Info Service on WTO and Trade Issues (Jul13/02)
The Trans Pacific Partnership Agreement talks that takes place from 15 to 24 July 2013 in Kota Kinabalu, Malaysia can be expected to deal with several contentious issues as countries weigh the advantages and disadvantages to them.
Below is an article by Martin Khor, Executive Director of South Centre. A shorter version of the article was first published in The Star (Malaysia), Monday on 15 July.
What to expect in TPPA talks
Geneva, 15 July (Martin Khor) -- The nature and effects of free trade agreements have become a topic of public discussion, especially with the 18th round of talks of the Trans Pacific Partnership Agreement (TPPA) that takes place from 15 to 24 July in Malaysia.
Not much is known about the TPPA drafts. But with some of its chapters leaked and available on the internet, and since much of the TPPA is likely to be similar to bilateral FTAs that the United States has already signed, we can have a good idea of its main points.
As can be expected, there are many contentious issues to consider, especially for developing countries like Malaysia.
(The countries involved in the TPPA negotiations are Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Japan has just joined too.)
Actually, only a small part of the TPPA is about trade as such. Most chapters are on other issues, like services, investment, government procurement, disciplines on state-owned enterprises and intellectual property. Joining the TPPA or similar FTAs will mean the country having to make often drastic changes to existing policies, laws and regulations, which will in turn affect the domestic economy and society.
On trade itself, the TPPA countries will have to remove tariffs on almost all products coming from one another. Perhaps only one or two products can still be protected. The main implication is that local producers and farmers would have to compete with tariff-free imports from other TPP countries. This may lead to loss of market share or closure of some sectors.
Ironically, agricultural subsidies, which is the main trade-distorting practice of developed countries like the US, have been kept out of the agenda of the TPPA or other FTAs involving Europe. The developed countries are clever not to include what would be damaging to them. Thus the developing countries are deprived of what would have been the major trade gain for them.
services and investments, we can expect that TPPA countries will have
to open all their services and investment sectors to the entry and
establishment of companies, in manufacturing as well as services including
finance, commerce, telecoms, utilities, professional and business
services. If a country wants to exclude any sector, it will have to
list this in a table of exceptions, and this will also be subject
to negotiations. Future new services cannot be excluded as they
are not even known yet today.
any new laws or changes in laws and regulations that the foreign investor
claims will affect its future revenues can be challenged in an international
tribunal for monetary compensation. The regulations could be economic
(for example, terms in contracts, type of or ratios on foreign ownership,
financial regulation including in a crisis), health-related (food
safety, tobacco control, provision of cheaper medicines), environment-related
(ban on chemicals, policies on rivers, forest, climate change) and
social (for example, affirmative action for disadvantaged groups or
investor-to-state disputes can cost countries a lot. A tribunal awarded
an American oil company US$ 2.3 billion against Ecuador’s government
in 2012. Indonesia is being sued US$2 billion for withdrawing
a contract that a state government made with a UK-based company.
The chapter on intellectual property has generated public debate because it obliges the TPPA countries to have IP laws far beyond the WTO rules. Longer patent terms and restrictions on the state’s policy freedom to promote generic medicines are expected to raise the prices of medicines. Tighter copyright rules would also affect access to knowledge, including books, journals and digital information.
Local producers in industry may also find it more difficult to upgrade their technologies and local farmers could have less access to agricultural inputs including seeds.
These are the specific issues that are or should be in the centre of the negotiations. There are many benefits to the foreign investors or companies, as contrasted to the local, as can be seen from the above. Local companies would lose a lot of their present advantages or preferences, they cannot stake a claim to “fair and equitable treatment” nor sue the government in a foreign court, unlike their foreign counterparts.
Naturally, there are pros and cons to any agreement. Any potential gain for a country in exports or investments should be weighed against potential losses to domestic producers and consumers, and especially the loss to the government in policy space and potential pay-outs to companies claiming compensation.+