Passage of the ‘Trans Pacific Partnership’ (TPP) free trade agreement between the USA and 11 other pacific rim countries has been the number one economic priority of both political parties in the USA since last November 2014’s national Congressional elections. Concluding a TPP deal in 2015 is right up there—along with across the board corporate tax rate cuts—at the top of Corporate America’s ‘must have’ list for this year.
But the window may be closing on concluding a deal. That’s why American trade negotiators are desperate for ‘fast track’ authority to accelerate the effort to finish negotiations—before global developments force the window shut.
Republican and Democrat representatives and Senators in both houses of Congress in the USA, as well as the Obama administration, have been pushing hard for passage of the TPP since December 2012, when the most recent media-legislative campaign to pass a TPP deal was rolled out immediately following the presidential elections the month before.
The TPP-Free Trade USA push goes back even further, however, to at least 2010. That’s when Obama put Jeff Immelt, the CEO of the giant US global corporation, General Electric, in charge of a special Presidential Committee tasked with coming up with recommending future USA trade initiatives. TPP was one of them.
But before acting on Immelt’s 2010 recommendations, Obama had to first wrap up the loose ends of the several bilateral free trade agreements still on the table between the USA, South Korea, Colombia, Panama and other countries. Then there was the 2012 presidential elections. Obama and Democrats knew trying to push the TPP through before would risk their re-election chances. So they waited. Then came the November 2014 midterm Congressional elections. Better wait again, since Democrats in Congress coming out for TPP might jeopardize union and consumer support for their re-election, and potentially cost the administration and Democrats their majority in the Senate—which they lost anyway due to many reasons.
But now, early 2015, the short term political risks are reduced and bilateral free trade agreements with the other countries have been completed. Now the majority of Congressional Democrats, nearly all the Republicans, and the Obama administration are all united on the goal of pushing through the most massive free trade agreement to date, called the TPP. How massive? No less than 40% of the world’s total annual GDP and a third of all global trade, that’s how massive.
US Corporations and Corporate Parties United for TPP
The vast majority of members of Congress, in the House and Senate alike, don’t even know what’s being negotiated in TPP. Except for perhaps a few in-siders in both parties, virtually no one in Congress has any real information whatsoever as to the details of the current TPP negotiations. Only the trade representatives of the 11 countries and their invited guests, the representatives from global corporations, are privy to what’s being discussed in the 28 industry negotiating sessions.
Of the 566 groups that have been invited to attend the negotiations at various levels, 480 are apparently representatives of businesses, trade, and industry groups. The rest are pro-trade academics, a smattering of sympathetic NGOs that benefit from corporate contributions, and a few token union representatives in the pockets of their corporations or governments at home.
From what is known from the periodic leaks from the discussions, it appears proposals for TPP are heavy on permitting capital to freely and easily enter a country, for profits to be just as easily repatriated, for wholesale privatization of public enterprises, and for proposals to allow corporations to sue governments in global secret courts if national laws are passed that challenge any provision of the TPP—to name but the most corporate-friendly measures being proposed.
Even though there are apparently no provisions for Congress to receive progress reports on the status of negotiations, nevertheless a majority in Congress is about to vote in April in favor of TPP, and specifically on a strategic measure will increase the possibility of passage of TPP soon after. That vote and measure is called ‘fast track’ authority.
Fast track means Congress agrees with the president’s negotiating demands before an agreement is struck, and then votes quickly on it once it has, voting yes or no, without any amendments or procedural delays in the legislation making TPP a law in the USA. In other words, if ‘fast track’ passes, whatever the President’s trade negotiators agree on will quickly become law of the land. Corporate America in particular likes ‘fast track’. It means whatever anti-worker, anti-consumer, anti-environment and deals are agreed to at the negotiating table cannot be challenged, amended or reversed by Congress when the vote comes up.
Fast track’ passage in April will mean the push to conclude a TPP deal will accelerate and intensify in subsequent weeks. It means the path is politically paved to conclude a TPP deal asap. Passage of fast track is not the ‘endgame’, but it’s damn near close to meaning just that.
Recent USA history shows that a massive, free trade treaty like TPP can only be passed with the support of a Democratic president and Democrat support in Congress—just as Democrat Bill Clinton was essential for passing the previous USA free trade initiatives in the 1990s: the North American Free Trade Agreement (NAFTA) and opening up China-USA trade by proposing the Preferred Nation Trading Rights (PNTR) for China, a quasi free trade measure.
If another Democrat is elected president in 2016—an unlikely but possible event—that Democrat will have to wait until 2018 or later to push for TPP. And if a Republican is elected president in 2016, it is likely that Democrats may not support TPP in Congress. Corporate America does not want to wait that long for TPP, given either those events. It wants TPP now, not later.
The political timing on the USA side is right, in its view, given the current party alignments in Congress, and with the current Democrat President, Obama, a strong, unequivocal advocate of free trade agreements like TPP since 2010. (In contrast to his election promises in 2008 when he said he would not support more free trade agreements). But there’s another reason ‘why TTP now’. They all know—corporations, Republican and Democrat politicians, and the Obama administration alike—that the longer they wait, the more unstable the global economy will continue to become, and thus the more difficult will become the concluding of a TPP deal. Not only are internal US political alignments the best in years. But the external global economic developments can only get worse over time.
The US side of the negotiations are in sync, with all the corporate and pro-corporate players agreed on doing a deal quickly. But the rest of the 11 TPP countries in negotiations will find it increasingly difficult to agree to a deal as time goes on, as their economies become more unstable and slow.
The Global Instability ‘Wildcard’
Time is not on the side of advocates of the TPP in the USA and they know they need to accelerate the process.
The global economy is slowly but steadily unraveling. Currencies are becoming more volatile. More economies are slipping into recession. Inter-capitalist competition is shifting and assuming more aggressive forms. Real investment is slowing everywhere. Trade in commodities, including oil, is collapsing in price and volume. Furthermore, these trends are going to get worse, not better, and will likely continue to do so in what remains of 2015-16. Only a short window may exist therefore this year, or early next at the latest, to conclude a TPP deal. Here’s why.
The quantitative easing (QE) programs of the two weak links today in the advanced economies—Japan and the Eurozone—are causing increasing global currency instability. And the more currency instability, the more complicated the negotiations for TPP will become, as well as the more difficult it will be to conclude a deal.
Japan set off the current deepening currency war in 2013 when it introduced its first QE. That had little to no effect on Japan’s real growth but it boosted stock prices for a while and then, like all QEs, even that dissipated. Japan fell into another recession, its fourth since 2008, during early 2014. So it increased is QE-liquidity injections last fall 2014 still further, as it expected the Eurozone to introduce its own QE, which the Eurozone did just recently.
Then there’s the matter of China. Not a party to the TPP negotiations, China’s general economic slowdown underway will undoubtedly result in China allowing its currency, the Yuan (reminbi), to decline as well, in order for China to boost its exports too.
So all three major regions—Japan, China, and Europe—are driving down their currencies to get a short term export (and economic growth) advantage. Unable to confront this ‘triple threat’ to their exports, many of the 11 Asian rim TPP countries are becoming desperate to increase their exports in response—as are most of emerging market economies in general worldwide. And where better to do that than to open and raise new demands and to request even more concessions from the USA in current TPP negotiations?
As their own currencies rise in value, and their economies slow, many of the 11 will also seek even more guarantees of USA to ensure direct investment into their economies. But with the US dollar rising sharply, US corporations also want and plan to invest heavily in the Eurozone and Japan economies. How will the USA assure the 11 TPP partners that US corporations will invest even more money capital in their economies, when there are growing opportunities at the same time for even better investments in Europe and Japan, and of course China.
There’s also the matter of collapsing oil prices. This will undoubtedly complicate the energy track discussions in the TPP negotiations.
Then there’s the USA dollar and imminent US interest rate hike policies. The rising dollar and US interest rates mean capital outflows and even capital flight are high on the agenda for a number of the 11 TPP negotiating countries. Will the USA agree in TPP negotiations to lower the dollar’s value as concessions in TPP bargaining? Not likely, give the growing consensus to raise interest rates in the USA very soon, either this June or September at the latest, which will continue to drive up the dollar and in turn suck money capital out of many of the 11 other TPP partners in the form of capital flight and redirected investment. The TPP 11 will want to know what their USA partner is going to do about all this. They will want more concessions, in exchange for the USA demands for intellectual property and software products protections, patent protections, more opportunities for US banking access to those countries, and so on.
There are literally dozens of other examples and ways that current TPP negotiations can, and will, be up-ended by the monetary policies of Europe, Japan China, and the USA. Global currency instability, falling exports, redirected global investment flows, capital flight, etc., will impact TPP negotiations significantly in the coming weeks and months as the global economy becomes still more unstable and continues to slow. TPP negotiations will become even more complicated, more time may be needed to conclude a deal, and the negotiations themselves may be suspended in part. All of which does not bode well for concluding a deal long term. A deal must be struck quickly, in the shorter term, according to the Corporate view.
All of which leads to the key to the entire process: the current rush to conclude fast track, to get a TPP deal as quickly as possible. For it is fundamentally for TPP negotiators a race against time, given the progressively deteriorating global economy.
The Politics of TPP
TPP is not only about US multinational corporations getting a free entry into economies that make up a third of world trade and constitute 40% of world GDP. It’s also about Obama’s , the US military’s, and US neocons ‘pivot’ to Asia to contain China.
Without concluding the TPP, the USA’s ability to contain China on the economic front—a strategic necessity for its political and military containment goals for China—will unravel.
China is already causing the USA major concerns on a number of economic fronts. There’s China’s recently announced $50 billion development bank, designed to rival the USA-dominated World Bank. There’s Russia’s turn to deeper economic relations with China, especially with regard to oil and energy, which threatens long term to raise energy prices in Europe to unpleasant levels. There’s China’s deepening trade deals with Germany, making it already one of Germany’s prime trading partners; China’s buying of sovereign bonds in southern Europe to help bail out the Italian and other economies in that region; its targeting of east Europe and Baltic economies offering billions in new funding there to increase its influence; its negotiations with Greece to provide assistance (including buying the Piraeus port) as that country confronts its European bankers insisting on continuing austerity; and there’s the recent announcement, just days ago, that Britain—with its so-called ‘special relationships’ with the USA—is breaking ranks with the USA and deepening its financial relations with China. The UK had already become the future currency trading hub for the China Yuan, as that currency challenges the US dollar long term. But now, in a surprise announcement, the UK has agreed to participate in China’s new global development fund as well.
If the USA fails to conclude the TPP deal, designed to contain China economically, it’s likely that China will subsequently sweep up a good number of the 11 countries in current TPP negotiations into its own economic orbit and its own regional free trade agreement. Should that occur, the USA’s political and military pivot to Asia will be limited to Japan and South Korea.
Should TPP negotiations fail, much of South Asia, and potentially even Australia with its heavy dependence on raw materials and commodities trade with China, could adopt a more neutral economic position vis-à-vis China and the USA—instead of acting as pro-USA allies, as in the past.
Much is riding on the TPP, in other words, politically as well as economically, for the USA. That’s why US trade negotiators are pulling out ‘all the stops’, as they say, to accelerate concluding a TPP deal. That’s why ‘fast track’ is so important to them. Without it, ‘all the stops’ don’t get pulled out.
In short, so goes TPP, goes the USA ‘pivot’; and so goes fast track goes TPP. But in the end, as goes the global economy, so goes all the rest.
Jack Rasmus is the author of the forthcoming book, ‘Systemic Fragility in the Global Economy’, by Clarity Press, 2015, and the prior book’s, ‘Epic Recession: Prelude to Global Depression’, 2012, and ‘Obama’s Economy: Recovery for the Few’, 2012. He has been a local union president, negotiator and representative for several American unions. He blogs at jackrasmus.com.