Banyan: Trade, partnership and politics

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SOME 100 Japanese officials descended on the tiny sultanate of Brunei in Borneo this week to pursue it. Malaysian politicians are working themselves up about the threat it poses. And, in Washington, at the office of the United States trade representative, “the lights are on all night; they’re sending out for pizzas,” says Mike Moore, New Zealand’s ambassador. For Mr Moore, a former prime minister and head of the World Trade Organisation (WTO), this is good news. The American administration is serious about its goal of realising the Trans-Pacific Partnership (TPP) this year, a free-trade agreement bringing together a dozen countries, two-fifths of the world economy and one-third of all trade.

Since it also involves Australia, Canada, Chile, Mexico, Peru, Singapore and Vietnam, this is ambitious. Indeed to most outside observers, meeting the latest deadline (2012 was one as well) seems as likely as hell freezing over or, come to that, as a successful end to the WTO’s interminable Doha round of trade talks.

It is partly the gloom surrounding Doha that lends the TPP such importance. Combined with the Transatlantic Trade and Investment Partnership or TTIP, an agreement America is pursuing with the European Union, it could give the world economy a boost and help mitigate the WTO’s failure. Moreover, the TPP and TTIP are meant to do more than traditional trade agreements. They are to incorporate “21st-century” elements in labour standards, environmental safeguards, intellectual property, government procurement and the treatment of state-owned enterprises.

Mr Moore draws optimism from the electoral cycle. Australia apart, few TPP countries face imminent elections. But if the TPP relies on governments avoiding their voters, that is surely a weakness. And even one American negotiator sees the TPP as a ten-year project, not a campaign which will have him home by Christmas. Of 29 proposed chapters, 15 have yet to be negotiated.

Japan’s joining the 18th round of talks last month was not only the biggest recent boost to the TPP, but also the biggest obstacle to a speedy conclusion. The world’s third-largest economy gives the group real heft. The TPP is important to Japan, too, as part of the third “arrow” of structural reform in the quiver of the prime minister, Shinzo Abe. But to date Japan has insisted that liberalisation exclude rice, beef, pork, sugar and dairy products. Agriculture is among the most protected parts of the Japanese economy. So even if this is just an opening gambit, it suggests that a huge amount of work remains. Such old-fashioned issues also plague trade policy in America itself. America will have to cut tariffs and quotas for goods such as sugar (a big deal for Australia), dairy products (Canada) and catfish, footwear and textiles (Vietnam).

Meanwhile, America’s ambitions to agree on a “21st-century” trading regime, combined with the secrecy that cloaks the TPP talks, fuel the anxieties of anti-globalisation protesters worldwide. They see a plot to impose American standards and products on an unwitting and unwilling world.

Malaysia is an extreme case. As the world’s 17th-largest trading nation, and a Muslim-majority democracy, it is an important potential signatory. And for the government of Najib Razak, the prime minister, TPP ticks many of the right boxes for being modern, pro-trade and pro-America. With the opposition still disputing his victory in a general election in May, Mr Najib wants a planned visit to Malaysia in October by Barack Obama to go well. Yet the TPP is under fire from all sides. To Mr Najib’s left, Anwar Ibrahim, the opposition leader, sees it as an American effort “to impose its brand of economic model”. On his right, a former prime minister, Mahathir Mohamad, still influential in the ruling party, UMNO, also opposes it. Rules for public procurement under TPP might threaten the affirmative-action policies that favour the country’s ethnic-Malay majority. They underpin the grubby system of patronage that sustains UMNO rule.

Each of the 12 countries wants its own exemptions, known as “carve-outs” in the jargon. Vietnam resists rules that have the effect of forcing textile manufacturers to buy yarn from other TPP members rather than non-members (ie, China). Australia objects to “investor-state dispute-settlement” provisions, which it sees as a threat to the government’s ability to stand up to multinationals. In many countries politicians have expressed concern about new intellectual-property protections. And everywhere, the lack of transparency in the talks feeds conspiracy theories.

Nor is the TPP the only trade game in Asia. Also (and not coincidentally) in Brunei this week there were talks on the Regional Comprehensive Economic Partnership. The RCEP groups the ten members of the Association of South-East Asian Nations with Australia, China, India, Japan, New Zealand and South Korea. Seen as of lower “quality” than the TPP, the RCEP might for that reason have better prospects. But it is at a very early stage.

The ghost at the feast

The risk facing the TPP is that the political pressure to get a deal leads to its dilution: that, in the words of Jayant Menon at the Asian Development Bank, after all the carve-outs, “not much but a skeleton is left.” In Japan this week, the United States trade representative, Michael Froman, spoke of the need to work “pragmatically” to find solutions, while making sure that TPP rules and norms are “more than lofty ideals or appealing catchwords”.

Mr Moore insists that “people are not in the mood to have a political leaflet” as opposed to a serious trade agreement. But, with provisions that seem aimed at ensuring China’s exclusion, many still see the TPP as the trade-policy arm of America’s strategic “pivot” to Asia. China has said it is “studying” the TPP. But for now, its involvement in the RCEP makes the two pacts look like rivals. America is trying to design a trade regime which China will eventually have to join—rather than getting to set its own rules as its clout increases. It is an ambition worth a few takeaway dinners; but not one susceptible to a quick fix.

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