The controversial Trans-Pacific Partnership (TPP) is back, despite the best efforts of many, including some of the most important countries that drove it in the first place.
The TPP is a deal eight years in the making. It was intended to include 12 nations, the US, Australia, New Zealand, Singapore, Brunei, Chile, Peru, Vietnam, Malaysia, Mexico, Canada and Japan. But it’s been mired in controversy almost from the beginning.
So much so that withdrawing from the deal was one of US President Trump’s first acts in office.
After the US withdrawal, many assumed that the deal was dead. Negotiations to bring the US back to the table have so far failed. Canada also walked away in November, but has since returned after winning several concessions.
There’s an argument to be made that the US refusal to return to the table may be a negotiating tactic. Perhaps seeking similar concessions to those Canada managed. It’s difficult to imagine the Trump government producing such a nuanced position, though. Pulling out of the TPP was a populist election promise for Trump. Part of his protectionist policy, to bring jobs back to the US.
It’s not clear how refusing to trade with its neighbours will create jobs for the US. But former President Obama’s government was a key driver of the TPP. That may have more to do with it than any actual disagreement about the deal. Or even understanding of it. Trump made it a highly public goal to destroy anything Obama achieved in office, for good or ill.
Trump’s hatred for anything his predecessor ever touched seems obsessive. And he’s been far too vocal about it to ever walk it back. It’s unlikely that he could re-join the deal even if he wanted to.
But it seems that if the US won’t trade with the world, the world will trade without the US.
Following talks in Tokyo, Australia’s Trade Minister Steve Ciobo said this week that the remaining 11 nations are ‘at the finish line’ on the deal. If all goes to plan, it will be signed at a ceremony in Chile in March.
The original intent of the deal was to lower trade barriers between Pacific nations. A statement from the Trade Ministers of the nations behind the agreement claims it will:
‘[P]romote economic growth, support higher-paying jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty… and… promote transparency, good governance, and strong labour and environmental protections.’
But to achieve that, it goes much farther than a simple free trade agreement. Which is where the problems began.
Detractors argue that it violates the sovereignty of every nation involved. The deal requires signatory nations to change their local laws, bringing them in line with the TPP on many issues. Those include copyright laws, investor protections for corporations, and environmental laws.
The blowback against the deal was strengthened by the secrecy surrounding it. Much of the details remained hidden from the public, until Wikileaks released a leaked draft version.
The fact is, this isn’t the first time a free trade agreement has required changes to local law. By definition, any agreement to lower or reduce trade barriers are changing local laws. But the extent of the TPP’s requirements have led to protests in every signatory.
Australians have lashed out at the idea that foreign corporations could sue our government for lost profits caused by Australian laws. It’s been unclear whether something like plain packaging for tobacco could be used as the basis for US tobacco companies to sue our government for lost profits. And it’s even more unclear whether or not they would win.
Today the proponents of the deal claim that the above example wouldn’t be possible, and that provisions exist to protect governments acting in the public interest. And you may disagree with the necessity or effectiveness of government interference in tobacco packaging or similar things. But the idea of foreign corporations overriding the Australian government on local issues is an uncomfortable one.
How you or I feel about the TPP doesn’t seem to matter, though. Questions, comments and protests have all been ignored by governments of all 11 remaining nations.
Trump’s America has chosen the route of isolation and protectionism. A short-sighted path that’s usually far more destructive to jobs, and whole economies, than free trade. But whether the TPP is a better alternative for Australia, only time will tell.
This week in Money Morning
The recent government shutdown in the US caught plenty of headlines, and for good reason. It was a remarkable event. Especially considering that the Republican Party controls the White House, congress, and the senate. But markets seemed unaffected.
However, Ryan explained that this month’s shutdown crisis could be just a preview of much worse to come. Another US government shutdown is looming on the horizon. One that Ryan argues will have a much greater economic impact. To read why, you can find Monday’s Money Morning here.
Then, on Tuesday, Ryan looked at the quiet rise in oil prices recently. One analyst called this resurgence in advance. So far, events have gone exactly as predicted. But the oil story isn’t fully played out yet. And if these predictions continue to be as accurate as they have been, the opportunity in the rest of 2018 could dwarf the rise in oil prices so far. Read the details here.
Ryan looked at the latest from one of the great rebels of the financial world in Wednesday’s Money Morning. Nassim Taleb has made a highly successful career out of calling out supposed ‘experts’ who are confidently wrong. He’s built a fortune finding unlikely but still possible outcomes that the mainstream investment industry had dismissed entirely. And he’s never hesitated to take on anyone, no matter how powerful, who mistakes their assumptions for facts.
Taleb’s latest tilt at mainstream foolishness was directed at the cryptocurrency bears. Most of Wall Street see the current volatility as justification for their dismissal of cryptos. But Taleb argues they have it all wrong. He believes you must hold bitcoin, despite its recent falls. To read why, click here.
A lot has changed in the past 10 years, and on Thursday Ryan explained just how much. Our lives revolve so much around our smart phones — something that has only been a part of society for the past decade. It’s basically a computer that lives in your pocket. As Ryan explains, 2007 brought around the start of a new industry — apps. And the industry is booming. It’s worth billions. And now many web-based businesses are receiving over half of their profits from apps.
A data revolution is here, and with it a collision of growing sectors such as AI and blockchain technology. To read more, click here.
According to the International Monetary Fund’s chief economist, Maurice Obstfeld, we’re heading towards a recession. And so in Friday’s Money Morning, Ryan urged everyone to remain calm at this stage of the cycle. The GFC is a decade old, and Australia hasn’t had to recover as much as other nations. Ryan provides a graph showing that a correction in the markets could be on its way, but not a collapse. To find out why, click here.
Editor, Money Weekend