The formal signing last week of the world’s biggest trade and investment agreement — the Trans-Pacific Partnership, or TPP — went almost unnoticed in most countries, but it could soon start to change the world’s economic and political maps.
One of the reasons why the 12-country trade agreement’s Thursday signing ceremony in New Zealand drew little world attention was that neither President Barack Obama nor other leaders of participating countries attended the event, and chose to send their trade ministers instead.
Obama did not want to draw much attention to the TPP in an election year, when his Democratic Party’s presidential hopefuls — Hillary Clinton and Bernie Sanders — are saying they oppose the free trade deal.
But that’s standard procedure by Democratic presidential hopefuls, who don’t want to antagonize anti-free trade union supporters in election years. Both Obama and former President Bill Clinton opposed or questioned free trade deals when they were running for president, only to embrace them once they took office. Hillary Clinton wouldn’t be much different.
So the TPP, which took five years to negotiate and has to be ratified by its major signatories, has a good chance of passing the U.S. Congress after the November elections with the support of most Republican and some Democratic legislators.
It will include the United States and Japan — the world’s third-largest economy — alongside other Pacific Rim countries such as Australia, New Zealand, Singapore, Vietnam, Canada, Mexico, Peru and Chile. Together, TPP member countries represent an 800 million people market, and nearly 40 percent of the world economy.
The Obama administration says the TPP will eliminate more than 18,000 taxes that member countries now put on U.S. products, which should help significantly increase U.S. exports. Strategically, it will also help contain China’s influence in the world, U.S. officials say privately.
In Latin America, it will allow Mexico, Peru and Chile to have greater access to Asian markets. Also, at a time when foreign investments in Latin America are falling as a result of the region’s current recession, it will allow the three Latin American TPP member countries to attract more international investments.
Under the deal, a Mexican firm that exports car parts to the United States, for instance, will be able to offer investors greater returns, because more of its products will be allowed to be assembled in the United States for duty-free export to Asian TPP countries. Not surprisingly, Colombia, Panama and Costa Rica have expressed interest in joining the agreement.
Conversely, unless they decide to join TPP in coming years, the TPP will further isolate Brazil, Argentina, Venezuela and other South American countries that are not part of it. These countries are already being hurt by their dependence on China, whose economy is slowing down.
“The TPP does not aim to create divisions within Latin America, although it will accentuate the contrast between TPP member countries’ pursuit of export-oriented growth strategies, and the more closed economic models of countries such as Brazil and Venezuela,” says Christopher Wilson, of the Woodrow Wilson International Center for Scholars’ Mexico Institute.
In other words, it will heighten an existing partition of the Americas, between countries that seek to further insert themselves in the global economy and export more manufactured and high-tech goods, and those that have no extra-regional free trade deals and export almost exclusively raw materials.
My opinion: Like in a game of musical chairs, the TPP will force all countries to find a place in the new world trade map, or risk being left out of the picture.
China’s economic slowdown will make it increasingly difficult for South America’s commodity exporters to stay out of the TPP, or other major extra-regional economic blocs. Brazil and Venezuela’s idea that they can prosper by increasing free trade within South America — which accounts for 8 percent of world trade — is increasingly absurd, and a recipe for greater poverty.
And, because the TPP will increase the number of countries that will enjoy free trade access to the giant U.S. market, there will be a greater-than-ever need for all countries — TPP members or not — to become more competitive and more innovative.
There will be so many countries with free trade deals that the key to growth will not be just expanding access to markets, but inventing new products to export.
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Miami Herald/El Nuevo Herald Speakers Series
Columnist Andres Oppenheimer interviews former Colombian President Alvaro Uribe at 8 a.m. on Feb. 29 at Miami Dade College, Wolfson Campus. The event will be in Spanish. Tickets are $25 in advance. Purchase at elnuevoheraldeventos.com.