On TPP and Fast Track

28 June 2015

The granting of ‘fast-track’ authorisation by the US Congress for the Obama administration to negotiate the Trans-Pacific Partnership (TPP) marks a new stage in the attempts by the United States to erect a multilateral trade and investment framework that favours US interests. (Fast track authorisation means that when the bill finally gets to the US Congress, it can only accept or reject the bill, not change its contents). Along with Peru, the TPP will include twelve countries in the Pacific basin, the biggest of whose economies, by far, are the United States and Japan.

The US has a huge strategic interest in mitigating the growing regional influence of China, but of course with any trade deal, like NAFTA before it, it has to benefit US commercial interests. The TPP will not include China, Peru’s key trade partner and the source of much of its investment. Indeed, the geopolitical idea behind the TPP appears to be to set new rules of the game for business within the Pacific basin, rules which China will, sooner or later it is assumed, be obliged to adapt to.

Fast track was opposed vehemently by many Democrats in the House of Representatives, but was approved by a majority made up mainly by Obama’s Republican opponents. In Peru, as in the US, details of the negotiations around the TPP have been shrouded in secrecy. That does not mean that there has been little interest internationally in the principles of the agreement or in what is guessed are the details (see for example http://www.newyorker.com/news/daily-comment/why-does-obama-want-the-trans-pacific-partnership-so-badly). Of course, as in other countries, the Congress in Peru will have the last word about whether TPP goes ahead, but by that time it is likely to be viewed as a done deal.

As was the case with the Free Trade Agreement (FTA) between Peru and the United States, this deal is as much about investment as it is about trade. In addition to the strategic interests, the aim is to buttress the interests of US-based transnational companies and to make it more difficult for other countries to question the validity of the rules under which they operate. Particularly thorny issues relate to intellectual property rights and rules on public procurement.

As with all reforms, there will be winners and losers, both in terms of countries and in sectors within them. The most powerful countries will seek to fashion the rules in ways which they perceive to be to their advantage. As in the United States, the main beneficiaries in Peru are likely to be business groups (especially those exporting or working in close collaboration with transnational companies or involved in exporting to the Pacific Rim economies). The main losers are likely to be in the labour sector, those who end up paying for intellectual property (eg pharmaceuticals) and those industries that find themselves undercut by cheap imports from abroad.

Peru’s chief negotiator is the former finance minister and now ambassador in Washington Luis Miguel Castilla. Judging by his trajectory, there can be little doubt as to which side he is on. Castilla recently expressed his hope that the TPP would be fully ratified well in advance of the 2016 elections in both Peru and the United States.
http://gestion.pe/economia/embajador-luis-castilla-se-finalizar-negociaciones-acuerdo-transpacifico-antes-elecciones-peru-2134263

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