There is no doubt that free trade has been one of the best generators of global wealth, but it has also brought a requirement for inefficient countries to try to compete with the best, and sometimes fail. This political backlash has crippled the work of the World Trade Organisation, which seeks to include all countries in a slow process of global liberalisation. Therefore, powerful states have seized the chance to build their own trading blocs, which if managed with a liberal intention could form a patchwork of growing free trade agreements, but could also be misused as the basis of protectionism.
United States President Barack Obama sees the Trans Pacific Partnership (TPP) as a key part of his legacy, but the danger of the 12-nation treaty is that it ignores China, one of the giants of the region. In addition, even if the 12 TPP nations have signed the treaty, there will be huge arguments before its ratification, which will not be helped by many of its requirements having been kept secret for too long.
Obama wrote in the Washington Post this week that TPP is necessary and deserves the support of all concerned. He knows that the two candidates for the US presidency have rejected the deal — Donald Trump viscerally and Hillary Clinton tactically. So Obama made some tactical points to encourage support for the deal and mentioned one of the most controversial parts of the TPP, which was to extend the range of the treaty obligations to cover intellectual property. Australia led the opposition to the US imposing its own ideas on how to defend the intellectual property of America’s creators, artists, filmmakers and entrepreneurs.
Opposition from the other 11 members stopped the US, including some elements in the treaty to stop what the US calls currency manipulation. When a currency devalues, then any export from that state becomes cheaper and the US wanted to stop deliberate devaluation to bolster exports. But its partners in the TPP negotiations pointed to America’s own devaluation as it went through quantitative easing to survive the crash of 2009 and the consequent boost to the cheaper dollar-priced exports.
The TPP deserves to be ratified, but not if it is going to be administered as a device to protect American exports. It has to be a genuinely multilateral arrangement that benefits all partners, but that is not something that either of the two potential next US presidents want to support. They fear their voters too much.
