Vietnam leads way with trade deal

 

 

Port of Vancouver, the largest port on the west coast of North America by metric tonnes of total cargo. Source: Wikimedia

While the Pacific region is moving ahead with the creation of a colossal free-trade zone, the murky politics of the US, wrapped up in election fever, is casting doubt on the involvement of the world’s biggest market.

Hanoi has officially announced it would ratify the Trans-Pacific Partnership (TPP) trade agreement during the next session of the National Assembly after July 20.

Now at least six of the 12 countries involved in the deal must ratify it for it to come into affect. But if the US does not formally sign it off, the project will be dealt a hammer blow.

Vietnam’s GDP growth could double by 2025 under the TPP, the American Chamber of Commerce in Vietnam claimed. Sticking points for Hanoi include productivity competitiveness and conditions such as allowing trade unions, health and safety and environmental protection inspections but, generally, Vietnam is set to do well from the deal with its old foe.

The TPP would become a free-trade market of 800 million, potentially accounting for 30 per cent of global trade and about 40 per cent of the world’s economy.

Deputy Director of the Central Institute for Economic Management Le Xuan Sang said exports such as food, textiles, footwear, seafood and timber products would be exempt from import duties when entering Japanese, Canadian and US markets.

Other participants also look set to sign it off. The TPP started out with Chile, New Zealand, Singapore and Mexico with the US joining in 2008 and Vietnam in 2009. The deal now includes 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam. But US ratification is in doubt with the issue becoming increasingly political ahead of November’s presidential election.

The ratification process is also facing political hurdles in Canada and Japan.

A US failure to join the deal would not necessarily be terminal. In March New Zealand’s Prime Minister John Key said “everyone else isn’t going to stand still” if the US Congress rejected the TPP and that other countries would move in to take advantage of the available markets.

But with the US it would be one of the world’s biggest multinational trade deals and the economic centrepiece of outgoing President Barack Obama’s “pivot to Asia”. The 12 leaders signed it in February, following five years of talks.

As well as lowering or removing tariffs and duties, it would set common standards on issues ranging from workers’ rights to intellectual property protection.

There was now “a very small chance” of a US TPP ratification during 2016, said Assistant Professor Kaewkamol Pitakdumrongkit from Singapore’s S Rajaratnam School of International Studies.

“TPP, like all other trade deals, creates winners and losers. Multinational companies or some farmers may gain access to new markets overseas but there are those who lose out, namely workers in labour-intensive industries,” she said.

“Given that the election race is heating up, parties would avoid voting on controversial legislation like the TPP, as doing so is seen as too risky. That’s why I don’t think Obama can muster enough votes to ratify the TPP this year,” Pitakdumrongkit added.

Democrats do not want to alienate the working voter in an election year. And Republicans have expressed unhappiness with details in the TPP, such as the period of market exclusivity for biologic drugs, which they say could harm the industry in the US.

Republican hopeful Donald Trump is vocal in opposition to free-trade agreements, in general, in his bid to win over the disenfranchised middle class voters who feel their jobs and prosperity have been washed away by free trade and foreign competition. Trump called the TPP “a disaster” and warned that it could encourage US firms to relocate production overseas.

Democrat Hillary Clinton, partially forced to campaign on the left by primary challenger Bernie Sanders, has also expressed reservations about the agreement. Clinton has made a U-turn to oppose a deal she once described as “setting the gold standard” in 2012.

But her opposition may well melt away after being sworn in.

A coalition of more than 450 US environmental groups are also opposing TPP, arguing it would expose the US to legal action by energy companies in international tribunals to roll back laws designed to protect the environment. The US, however, has a history of ignoring other international organisations so this is probably not a major threat.

While Yogi Berra sagely pointed out that “it’s tough to make predictions, especially about the future”, US opposition to TPP may well look very different after November.

Despite a media storm over Trump’s apparent successful nomination as the Republican candidate, he remains the most implausible presidential candidate in living memory.

US candidates perceived as being on the political extremes, like Barry Goldwater in 1964 and George McGovern in 1972, get hammered in general elections and Trump’s own adopted party already appears to be positioning itself ahead of his eventual failure.

If Obama cannot get the TPP deal through after November but before he leaves office in January, it will fall in the next president’s in tray. Whether a president Clinton could, however, persuade a hostile Congress to sign off on the TPP is another challenge and it might well provide her with an early headache. But the job does famously come with its difficulties.