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The Financial Express

US electoral consequence: Taking a hike with trade?

| Updated: October 19, 2017 09:37:55


US electoral consequence: Taking a hike with trade?

 

If both US presidential candidates - Hillary Clinton and Donald Trump - stick to their election platforms, one can really say bye-bye to the Trans-Pacific Partnership (TPP), at least in 2017. Since it is slated to begin in 2018 (affording time, until then, for domestic ratification in the twelve member countries), one could logically conclude the TPP fate has been hung.
That is unfortunate since free trade can be the linchpin of accelerated global growth when it is needed the most. At no previous moment in modern history has there been greater symmetry between the power engines facing a recession/depression as right now: whereas the classical instance of symmetry, in the 1930s, produced, as one of its probing scholars dubbed it, "the world in depression" (Charles P. Kindleberger, title of his 1973 book), the only other instance of global symmetry, in the 1970s, was quickly dissipated as the 1980s ended. Great Britain and the United States contested each other for leadership in the 1930s, and both were challenged by the state-driven economies of France, Germany, Japan, and Russia; while in the 1970s, perceived US decline brought up hopes of a Japanese or European collective economic leadership as well as Soviet military parity, only to find those configurations also collapsing by the 1990s.
Today's U.S. competitors show a greater staying power than those in the 1930s and 1970s: there are several collective pacts between them (the Shanghai Cooperation Framework between China, Russia, and other Central Asian countries; BRICS, referring to Brazil, Russia, India, China, and South Africa, as, falsely, emergent economies; the European Union; and so forth); and there are too many of them to believe the global system will actually bankrupt. That does not mean the system is hale and hearty: it is not, but countries with game-changing capabilities have carved out their niches (China, India, Japan, Russia, and so on), as so many countries did in the 1930s, only this time we have multifaceted buffers and regional safeguards.
China is probably the U.S. competitor a majority of analysts will point to, as they would to a potential India with a few "ifs" and "buts" (for example, its regional rivalry with Pakistan, not enough market reforms, indeed market reforms skewing domestic income inequalities, and so forth). The world's third largest economy, Japan, cannot be discounted as it, too, hurries to complete its Abenomics reforms, while the world's third largest exporter, Germany, has the entire continental Europe to align with at its leisure. There, then, follows even more putative economic powers: Argentina, Australia, Brazil, Britain, Canada, Mexico, Iran, Russia, South Africa, Turkey, among others with a large population, Hong Kong, Singapore, the United Arab Emirates, and others among the lightly populated ones. In short, there are many more countries with actual or potential economic strength as there are economic partnerships that end up wagering more than the sum of its parts: the Association of Southeast Nations (ASEAN), the European Union, North American Free Trade Agreement (NAFTA), Pacific Alliance, and so on.
One of the underlying TPP thrusts was to shift the fulcrum of global trade more decisively towards, not just Asia, but an Asia the United States would be friendly with: from the very start it was pitched against China, yet implicitly contributed to shifting the centre of trade gravity from the Atlantic to the Pacific. In this the United States has done what it did to downgrade the Atlantic zone, first by utilising the Western Hemisphere from the 1980s (the Americas), then concluding a string of free-trade agreements (FTAs) on US terms (that it never did before 1984), from the 1990s. West Europe was undermined, as too multilateral institutions, like the World Trade Organisation (WTO). Another U.S. stamp has been to shift the levers of trade to investors, but also, more egregiously, supply them the terms to sue states with. One will note how the recent US FTA provisions on dispute settlement empower corporations against state policies. Since a dominant proportion of corporations belong to the United States, this magnified the US clout in an unprecedented way. Although such clauses might have functioned better across the Atlantic (the US-EU Transatlantic Trade and Investment Partnership, or TTIP, negotiations kept stumbling over this), it exposes other deeper problems for Asian countries.
Among the TPP problems for Asian countries is that, although they would get enormous concessions for US market access (as the largest market in human history, the United States alone commands this clause), US corporations, lawyers, and ultimately manufacturers would simultaneously be able to manipulate Asian-country policies, very much exerting some sort of a veto power against what must not be acceptable in order for US accented trade to continue. Many Asian members, such as Indonesia, Malaysia, the Philippines, and Vietnam need the US investment to be able to shift from an "emerging" status to a developed country, which might be why their relative silence over such controversial clauses: Canada has been silent on this in NAFTA as too Mexico; but the Free Trade of the Americas (FTAA) did not get far, as too the TTIP pursuits.
When all is said and done, though, it is China's TPP exclusion that might unwittingly emerge as the TPP ghost: China has built its own network of bilateral and plurilateral trading arrangements, often with so many concessions, such as infrastructural developmental finance and very long-term resource-import contracts from relatively backward countries, that it could use this as a bargaining chip to constrain TPP member exports to China. On another flank, its creation of the Asian Infrastructure and Investment Bank (AIIB) and the "strings of pearls"-based revival of the Silk Route has involved so many countries that it stands on the threshold of challenging such US-dominated multilateral institutions like the World Bank.
In short, then, omitting China, or rather targeting China, was an original mistake. A President Trump or President Clinton will only rectify that: the former would deconstruct it, the latter would put the TPP arrangements under greater scrutiny, at the least, or trash-can them, at the most. This would liberate Asian (and Latin) partners to go to China, which not only has (a) trillions of surplus cash to distribute for strategic goals that the United States does not have, (b) a huge market that can easily compete with the United States, and (c) the institutions to replace World War II US institutions; but it also has (a) a forgiving attitude, (b) no Trump-like or Clinton-like domestic impediment, and (c) a global diaspora that will eventually eke out trade partnerships with many, if not all, TPP partners. Nuances and idiosyncrasies have a habit of hijacking collective benefit initiatives.
Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global Studies & Governance at Independent University, Bangladesh.
[email protected]

 

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