TPP risks a weaker global trading system, says ex-WTO head

Monday 21st July 2014

The Trans-Pacific Partnership is a step backwards to the days before the World Trade Organisation when the the US and Europe controlled the global trading system to the detriment of developing economies, says a former director-general of the WTO, Supachai Panitchpakdi of Thailand.

In New Zealand for a meeting of the honorary advisers to the Asia-New Zealand Foundation, Supachai told BusinessDesk in an interview that Asian economies had more to gain by pursuing the Regional Comprehensive Economic Partnership (RCEP), which includes China and India but not the US, than TPP, which he described as a "US-centric" trade deal.

New Zealand is one of three countries that initiated the TPP concept and has committed substantial resources to its negotiation, but it only gained momentum once the US became a member of the 12-country grouping seeking a new set of trade rules for an Asia-Pacific trade bloc. The US and Europe are also negotiating a TPP-style deal, known as TTIP (Trans-Atlantic Trade and Investment Partnership).

"TTIP amd TTP together could drive the world back into the old days before the WTO was conceived, a world trading system predominated by major trading nations, which was something I thought we tried to adjust with the more democratic participation of membership of the WTO," said Supachai, who was director-general of the WTO from 2002 to 2005, immediately after former New Zealand prime minister Mike Moore.

New Zealand belongs to both TPP and RCEP, which was initiated in 2012, and is part of the four year-old Association of South-East Asian Nations Free Trade Area (AFTA), most of whose members are involved in both TTP and RCEP.

"For me, the priority should be for Asia to move in the direction of RCEP," said Supachai. "If there should be a need for the US to join in or others, it should be in the context of RCEP."

As secretary-general of the United Nations Conference on Trade and Development (UNCTAD) between 2005 and 2013, Supachai also oversaw analysis of the North American Free Trade Agreement, which found that Mexico had done poorly from the deal while the developed economies in NAFTA - the US and Canada - had benefited.

"At UNCTAD, we pointed out that for a developing country that joins a regional agreement with major, much more advanced economies, they are not easily going to gain much."

That risk existed with TPP, which would be "mainly driven by the major players of the world trade system to set up very forward-looking, very avant garde" rules in areas that less developed economies would struggle to accommodate. These included intellectual property restrictions that could thwart the availability of affordable universal healthcare and rules requiring privatisation of state-owned enterprises with certain timeframes.

TPP negotiations have stalled for more than a year on such sticking points.

"TPP is US-centric," said Supachai. "It leaves the question as to what would the rest of the membership of the TPP be able to contribute fairly to the outcome? My general basic principle on the two so-called mega-deals (TPP and TTIP) is that we have to be a bit cautious about the way we are practicing regionalism these days. I'm open-minded, but regionalism should ultimately prove to strengthen the multi-lateral processes."

Regional trade deals have become increasingly commonly pursued as the global process overseen by the WTO has failed over the last 13 years of the so-called "Doha Round" negotiations to produce a new global trade agreement.

The RCEP initiative was better suited to bolstering Asian economies' growing role in the world economy, said Supachai.

"RCEP is more ASEAN-centric and, for better or worse, ASEAN has a good record of expanding trade. Intra-ASEAN trade is now 53 to 54 percent," he said. "This is only lower than Europe, which is 70 to 80 percent."

New trade agreements needed to be favourable to Asia if only because of the region's status as a "global public good."

"We are the ones now generating more than half of world growth and 67 percent of world trade and the area has been excessively accumulating financial reserves," said Supachai. "That's why RCEP is important. TPP comes in between."

BusinessDesk.co.nz

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