But the TPP has given rise to several concerns. First, the agreement maximises US business interests and minimises those of others. The agreement proposes strong and rigid IPR rules, using the US–ROK bilateral free trade agreement as a benchmark.
The US–ROK free trade agreement provides strong protection to patents, trademarks, geographical indications and copyrights for digital products, as well as strong penalties for IPR infringements. It criminalises end-user piracy and empowers customs officials to act against products suspected to be counterfeits without waiting for formal complaints.
There will be serious implications if similar or even stronger rules are reproduced in the TPP. Patent holders would be allowed to issue criminal proceedings on the slightest suspicion of piracy and customs authorities would be given sweeping powers to stop the entry of pirated products. Both these powers have high potential to be misused, and emerging-market products using small variations on patented products will suffer the most.
The US is keen on including strong IPR rules in the TPP because it issues the most patents and copyrights, and wants the highest protection for its patent holders. While these rules will allow US products easy entry into other countries, similar products from other countries may be denied access to the US market on grounds of piracy. Rigid IPR rules are likely to discourage innovation and increase global disputes over violation of patents, as is evident from the patent war between Apple and Samsung.
Second, the TPP is attempting to create a major trade bloc without some of the biggest emerging economies. None from the BRICS group — Brazil, Russia, India, China and South Africa — are part of the TPP. And while the countries negotiating the TPP are all members of APEC, some major APEC economies — in particular the Chinese mainland, Hong Kong, Taiwan, Indonesia, Russia and Thailand — are not included in the negotiations.
China’s exclusion is strange given its huge economic presence in the Asia Pacific. This has given rise to views that the US is driving the TPP with the strategic objective of marginalising China.
Another concern with the TPP is its impact on Asian integration. Various models of economic integration are being pursued in Asia. For example, APEC is pursuing a Free Trade Area for the Asia Pacific, the East Asia Summit is developing a Comprehensive Economic Partnership for East Asia, and ASEAN, China, Japan and the ROK are pursuing the East Asia Free Trade Area (EAFTA). All these efforts will be hampered by the advent of the TPP, which will add a strong ‘non-Asian’ flavour to economic integration efforts in Asia and force Asian economies to develop different strategies for regional integration.
The complications created by the TPP are becoming visible in Asia. Japan and the ROK, while expressing interest in the TPP, are also negotiating the EAFTA. The dilemma of choosing between the TPP and other Asian trade frameworks will affect more Asian economies.
Emerging markets like China, Brazil and India will find it difficult to join the TPP, given its rigid rules and the US dominance. But to ensure that the TPP does not divert global trade from them, they will need to act together. The best thing for them to do would be to expedite BRICS’ development so that it can provide an alternative trade framework to the TPP by creating rules that emerging market industries find easier to implement and follow. A strong BRICS structure will also strategically balance global trade, which could otherwise be dominated by the TPP.
Amitendu Palit is Head (Partnership & Programme) and Visiting Senior Research Fellow at the Institute of South Asian Studies, National University of Singapore.
This article was first published here by China Daily.