Reject CPTPP, Stay Out of New Cold War

Yves here. Here you thought the TPP was dead. Silly you! The TPP was such a great way to further enrich corporations by weakening environmental protections, labor rights, and other national laws that it was sure to be revived. And to add insult to injury, the CPTPP is the same bad wine not even in a new bottle, just with a new label and no US market access.

By Anis Chowdhury, Adjunct Professor at Western Sydney University and University of New South Wales (Australia), who held senior United Nations positions in New York and Bangkok and Jomo Kwame Sundaram, a former economics professor, who was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought. Originally published at Jomo Kwame Sundaram’s website

Joining or ratifying dubious trade deals is supposed to offer miraculous solutions to recent lacklustre economic progress. Such naïve advocacy is misleading at best, and downright irresponsible, even reckless, at worst.

TPP ‘Pivot to Asia’

US President Barack Obama’s ‘pivot to Asia’ after his 2012 re-election sought to check China’s sustained economic growth and technological progress. Its economic centrepiece was the Trans-Pacific Partnership (TPP).

But the US International Trade Commission (ITC) doubted the Washington-based Peterson Institute for International Economics (PIIE) and other exaggerated claims of significant TPP economic benefits in mid-2016, well before US President Donald Trump’s election.

The ITC report found projected TPP growth gains to be paltry over the long-term. Its finding was in line with the earlier 2014 findings of the Economic Research Service of the US Department of Agriculture.

Meanwhile, many US manufacturing jobs have been lost to corporations automating and relocating abroad. Worse, Trump’s rhetoric has greatly transformed US public discourse. Many Americans now blame globalization, immigration, foreigners and, increasingly, China for the problems they face.

Trump U-Turn

The TPP was believed to be dead and buried after Trump withdrew the US from it immediately after his inauguration in January 2017. After all, most aspirants in the November 2016 election – including Hillary Clinton, once a TPP cheerleader – had opposed it in the presidential campaign.

Trump National Economic Council director Gary Cohn has accused presidential confidantes of ‘dirty tactics’ to escalate the trade war with China.

Cohn acknowledged “he didn’t quit over the tariffs, per se, but rather because of the totally shady, ratfucking way Commerce Secretary Wilbur Ross and economic adviser Peter Navarro went about convincing the president to implement them.”

Cohn, previously Goldman Sachs president, insisted it “was a terrible idea that would only hurt the US, and not extract the concessions from Beijing Trump wanted, or do anything to shrink the trade deficit.”

But US allies against China, the Japanese, Australian and Singapore governments have tried to keep the TPP alive. First, they mooted ‘TPP11’ – without the USA.

This was later rebranded the Comprehensive and Progressive TPP (CPTPP), with no new features to justify its ‘progressive’ pretensions. Following its earlier support for the TPP, the PIIE has been the principal cheerleader for the CPTPP in the West.

Although US President Joe Biden was loyal as Vice-President, he did not make any effort to revive Obama’s TPP initiative during his campaign, or since entering the White House. Apparently, re-joining the TPP is politically impossible in the US today.

Panning the Trump approach, Biden’s US Trade Representative has stressed, “Addressing the China challenge will require a comprehensive strategy and more systematic approach than the piecemeal approach of the recent past.” Now, instead of backing off from Trump’s belligerent approach, the US will go all out.

Favouring Foreign Investors

Rather than promote trade, the TPP prioritized transnational corporation (TNC)-friendly rules. The CPTPP did not even eliminate the most onerous TPP provisions demanded by US TNCs, but only suspended some, e.g., on intellectual property (IP). Suspension was favoured to induce a future US regime to re-join.

Onerous TPP provisions – e.g., for investor-state dispute settlement (ISDS) – remain. This extrajudicial system supersedes national laws and judiciaries, with secret rulings by private tribunals not bound by precedent or subject to appeal.

Lawyers have been advising TNCs on how to sue host governments for resorting to extraordinary COVID-19 measures since 2020. Most countries can rarely afford to incur huge legal costs fighting powerful TNCs, even if they win.

The Trump administration cited vulnerability to onerous ISDS provisions to justify US withdrawal from the TPP. Now, citizens of smaller, weaker and poorer nations are being told to believe ISDS does not pose any real threat to them!

After ratifying the CPTPP, TNCs can sue governments for supposed loss of profits due to policy changes – even if in the national or public interest, e.g., to contain COVID-19 contagion, or ensure food security.

Thus, supposed CPTPP gains mainly come from expected additional foreign direct investment (FDI) due to enhanced investor benefits – not more trade. This implies more host economy concessions, and hence, less net benefits for them.

Who Benefits?

Those who have seriously studied the CPTPP agree it offers even fewer benefits than the TPP. After all, the main TPP attraction was access to the US market, now no longer a CPTPP member. Thus, the CPTPP will mainly benefit Japanese TNC exports subject to lower tariffs.

Unsurprisingly, South Korea and Taiwan want to join so that their TNCs do not lose out. China too wants to join, but presumably also to ensure the CPTPP is not used against it. However, the closest US allies are expected to block China.

The Soviet Union sought to join NATO in the 1950s before convening the Warsaw Pact to counter it. Russian President Vladimir Putin also tried to join NATO years after Vaclav Havel ended the Warsaw Pact and Boris Yeltsin dissolved the Soviet Union in 1991.

Unlike Northeast Asian countries, Southeast Asian economies seek FDI. But when foreign investors are favoured, domestic investors may relocate abroad, e.g., to ‘tax havens’ within the CPTPP, often benefiting from special incentives for foreign investment, even if ‘roundtrip’.

Stay Non-Aligned

The ‘pivot to Asia’ has become more explicitly military. As the new Cold War unfolds, foreign policy considerations – rather than serious expectations of significant economic benefits from the CPTPP – have become more important.

Trade protectionism in the North has grown since the 2008 global financial crisis. More recently, the pandemic has disrupted supply chains. With the new Cold War, the US, Japan and others are demanding their TNCs ‘onshore’, i.e., stop investing in and outsourcing to China, also hurting transborder suppliers.

Hence, net gains from joining the CPTPP – or from ratifying it for those who signed up in 2018 – are dubious for most, especially with its paltry benefits. After all, trade liberalization only benefits everyone when ‘winners’ compensate ‘losers’ – which neither the CPTPP nor its requirements do.

With big powers clashing in the new Cold War, developing countries should remain ‘non-aligned’ – albeit as appropriate for these new times. They should not take sides between the dominant West and its adversaries – led by China, the major trading partner, by far, for more and more countries.

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  1. Acacia

    In Japan, the LDPs proposed revisions to the Constitution include changes to foam the runway for this.

    Kill it with fire.

    1. Kfish

      At least Japan has Constitutional protections. Australia’s screwed, and we just cannot seem to stay away from this idea.

  2. flora

    One of the worst TPP features, imo, was its primacy over national and state laws for things like environmental protection, taxes, and recoverable damages by any “harms” to corporate profits caused by existing state or national laws. Think of the Investor State Resolution Settlement (ISDS) courts.* The nation and states become secondary to corporate profits, no matter what. Very democratic – not.

    Now it’s back? Sounds like a horror movie: The Thing that Wouldn’t Die.


    1. ChrisRUEcon

      > So I guess our only hope is to re-elect Donald Trump?

      … and you can be sure he’s going to let everyone know on the ’24 campaign trail.

  3. Susan the other

    Consumerism ponzi. Kinda like a Minsky Moment for Trade. In this way: production, the engine of capitalism, has reached its limits. Not even planned obsolescence can keep it on life support. It feels like all this non-productive talk (about how to organize a CPTPP) reflects the reality. Trying to stimulate international trade is like pushing on a string. Big TNCs think they can make the world actually buy all their crap? Even as costs skyrocket. And this delusion lingers on in spite of the clear and present fact that the planet cannot support any more garbage production and “trade” which only manages to be profitable by exploiting unprotected resources and externalizing costs to society. It’s not “trade negotiations” at all. It’s a dumping ground.

    1. podcastkid

      It was a heady brew of mythology filled mostly with horse feathers. Oh, if such were but the worst of its contents! (simple organic variety)

      A Mennonite was once telling us how grain farmers in North Dakota don’t go by acres, but by something bigger. Wish I could remember that word. Trains I guess are ok, but from there distribute the flour (and hay) by mule wagon?

  4. chris

    Is it too much to ask that our government at least try to do something good for the citizens of the country they allegedly represent? Must we find more new ways to ruin our domestic life? Why can’t the lesson from bringing China into the WTO and outsourcing our entire manufacturing base be that we shouldn’t do anything like it ever again?

    1. anon y'mouse

      c’mon now! that kinda talk never gooses profits nor blows up the stonk market!

    2. ChrisRUEcon

      > Is it too much to ask that our government at least try to do something good for the citizens of the country they allegedly represent?

      In today’s neoliberal western world order, the answer is a loud and clear “YES”.

      1. John

        You want one answer; those who would benefit from new-TPP want another. The term “our government” implies that it might have the national interest or the general welfare as a goal. You would be wrong to think so. “Our government” is in fact not ours. It is owned by the oligarchs and their vehicles, the mega-corporations. It functions in what they see as their interest. That neo-liberalism or economic cannibalism is a false and destructive premise, that they are, in effect “eating their seed corn” does not trouble them as they see themselves as exempt from the consequences of their greed. The irony is that we shall suffer first from their headlong pursuit of money or power or status, whatever it is that drives them. Eventually even the one with all the toys will perish.

      2. darren price

        The most governments in the neoliberal era do for people is provide “information” and “nudge” them to help themselves. The only thing the western leadership class gets seriously excited about is stoking tension with “autocratic” nations and warmongering against them. Economic issues like inflation, when they are not treated like natural phenomena or acts of God that nobody can do anything about, are blamed on “Putin” or “China”.

        The concept of democracy is all but dead as a meaningful explanatory term. It basically means subservience to and promotion of “western liberal values” and the “rules based international order” and regular elections that are deemed “fair” by western leaders.

  5. Anthony Stegman

    These trade deals are thinly disguised forms of global governance. I mean global corporate governance. Davos Man would be proud.

  6. Brian Beijer

    I’m so confused about Taiwan. How can Taiwan “join” the CPTPP as a country when none of the other countries involved officially recognize Taiwan as an independent country? Japan doesn’t, South Korea doesn’t, Australia doesn’t. How then can Taiwan join without China implicitly being also a member? It would be like Texas joining the CPTPP and the other members saying that the US can’t be a member. It makes no sense. If find though that almost everyone nowadays seems to view reality as just another a “choice” one can make.

    1. Daniil Adamov

      Official recognition is hardly the same thing as reality. Taiwan has been de facto independent for decades, which is not the case with Texas. This is an awkward diplomatic fiction, but I don’t think it poses any real difficulty.

  7. Jason

    The irony is that the ISDS provisions were inserted by the American negotiators.

    But Anthony Stegman is right. These provisions serve the interests of transnational corporations, not the interests of any individual country. It sure doesn’t seem that there will be a surge in investment coming from this, which means the corporations that are already invested will reap the gains.

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