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Message: <blockquote data-quote="ibnanv" data-source="post: 19938566" data-attributes="member: 218596">The TPP is supposed to create a level playing field for trade. Instead, it unfairly shackles developing economies.he Trans-Pacific Partnership (TPP) — a major new trade agreement  under negotiation among 12 countries in the Asia-Pacific region —  received a shot in the arm in the United States at the end of June when  Congress voted to grant President Barack Obama “fast-track” authority to  negotiate it. The TPP has fueled considerable dispute. Reasons for this include the secrecy with which talks have been conducted, the agreement’s potential effects  on U.S. jobs and growth, and its geopolitical implications. But one  issue that has received comparatively little attention is how the TPP is  likely to impact the developing countries slated to join.The United Nations  designates six of the 12 TPP members — Brunei, Chile, Malaysia, Mexico,  Peru, and Vietnam — as “developing countries.” If enacted, the TPP  could block these countries from successfully industrializing and  joining the developed world. What would this mean in practice? Blocking  industrialization would mean locking these countries into low-end  agricultural and extractive industries, preventing tens of millions from  accessing higher-paying jobs in the manufacturing and service sectors.  Domestic tax bases would stay too low to adequately finance social  protection, investment in health, and education. High levels of poverty  would remain. And the cost in human potential would be all but  incalculable. All of this because of a trade deal? Yes, the TPP really is that bad. Here are nine major ways the agreement would stunt the national economic development of its developing-country members:<ol> <li data-xf-list-type="ol">The TPP forces equal rules on unequal partners.</li> </ol> We don’t let professional NFL teams play football against toddlers,  but this basic truism is tossed out when it comes to economies in the  TPP. The TPP members that are already rich and industrialized (Canada,  the United States, Japan, Australia, and New Zealand) are aggressively  seeking uniform tax and financial policies and low levels of regulation  around the world in order to reduce operating costs for their  multinational corporations — which had a hand in drafting the text of  the agreement. They claim that in today’s globalizing economy, trade  agreements must be based on “fairness” and “a level playing field” —  premised on the idea that a government’s tax, financial, or trade  policies should not provide preferential support for domestic companies. But though the TPP’s six developing-country members are each at very  different stages of economic development, what they all have in common  is that their domestic firms are far less advanced and competitive than  those from the more advanced economies. Correspondingly, each of these  countries needs to support its domestic industries with its own unique  mix of subsidies; long-term, low-interest subsidized credit; supportive  technology policy; and research and development. The TPP would forbid  many of these policies in the name of “fairness,” ignoring the fact that  its developing and developed members are at different stages of  economic development and, therefore, have diverging needs. <ol> <li data-xf-list-type="ol">The TPP forbids using trade policy to protect domestic industries.</li> </ol> Going further than current World Trade Organization rules, the TPP  seeks deep cuts in quotas, tariffs, and other protective trade policies,  ensuring that nascent manufacturing industries in its developing  members will face massive competition from far more competitive foreign  firms. The TPP would also prohibit levying taxes on the export of raw  materials — a policy that encourages such resources to stay at home and  be available for use by domestic manufacturers. But this demand that all  should play by the same rules and lower their levels of trade  protection in equal measure is especially egregious because it defies  the historical record and its key lessons about what developing  countries must do to industrialize successfully. In fact, today’s rich  countries developed their manufacturing sectors with high levels of trade protection and other state support, often for decades at a time, until they were finally able to compete in world markets. They realized,  through trial and error, that trade should be liberalized only after  domestic firms become competitive internationally — not before. <ol> <li data-xf-list-type="ol">The TPP bans using government procurement to assist domestic firms.</li> </ol> The rich countries in the TPP negotiations are demanding that foreign  corporations be allowed to compete with domestic companies for  government procurement contracts. But historically, countries have used  procurement as an explicit form of assistance for their domestic firms.  This has led the Malay Economic Action Council to warn that “if  Malaysian Government procurement was conducted on a level playing field,  many Malaysian companies would go under.” <ol> <li data-xf-list-type="ol">The TPP limits regulation of foreign investors too much.</li> </ol> The TPP proposes that no special regulations be allowed to apply to  foreign investors, meaning they must be treated no differently from  domestic companies. But this is another example of hypocrisy — most  industrialized countries long used “local content” rules and other  regulations to ensure that foreign investment transferred technology and  purchased local goods and services to boost domestic sectors. However,  according to a leaked draft of the TPP’s Investment chapter, any policies that favor local ownership would be considered “discriminatory” and prohibited. <ol> <li data-xf-list-type="ol">The TPP undermines the sovereignty of national courts and scares countries from adopting new regulations.</li> </ol> To enforce the TPP’s new deregulated standards, it also proposes to  radically extend the traditional definition of “unfair expropriation or  nationalization” of a foreign investment to include “the expectation of  gain or profit.” Thus, it allows a corporation to sue a signatory nation  for enacting new regulations or laws — even those that address  public-interest concerns like labor and environmental rights — if it  believes these would deprive it of “expected profits.” According to this  investor-to-state dispute settlement (ISDS) mechanism, already found in  many recent trade and investment agreements, if a new law or regulation  ends up costing foreign investors “lost planned profits,” they can sue  the government to either get rid of the law or pay up to hundreds of  millions of dollars in fines and penalties to the investors. The ISDS  feature takes disputes out of domestic courts  to secretive international tribunals that have the power to overturn  judgments of national courts and offer no chance for appeal. For  example, the tobacco giant Philip Morris is presently suing Uruguay because the latter’s public health regulations on cigarette advertising are hurting the sales it had “expected” there. While rich-country trade negotiators say that such assurances for  investors are needed to attract foreign investment, Nobel laureate and  economist Joseph Stiglitz  notes that many multinational corporations already have investment  insurance through either their own governments or the World Bank’s MIGA  and that the real reason for ISDS is political: to create “a chilling  effect” in the less advanced TPP countries, in which the threat of  lengthy, multimillion-dollar lawsuits is enough to make governments  reluctant to adopt laws or regulations that may offend foreign  investors. In so doing, foreign corporations seek to achieve by stealth —  through secretly negotiated trade agreements — what they could not  attain in an open political process. Although a growing number of  developing countries around the world (Brazil, India, South Africa)  refuse to allow ISDS clauses in future agreements, the TPP apparently  still includes the provision. <ol> <li data-xf-list-type="ol">The TPP makes countries more vulnerable to financial crises.</li> </ol> The TPP goes against new thinking on best practices  regarding capital controls — restrictions on the ability of investors  to bring in or take out vast amounts of capital from countries  overnight. Even the IMF reversed  its long-standing opposition to capital controls in 2012, finally  agreeing with mounting research showing that capital controls may be  useful in ensuring financial stability in a crisis by stemming sudden  outflows or disruptive inflows. Yet despite this new conventional  wisdom, the TPP would block developing countries from using capital  controls. As if nothing was learned from the 2008 financial crisis, the TPP  also calls for a whole range of financial liberalization rules that  would block countries from regulating speculative financial activities  and would further deregulate the financial services sector. Economist  Anton Korinek of Johns Hopkins University explained  that such excessive financial deregulation is similar to relaxing  safety rules on nuclear power plants: It may reduce costs and increase  profits for the nuclear industry, and may even reduce electricity rates —  while increasing the risk of a nuclear meltdown. Similarly, financial  deregulation increases the profits of the financial sector at great risk  to the rest of society, and it threatens the financial stability of  developing and developed TPP members alike. <ol> <li data-xf-list-type="ol">The TPP undermines public health.</li> </ol> Many health groups such as Doctors Without Borders  have campaigned against the TPP because its rules on intellectual  property rights (IPR) would keep cheaper generic drugs out of reach for  millions of poor people in developing countries. According to a leaked draft  of the IPR chapter, the TPP would greatly extend existing patents and  copyrights on essential drugs and expand the scope of patents and  copyrights beyond finished products to include coverage of many  components of finished goods. If enacted, such rules would considerably  undermine developing countries’ ability to address public health needs — meaning that more people would die. <ol> <li data-xf-list-type="ol">The TPP blocks companies from acquiring needed technology.</li> </ol> The IPR chapter would also significantly stunt the development of  manufacturing firms in developing countries because it would  considerably raise the costs of and create new barriers to accessing  needed manufacturing technologies, thereby hampering firms’ ability to engage in reverse-engineering — a key step in the learning-by-doing process used by all rich countries when they were first developing. <ol> <li data-xf-list-type="ol">The TPP undermines state-owned companies.</li> </ol> The TPP proposes breaking up state-owned enterprises (SOEs), which  have been cornerstones of East Asia’s successful industrialization  strategy for many decades. Not only would the proposed reforms  significantly curtail state support for such firms, but they would also  commercialize current SOEs in Malaysia, Vietnam, and Singapore. These  countries would be locked into such constraints going forward and would  be prevented from offering state support to any new or future SOEs. Once  again, this blocks developing countries from using strategies that rich  countries used themselves. As rich countries learned long ago, when  private investors are unable or unwilling to invest in strategic  sectors, the state needs to step in and play the role of “entrepreneur  of last resort.” Some developing-country policymakers in TPP countries  may be agreeing to these rules in the belief that accepting them is  necessary to attract foreign investment and secure participation in  global value chains. Others, it is widely believed, think that signing  onto the TPP will give them some added protection from China’s growing  influence in the region. If so, such shortsighted strategies may come at  the high price of forgoing successful long-term national economic  development.</blockquote>

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