Why Free Marketeers Are at Odds over the TPP

With 12 countries signed on, the Trans-Pacific Partnership will affect 40 percent of the global economy.
With 12 countries signed on, the Trans-Pacific Partnership will affect 40 percent of the global economy. (DPICuantico.com)

EspañolLast Monday, October 5, the United States, Mexico, and Canada, along with nine other countries agreed to move forward with the Trans-Pacific Partnership (TPP) to reduce trade barriers in the region.

As for the potential benefits of such a partnership, Steve Hanke, professor of applied economics at Johns Hopkins University in Baltimore, tells the PanAm Post that the treaty is far from a true commercial agreement, and it is therefore “complicated” to determine who may gain or lose from it.

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However, Hanke expects large multinational corporations, those who pushed for the creation of the TPP in the first place, to benefit most from the treaty.

Before it can be implemented, the agreement will need approval from the parliaments of each of the member countries. The plan is to regulate commerce and establish standards for goods of all types: from rice to automobiles.

The TPP will affect 40 percent of the global economy, and includes as its member states Australia, United States, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

The plan boasts of tax-free exchange benefits for the majority of products traded among member states, and reduced taxes for other goods.

“The multinationals have their political-action groups; they can hire law firms, everything. They want to handle it, because they want exclusive power,” Hanke says.

“If this were a free-trade treaty, everybody would gain from it, without a doubt. The buyer would have to think he is buying something good, and the seller would believe in the product as well; otherwise, there would be no sale.”

However, Hanke believes the TPP is not actually a step towards free trade, and may, in fact, be quite the opposite.

“They are telling buyers and sellers what the rules are, and what it is they have to do. By definition, this is not a free-trade treaty. It is thousands of pages worth of regulations dictating what each party should do,” he explains.

Argentinean Iván Cachanosky, an economist and researcher for the Foundation for Progress in Chile, says that the most important and immediate effect that this treaty will have is granting access to a larger quantity of goods, and at better prices for consumers.

“Goods will be higher in quality. More goods will be available, at a higher quality and at more accessible pricing,” the analyst explains.

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As for the potential of the TPP to generate greater unemployment, Cachanosky agrees that certain industries will likely be affected, but argues that the deal will have beneficial effects on local economies in the long term.

“There will be an improvement globally, since it will create more jobs in other industries; it will likely surpass the number of jobs lost, because it will allow for a more efficient use of resources dispersed around the world.”

Mosiés Kalach, president of the Mexico Coalition for TPP, insists that this treaty will benefit Mexico.

“This is great. Mexico couldn’t afford to be left out of a commercial agreement which will surely change how trade is done around the world in the next few years,” he says.

According to Kalach, Mexico continues to be a key player in global innovation, and says the country will act as a strategic bridge between Asia Pacific and the Americas. “The agreement opens up the possibilities for Mexico to continue growing in strength, particularly in manufacturing. It also opens markets for our agricultural and livestock products,” he adds.

He explains that there will likely be certain sectors that will not benefit from this agreement, but that “the treaty will, in general, be beneficial for our country.”

The Mexico Enterprise Coordinating Council (CCE) claims the treaty opens the door for US$150 billion in exports from the automobile, electric, electronic, agro-industrial, chemical, steel, and fragrance sectors in the country.

Finally, US President Barack Obama, one of the strongest supporters of the project, has promised that US citizens will be able to view the full text of the agreement before he signs it into law.

“Once negotiators have finalized the text of this partnership, Congress and the American people will have months to read every word before I sign it,” the president said. “I look forward to working with lawmakers from both parties as they consider this agreement. If we can get this agreement to my desk, then we can help our businesses sell more Made in America goods and services around the world, and we can help more American workers compete and win.”

Translated by Vanessa Arita.

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