Proposed Trans-Pacific Free Trade Deal No Remedy for APEC

For years, APEC has been a multi-million dollar talkfest of officials, trade ministers and political leaders that has been hard to justify. In the eyes of the US hosts and its Australian and New Zealand, this year’s forum that began today in Honolulu provides that rationale -- negotiations for a Trans-Pacific Partnership free trade and investment agreement (TPPA) involving nine APEC members will provide a “high quality” platform for a 21st century free trade deal across all the APEC “economies”.

John Key has foregone the ultimate pre-election “smile and wave” photo opportunity with President Obama and the other heads of state from the 21 APEC members. (Maybe the mantlepiece is full already?) Deputy-Prime Minister Bill English and Foreign Minister Murray McCully have been sent in his stead, although they are absent from the dignitaries'’ arrival details provided to accredited media.

The real work will fall to seasoned trade negotiator turned politician Tim Groser, who has arrived well ahead of trade ministers’ meeting on Thursday and Friday. He and Australian counterpart Craig Emerson will address the business leaders’ summit over the next two days, where representatives from will ‘network’ and set out their wish list for APEC for the next few years.

The real action will take place behind the scenes around the TPPA. A statement from the political leaders of the nine APEC members involved in the negotiations (Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, US and Vietnam) is expected on Saturday. There will be frantic lobbying and caucuses before then, with a business “dialogue” apparently planned for Saturday night. As with the entire TPPA process, this is an invitation only process that will be shielded from public view. As outsiders, we are left to speculate, drawing on what has been pieced together over the past one and a half years.

The original plan was for Obama to announce the conclusion of the deal at APEC this week. Instead, we can expect a statement that is strong on rhetoric on political will and short on detail about how the goals will be achieved – if at all.

Far from the TPPA being concluded, some crucial bits of the draft text are still missing. There are standoffs in other crucial areas, largely over the US’s aggressive demands on behalf of its powerful corporations. A number of sensitive political issues have emerged as “bottom lines”.

The US insists that access for dairy is not on the table for New Zealand.

New Zealand has opposed the US position on pharmaceuticals and information technology. Leaked texts have revealed a US position that goes further than its existing US FTAs, threatening drug purchasing regimes in a number of countries. However, there is no assurance that a National-led government would hold the line. Both Groser and Key have talked about protecting the “fundamentals” of the internationally acclaimed drug-purchasing agency Pharmac, but refused to take changes to how it operates of the negotiating table.

The Australians will not give foreign investors’ the right to sue governments in offshore courts over alleged breaches of investor guarantees. They took the same stance in their free trade deal with Australia in 2005 and are even more adamant since Philip Morris launched a legal challenge to plain packaging of tobacco laws using an old investment agreement between Australia and Hong Kong. Investor-state disputes are a baseline for the US corporations; making an exception for Australia would create an outcry in other countries, including New Zealand.

A recently tabled US text that attacks “anti-competitive” state-owned enterprises is targeted immediately at Vietnam, Malaysia, Brunei and possibly Singapore, but ultimately designed for China. The Vietnamese government rejected the US demands during TPPA negotiations in Lima three weeks ago. The New Zealand government says the text would have no impacts on Zespri or the ACC, but without access to the text such assurances are simply a matter of “trust me”.

How the vast differences between rich and lower-income developing countries remains a matter of dispute.

A range of other concerns have been voices by critics during “stakeholder’ held alongside the negotiating rounds, including constraints on governments’ ability to restrict hot money flows through capital controls and act to pre-empt or contain a financial crisis; ‘transparency’ rules that give corporations privileged influence over governments’ domestic decision making; the right to use public purchasing power to support local jobs and industries; and many more.

So what have the TPPA negotiators achieved so far? The nine parties have largely completed the preliminary phase of clearing away peripheral issues on relatively uncontroversial areas; although the texts on fraught issues like labour have just been tabled and others contested texts are being worked through.

The negotiators are making especially slow progress in working through the schedules of services and investment policies they will bring under the TPPA’s binding “disciplines”, which restrict the right of governments to decide how they regulate. This is a highly complicated exercise, especially as the high-risk approach of a “negative list” (where governments must state what is not governed by the rules) is new to Malaysia and Vietnam. Many other countries, including New Zealand, are under domestic pressure to protect highly sensitive areas of social policy, foreign investment, environmental regulation, financial regulation and economic development strategies.

These realities are likely to be swept away in the hype that surrounds this week’s meeting. One other question will also take centre stage: the prospect that the TPPA could form the basis for an APEC-wide free trade deal depends in the short term on whether Japan’s Prime Minister Yoshihiko Noda announces that they want to join the negotiations. If he does, Noda will be defying a tradition of political consensus and risk the collapse of his governing Democratic Party of Japan. Reports last week said 350 members of the 722-seat Diet wanted to prevent or delay the announcement. Already farmers have driven their tractors down the Tokyo streets and over 11 million have signed a petition opposing the deal. Ironically, Japan’s participation could heighten the change that the TPPA will collapse in the same way as the Doha round, the Free Trade Area of the Americas and other controversial and over-ambitious free trade and investment negotiations.

Japan is just a step to the ultimate trophy of a deal with China. There appears to be no desire to bring China into the negotiations at this stage, even if it were willing. The geopolitical strategy and economic objectives behind the TPPA have China acceding to an existing agreement on the other parties’ terms. Significantly, Chinese officials have already criticised the US’ goals for the APEC meeting as “over-ambitious”. On Monday they publicly called on the “international community” to “strike a balance” between the TPP talks, which China has not been invited to join, and other paths to achieve multilateral and regional trade goals.

There are rumours that Obama will announce on Saturday a mid-2012 target for completing the negotiations, but that is pie in the sky, presumably intended to show that his only free trade initiative is not headed the same way as the WTO’s moribund Doha round. The only way the TPPA could meet a June 2012 deadline is total surrender by all other governments to US demands and acquiescence by their domestic constituencies to such capitulation. The political costs of ignoring those constituencies, especially for President Obama in an election year, will become apparent from tomorrow, as Local and regional activists will start voicing their opposition to APEC and the TPPA.

Jane Kelsey from Honolulu
8 November 2011

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