Trans-Pacific Partnership agreement is nothing but an American fantasy

By Zhao Yongsheng Source: Global Times Published: 2015-10-11 21:43:01
Illustration: Peter C. Espina/GT

Representatives from 12 countries in Asia and North and South America finally made a breakthrough in Trans-Pacific Partnership (TPP) trade talks after five years of negotiations. This is considered a big deal, as the 12 countries represent 40 percent of the world’s economy, and this US-led free-trade pact is considered the “biggest and deepest multilateral trade deal in years.”

The US’s motive is clear: to rekindle its economic influence in the Asia-Pacific region and the world while neutralizing China’s rising influence. The US wants to maintain its economic hegemony in the world, particularly in the Asia-Pacific region, which is considered the world’s most economically dynamic region. This intention is clear if we look at the geographic distribution of the 12 countries, which encircle the Pacific Ocean against China.

However, in my opinion, these goals are just an American fantasy, given that the economic world is increasingly polarized, economic and military supremacies are separated, and the economies of China and the 12 countries of the TPP are inextricably intertwined.

Today’s economic world is already polarized among the US, China, Japan, Germany, France and the UK. This economic polarization is formed not only by these countries as individual economic players, but also through these countries’ participation in economic organizations and partnerships. At the global level, we have the WTO; on the regional level, we have the EU, the European Economic Area (EEA), the Commonwealth of Independent States (CIS), OPEC, the North American Free Trade Agreement (NAFTA), the African Union, the South Asian Association for Regional Cooperation (SAARC), Asia-Pacific Economic Cooperation (APEC), NATO and the Commonwealth of Nations, etc.; and at the local level, there are too many organizations to name.

The TPP will only link regional organizations and free-trade partnerships, and its lack of creativity will make its performance mediocre, even if the TPP one day achieves its target of free trade.

I foresee many difficulties and complexities in implementing the pending TPP in its 12 economically heterogeneous signatory countries.

The destructive impact of heterogeneity on free trade agreements has been demonstrated in the EU and the EEA after several decades of experimentation in Europe, despite the fact that European states are much more politically, economically, socially and ideologically homogeneous than the TPP’s 12 countries.

Furthermore, today’s world supremacies (if there are any) are diffuse or shared rather than concentrated in one country. Currently, the two largest military powers are the US and Russia, while the two largest economic powers are the US and China. If we consider the EU as an economic entity, the economic world is mainly led by the EU, the US and China.

This division between military and economic supremacies further increases the complexity of regional economic partnerships such as the TPP because of the “displacement effect.” The segmentation of economic supremacy among the EU, the US and China, and particularly between the US and China, shows that new economic rules cannot operate effectively without the active participation of China.

The TPP is also an American fantasy because of China’s influence on the world’s economy, particularly in the TPP region. China and the 12 TPP members are economically complementary. China plays an essential role in APEC, which represents over 50 percent of the world’s economy, and in the Shanghai Cooperation Organization, which represents more than 22 percent.

The very fact that the US has scraped together a new free trade organization reflects US insecurity about China’s growing economy. After three decades of reform and opening-up, China’s economic structure is much less fragile than before. Its export-oriented economic framework has also adjusted within the last decade.

In short, China’s economy is strong enough to withstand any negative effects the TPP may have on it. The country can choose to engage in this platform or act through another platform that it can create itself.

China already has many cards in its hand, including the Asian Infrastructure Investment Bank (AIIB), the “One Belt, One Road” strategy and many other free trade agreements.

The aggregate economic size of the AIIB member states will surpass the TPP’s 40 percent share of the world economy.

That said, it serves China’s best interests to remain open-minded, tolerant, quick to learn, and quick to adopt policies to counter-balance the US’s aggressive strategy in today’s polarized economic world.

The author is a Paris-based economist and vice-president of the China-France Association of Lawyers and Economists.

Posted in: Expert assessment, Biz Comments

About Uy Do

Banking System Analyst, former NTT data Global Marketing Dept Senior Analyst, Banking System Risk Specialist, HR Specialist
This entry was posted in AIIB, Analysis, Critic, Economist, opinions, TPP and tagged , . Bookmark the permalink.

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