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Home / Opinion / Online-views /  A tale of two trade initiatives

A tale of two conflicting trade initiatives last week offers an insight into the workings of the sputtering hegemon. On 5 October, the US concluded the Trans-Pacific Partnership (TPP) agreement with 11 diverse countries of vastly differing levels of development, in Atlanta. On the same day, the US along with the European Union, Australia and Japan were busy preparing the ground for guillotining the Doha Round of trade negotiations in Istanbul. Uncle Sam faced fierce opposition from India, China and Brazil at the Istanbul meeting for seeking to kill the Doha project without delivering on the commitments it had agreed to during 14 years of negotiations.

In clinching the TPP agreement, the US claimed success for setting a new template in global trade agreements for the 21st century. “Our future depends not on what trade deals did wrong, but on doing new trade deals right… And that’s what the TPP does," US President Barack Obama claimed on Saturday. The details of the pact involving the dozen countries—New Zealand, Singapore, Brunei, Chile, the US, Australia, Vietnam, Malaysia, Peru, Mexico, Canada and Japan—are not public yet.

Statements from some TPP ministers suggest the agreement is anything but equally beneficial. “It’s got the smell of a situation we occasionally see which is that on the hardest core issues, there are some ugly compromises out there," New Zealand’s trade minister Tim Groser told New Zealand’s Weekend Herald a day before he signed the agreement. “And when we say ugly, we mean ugly from each perspective—it doesn’t mean ‘I’ve got to swallow a dead rat and you’re swallowing foie gras’. It means both of us are swallowing dead rats on three or four issues to get this deal (TPP) across the line," Groser said. New Zealand failed to secure substantial market access for its dairy products in the US, Canada, Mexico and Japan.

Australia, Chile and Peru persuaded the US to scale down its demand on patent protection from 12 to five years for certain biologics. In reality, generic producers in Canada, Australia and New Zealand will pay a huge price even for five more years. Australia also managed to remove tobacco firms from the purview of disputes arising through the TPP’s Investor State Dispute Settlement provisions. Nevertheless, the provisions will apply to all other areas to benefit Nike Inc., Coco-Cola Co., Google and International Business Machines Corp. The deal includes disciplines for curbing the role of state-owned enterprises in trade—in Malaysia, Vietnam and Singapore.

In a nutshell, the gains from the TPP agreement are difficult to predict at this juncture because of too many intangible commitments spread across the 30 chapters. While not all tariffs will go to zero, agricultural products such as dairy, sugar, lamb and rice will remain moderately protected. Moreover, some TPP members with deep pockets, particularly the US, Canada and Japan, can continue to provide tens of billions of dollars in subsidies to their fat-cat farmers to offset losses suffered on account of modest market access.

What the US sought to secure in terms of market access for two major items—pork and beef—in the Doha Round, it succeeded in the TPP by squeezing Japan through a bilateral agreement. Japan also secured greater access for its automobiles into the American market. Arguably, the US secured maximum preferential access in Japan, Malaysia and Vietnam.

Of course, the Peterson Institute for International Economics, a thinktank seen as an unofficial voice of the US government, has estimated that the TPP would boost the world economy by $223 billion by 2025. The deal is anything but based on the comparative advantage framework, the scaffolding for past trade agreements.

C. Fred Bergsten, the Institute’s founder and the guru of the bicycle theory of trade liberalization (“you can never stop doing it, because if you do you will fall off, and that will be the end of it") has suggested audaciously that the Indian government will be better off joining the TPP and other plurilateral initiatives of the US such as the trade in services agreement (TISA).

Both TPP and TISA provide close to negligible benefits to India. In areas such as the movement of short-term services providers (Mode 4), the existence of the robust generic pharmaceutical industry that provides affordable medicines for the largest disease-burdened population in the world, and the agriculture sector which provides a major cushion in terms of employment for hundreds of millions of resource-poor farmers and availability of food grains, India will be a significant net loser with devastating consequences.

On a parallel track, Washington is pretty determined to ensure the Doha Round is declared dead at the World Trade Organization (WTO) ministerial conference in Nairobi from 15 December. Incidentally, the US’s actions to torpedo the Doha project began in 2008, the year in which it launched the TPP negotiations.

For the past five years, Washington worked on a war footing for concluding the TPP negotiations while jettisoning the Doha Development Agenda talks by adopting an aggressive form of diversionary tactics in Geneva. It turned the tables by raising the bogey of China, India and Brazil as the culprits to scuttle the Doha talks. At the same time, the US and its allies pocketed the trade facilitation agreement, which was never part of the core Doha agenda. Last year, it adopted a regressive farm bill which, if challenged, could prove to be trade-distorting like the earlier cotton subsidy payments.

Why blame just the US when the WTO leadership is ready to provide a helping hand to Washington for securing its goals? At the WTO’s public forum a fortnight ago, Biraj Patnaik, principal adviser to the Supreme Court Commission on the right to food in India, asked WTO director-general Roberto Azevedo why he always bats for developed countries, particularly the US, in accomplishing their trade agenda while ignoring the permanent solution for public stockholding programmes for food security. Azevedo seemed rattled and replied that he doesn’t work for any one member at the WTO.

Will Patnaik ask his own government whether it stands for Washington or for poor farmers when push comes to shove at the Nairobi meeting?

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