was my Trade Tripper column in the 10-11 July issue of BusinessWorld:
Several developments happened almost simultaneously in the international trade world, and amusingly they all involve just three letters: T, P and A. US President Barack Obama got his Trade Promotion Authority, albeit with much acrimony, and then accordingly set his sights set on the Trans-Pacific Partnership (TPP). Around about that time, the Philippines gave the clearest declaration yet that it wants to join the TPP. Naturally, without a word if the United States wants the Philippines.
On record, what needs to be done is the Philippines being able to comply with certain requirements for member countries: rule of law, opening up to foreign ownership of businesses or property, addressing State ownership of certain industries, intellectual property, and the like. The fact that the Philippines is requesting for “flexibilities” in dealing with TPP obligations isn’t also helpful.
But history is also against the Philippines, what with how we reacted in the immediate aftermath of the Cancun World Trade Organization ministerial debacle of 2003. Jubilant about the negotiation’s collapse rather than commiserating with our trade partners, particularly the US, we immediately followed this by quite unsubtly publicly rebuffing US invitations to enter into a trade partnership with it. Expectedly, the US has a long memory regarding insults.
Incidentally, the TPP currently includes as parties Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the US.
It can’t be denied that the TPP is important, at least as far as Mr. Obama’s foreign policy is concerned. As CNN points out, without the TPP “Obama’s entire Asia pivot strategy is in jeopardy. While Obama has struggled to stamp his authority on the globe, his Asia policy had until now been seen as a bright spot given the fracturing of nations in the Middle East, the rise of extremist groups such as ISIS and the return of Cold War-style hostilities with Russia. His promise to channel power and resources toward Asia was widely welcomed in the region as an antidote to China’s rising might among allies deeply concerned about Beijing’s territorial ambitions on the East and South China seas. Japan, for instance, was deeply appreciative of Obama’s forceful statement in April 2014 that US treaty commitments to its ally were ‘absolute’ amidst rising territorial tensions between Tokyo and Beijing.”
Unfortunately, despite this, the Philippines has absolutely no leverage with the US to gain admission to the TPP. Philippine policy regarding China and the West Philippine Sea, for example, is so obsequiously in line with US interests (some say, more American than the US position) that Mr. Obama would rightly see no point in even considering it. Gratitude has no place in foreign relations and no country in its right mind would pay for something it already has.
The other thing that the Philippines perhaps failed to take into account in its wishing is how dysfunctional ASEAN really is. Milton Friedman’s 1997 remarks was recently quoted in relation to the Greek financial crisis but the words practically apply to our region (just change the word “Europe” for “ASEAN”):
“Europe’s common market exemplifies a situation that is unfavorable to a common currency. It is composed of separate nations, whose residents speak different languages, have different customs, and have far greater loyalty and attachment to their own country than to the common market or to the idea of ‘Europe.’ Despite being a free trade area, goods move less freely than in the United States, and so does capital.”
Hence, why Cambodian Prime Minister Hun Sen’s lament against the TPP seems spot on. Reported by The Diplomat, he blames “the TPP for leaving half (or, more accurately, six out of 10) ASEAN countries outside of it. ‘We should review again... why the Trans-Pacific Partnership did not include 10 ASEAN members,’ Hun Sen said. “What is the purpose, real intention of establishing [the] Trans-Pacific Partnership... that they include half of ASEAN to be partners... and leaving half of ASEAN outside.”
This is despite the praises that economic commentators (and even Singapore Prime Minister Lee Hsien Loong) have heaped on the TPP. But Hun Sen’s criticism may ultimately be correct, if not for what he actually said.
The TPP is divisive not because it intentionally excludes certain countries but because, as I alluded above, it offers a divided ASEAN of differing interests an avenue to expand trade individually rather than as one. And the nature of the TPP further exacerbates these differences.
Gone are the days when trade negotiations meant the lowering of tariffs and the ridding of quotas. Right now, these are shallow considerations, and for a country like Singapore already mean nothing. But for countries like the Philippines, these will mean copyright and pharmaceutical-related measures, investment regimes, property ownership, and -- most significantly -- investment disputes. The latter effectively transfers to a foreign body the power to hold back health, sanitary, or environmental measures that the Philippines may deem necessary.
Not to be flippant, but the TPP clearly is not as easy as ABC.