The World Trade Organization (WTO) has failed. In December, the Doha Round is turning ten years old, with nothing to celebrate[i]. Formal negotiations of the Round expired in 2005, without any agreement, and informal negotiations stalled in 2008. Indications in December too were that an agreement to liberalize trade among its 153 member countries was eluding.
The policies and practices governing the global world until now have also failed. The first world crisis rustles the fundamentals of market liberalization and mobility of unchecked and non-regulated capital flows, although some people do not seem to hear the sound of the collapse, mainly in Europe, which remains dogged in patching the cracks.
In the strictly commercial sphere, due to a lack of resolute action at a global level, small and large countries have resorted since the beginning of the crisis to domestic measures in order to deal with its impacts on the domestic economy, from import restrictions to intervention in the foreign exchange market and manipulation of exchange rates, all of them protectionist measures, which are contrary to the practices of the global model.
From the experience of ten years of Doha Round setbacks, and the lessons this crisis in the first world is leaving us, that model no longer seems viable. To the contrary, the crisis has pushed or made haste on untold number of initiatives for bilateral or regional trade.
Some initiatives are set up around geographical vicinities, such as in Southeast and East Asian regions, where several countries compete in the same sectors, or keep historic rivalries, which make it difficult to reach general free trade agreements; as a matter of fact several similar initiatives are negotiated simultaneously, and face obstacles similar to those which took place at the heart of the WTO.
Others are based on affinities or historic alliances. For instance the Customs Union between Belarus, Kazakhstan and Russia, already in effect, to which Tajikistan and Kyrgyzstan might join. This union is the first step in a very ambitious and complex Russian integration project: The Eurasian Union (EAU), which goes beyond a mere comercial sphere; similar to the European Union.
And finally there are other leagues, similar to the previous ones, but without the geographical proximity component, which seem to blend economic interests and political alliances. Within this group lies the Trans-Pacific Partnership Agreement (TPP), comprising nine countries: Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, United States and Viet Nam, with the U.S. as its leader, and to which Canada, Japan and Mexico are negotiating their entry.
There is always a dominant member in any multilateral partnership, even if it is a strictly commercial one, needless to say when it has political components. Even in the European Union, which on paper grants equality to all its members, is clear that France and Germany carry the leading voice.
East and South Asia present a more complex situation; although China exerts its influence on its neighbours, this hardly transcends the commercial scope and it is highly unlikely that a political-economic bloc would emerge in the region, or that the political leadership of a dominant rival be admitted.
The three major free trade agreements being negotiated in the Asia Pacific region are the East Asia Free Trade Area and the Comprehensive Economic Partnership for East Asia on one hand, and the TPP on the other.
The difference between them is that the first two integrate exclusively Asian countries; China is one of its promoters and the U.S. is not part of them, nor could it be.
The TPP incorporates countries from the Pacific Rim instead, and is open to any Rim country that applies for membership and is willing to adhere to the TPP policies. The US is the dominant country and for now China is not part of it and seems unlikely to be included.
Considered from both sides, Chinese participation seems difficult. The Chinese perspective views the U.S. return to the Pacific on the one hand as an attempt to limit China’s economic growth and to narrow down its potential military influence in the region. On the other, China is unwilling to comply with regulations imposed by others.
From the point of view of the counterpart, the U.S. hastened the conclusion of the general agreement in such a way that potential new members will have to agree to its principles as they are, some of them custom made for the U.S., and no gaps are left for the Asian giant to enter.
The Trans-Pacific Partnership (TPP) Agreement will be comprehensive, and the following are some of its unique features [ii]:
Core issues: traditional trade agreements, including those regarding indU.S. trial goods, agricultural and textile products, as well as intellectual property policies, technical trade hurdles, labour and the environment.
Cross-cutting issues not included in previous trade agreements, like making the regulatory systems of TPP member countries more compatible so U.S. companies can operate more seamlessly in TPP markets, and assistance for small and medium innovative enterprises which generate employement to participate more actively in international trade.
New emerging trade issues: trade and investment in ground-breaking goods and services, including digital technologies, and mechanisms to ensure that state-owned enterprises compete on equal grounds with private companies and do not distort competition in ways that put U.S. companies and workers at a disadvantage.
Also the TPP has a unique attribute: most of the Asian Pacific members hold treaties or cooperation commitments in the military and security spheres with the United States. The U.S. has military bases in Australia, Japan and South Korea, the latter a potential candidate for the TPP.
With Brunei, Malaysia and Singapore the U.S. has 17 years of uninterrupted military exercises in the South China Sea under the Cooperation Afloat Readiness and Training (CARAT exercises), and is currently under negotiations with Singapore for setting up a naval station for its new LCS (Littoral Combat Ships) type warships[iii] at the Changi Naval Base [iv].
Other potential TPP members are Colombia, Thailand and the Philippines; the U.S. has agreements of cooperation, logistical support and military training with them as well.
Another aspect to consider is that the TPP members are stepping up the pace; at the APEC Summit in Honolulu in November 2011 the conclusion of the general agreement and the decision to finalize pending detail matters shortly were announced with the aim to sign the definitive agreement in 2012.
As already mentioned, the TPP follows the line of the Russian Customs Union and both initiatives – if the TPP becomes a reality – seem to shape the model of future economic blocks, based on trade agreements and alliances on other common interests and affinities.
Raúl de Sagastizabal
[ii] http://www.whitehouse.gov/the-press-office/2011/11/12/trans-pacific-partnership-leaders-statement and