The Trans Pacific Partnership

Mauritius can increase its bargaining and political power for its economic advancement only when it has concretely joined up, like Singapore, with some of the most meaningful global players in a secure club

Trade Ministers from 12 nations (US, Japan, Canada, New Zealand, Australia, Singapore, Vietnam, Malaysia, Brunei, Mexico, Chile and Peru) signed up on Monday 5th October a free trade pact, the Trans Pacific Partnership (TPP). This was preceded by five days of arduous negotiations among the ministers gathered in Atlanta, USA. Even so, the trade accord came on Monday last after 5 years of intense haggling on certain key concessions the participating countries would make to each other on international trade exchange. The TPP will become effective however only after the lawmakers of each country have ratified it.

The trade pact has a wide geographic coverage involving countries of the Pacific rim sharing 40% of the World’s GDP among them, two-fifths of global trade and an estimated total population of 800 million. Note that the World’s population is today in excess of 7 billion and that the combined population of these countries make up hardly 11% of the total.

According to the TPP, it is sought to intensify trade exchange among the concerned countries by eliminating, amongst other things, trade barriers and up to 18,000 existing trade tariffs as part of the free trade area agreement. It is also expected to tackle the thorny issue of Intellectual Property rights (IP rights). US companies which have backed the negotiations, engage in extensive R&D, such as in the field of biologics (a class of treatment derived from living materials) and pharmaceuticals.

Ideally, these corporations wanted to preserve their IP rights over a period of 12 years, whereafter rival companies from partner countries could copy the chemical and other compositions and reproduce them much more cheaply for the consumption of the general public at lower price. Australia, for example, wanted to reduce the period to 5 years. Finally, a compromise was reached on 5th October for a period of 8 years. This give-and-take approach is the stuff of which most sound negotiations are made.

Other issues that have been thrashed out include industrial and agricultural trade, competition with state enterprises, the digital economy and investment dispute mechanisms. Members have had to cut down their expectations on the degree to which the TPP was expected to open up doors in each other’s countries for their exports. Despite mutual concessions made taking into account negative political fallouts at home of concessions granted, the US itself anticipates that the deal will add $305 billion to its exports to TPP countries each year.

The Americans have been at the forefront of the negotiations. President Obama has already labelled it as “one of the most ambitious free trade agreements to build up closer ties among the negotiating nations, involving substantial reduction of tariffs, if not their complete elimination, open up trade in goods and services, set high standards for workers and preserve the environment”.

Despite opposition already bristling up in US Congress both from Republicans and fellow Democrats, such as from Senator Bernie Sanders, President Obama is hoping to leave behind the TPP as a major legacy of his tenure at the White House which is ending in about 15 months from now. On his part, Japanese Prime Minister Shinzo Abe has qualified the emerging TPP as a new growth centre in the world capable of propelling the Japanese economy into the foreseeable future.

At another level, it will be noted that China, the big economic powerhouse of the region, has been left out. This is seen in some quarters as a deliberate attempt to isolate China. Some American leaders have gone as far as to state that if China ever wanted to join the emerging TPP group, it would have to abide by the rules laid down for the TPP. In other words, they hold the view that China would like to operate in an environment in which it – and nobody else – laid down the rules of trade exchange. Not surprisingly, China has, in the wake of the TPP, proposed the counterweight creation of another free trade bloc called the Free Trade Area of Asia-Pacific (FTAAP). Time will tell what shape this one will take.

It may be recalled that another large trade and investment bloc is also under formation called the Transatlantic Trade and Investment Partnership (TTIP) involving a free trade and investment pact between the US and Europe. If this one were also to materialize, we will see a world carved out among certain large global trading groups to which even a small country like Mauritius would only have access provided it overcame the trade preferences the concerned countries give to each other. It will be very tough for us to do so.

This is the reason why we’ve been advocating since a long time now that Mauritius can increase its bargaining and political power for its economic advancement only when it has concretely joined up, like Singapore, with some of the most meaningful global players in a secure club. We have to devise a plan for working together with others in a world where the richest economies of the world would have carved out a privileged position for themselves in matters of trade and investment to the exclusion of non-members.

  • Published in print edition on 9 October 2015

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