Let me ask you a question: what do you know about the Trans-Pacific Partnership (TPP)? Like most people, chances are you’ve never heard of it. Otherwise, you may have a vague idea that it somehow relates to free trade. Most likely, you’ve confused it with the TTIP at one time or another. It can be hard keeping up with all these acronyms after all.
But I want to cut through all the confusion today by explaining why the TPP is such a big deal — and why it has its champions and detractors in equal measure.
Simply, the TPP is one of the most ambitious free trade agreements in history. In fact, it’s as close to a global FTA as we’ve ever seen. It’s aim? To create a massive single trading bloc between participating Asia-Pacific countries.
Australia counts itself as part of the 12 nation committee hoping to enact the FTA into law. The US, Canada, Japan, Mexico, Malaysia and New Zealand are among the nations making up the TPP.
Altogether, a fully realised TPP would cover 40% of the global economy. It would also encompass one third of all global trade. Those close to the negotiations say that it could raise global economic output by US$300 billion every year.
That’s the good bit. But there’s a reason why its negotiations have remained so secretive.
The truth is that the TPP is controversial as a result of its broad ambitions. It’s attempting to bind together a diverse, cross-continental bloc under one economic umbrella. For many, that’s problematic because of the challenges that presents. What will happen to Australian jobs? And what about safety regulations? We simply don’t know, because the average person on the street hasn’t been told what it will do for their livelihood.
Granted, the TPP hasn’t passed into law just yet. But it’s now one step closer to becoming a reality.
Overnight, the US Senate passed a piece of legislation called the Trade Promotion Authority. This bill will allow president Obama to fast track any FTA’s for Congress to vote on. Negotiators view this bill as critical to passing the TPP, as it will prevent US lawmakers from altering the legislation once it passes. This has removed one of the major concerns other nations harboured about the TPP.
With that out of the way, the other 11 nations could meet to finalise the TPP agreement as early as next month.
Why corporations are behind the TPP
Some critics label the TPP as a sham that only serves to widen and consolidate corporate power. There is some merit to this claim.
In the first three months of the year, corporations donated millions of dollars to US Senate and House representatives. Goldman Sachs lobbied politicians to the tune of US$200,000. Other major corporations include Citigroup, Coca-Cola and Disney. The most active contributors were big pharmaceutical companies, like Novartis and Pfizer. The full list includes over 50 corporations who donated funds to politicians, amounting to several million dollars.
The specific reason corporations lobby politicians is not always clear. But we do know they do it to curry favour with lawmakers to fast track legislation that benefits them.
It’s no mystery why corporations would want to fast track the TPP either. There is a lot of money to be made by reducing barriers to trade. It also gives them greater influence over foreign markets, expanding their global footprint. And we shouldn’t forget the all-important reduction of ‘pesky’ foreign regulations.
Non-American critics argue that the TPP would lump other nations with slacker US standards and regulations. The Productivity Commission had this to say on the TPP:
‘Preferential trade agreements add to the complexity and cost of international trade through different sets of rules of origin. [TPP would affect] intellectual property protections and investor-state dispute settlement provisions’.
What could this mean?
One example of this that’s often brought up relates to food safety standards. American poultry exporters are renowned for their use of harmful chemicals in treating their produce.
Do you, as an Australian consumer, have a problem with that? I suspect you do. Can you do anything about it once the TPP passes? Other than limiting what you eat, probably not.
More concerning is how food labelling standards will be affected. Will treated produce from the US need to be labelled as such? Answers to questions like these are either being kept quiet, or are undecided.
Either way, member nations would have less recourse to ban the import of such products. Similarly lax regulations may seep across the entire TPP trading bloc. Health and safety standards could suffer across all industries.
Another example is environmental concerns. In 2013, a leaked chapter from a TPP draft made headlines for its sheer audacity. The leak outlined that corporation-state disputes over environmental factors would favour big business. In other words, corporations have a free reign to do as they please in our backyard.
We can only guess what other clauses the TPP includes. And that’s part of the problem. We simply don’t know enough about it yet. The negotiations are so secretive it’s impossible to tell what effect it will have on Australian industries, jobs, and other standards.
In a few months, we’ll probably know a lot more — once it gets approved. By that point, it will be too late to change anything. The corporate takeover is showing no signs of slowing down.
Contributor, Markets and Money
PS: Markets tend to greet free trade agreements with optimism. When the TPP passes, we’re likely to see both the ASX and global markets rise on the back of the deal. But not everyone is bullish on the future of the local share market.
Markets and Money’s Vern Gowdie sees a major correction across the ASX in the future. Vern is the award-winning Founder of the Gowdie Family Wealth advisory service. He’s been ranked as one of Australia’s Top 50 financial planners. He believes we’re set for a catastrophic crash in stocks in the future. And he thinks the ASX could lose as much as 90% of its $1.8 trillion market cap.
Vern wants to help you avoid the coming wealth destruction. That’s why He’s written ‘Five Fatal Stocks You Must Sell Now’. In this free report, he’ll show you which five blue chip Aussie companies could destroy your portfolio — and you almost certainly own one of them. To find out how to download the report, click here.