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9 Ways the TPP Is Bad for Developing Countries

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9 Ways the TPP Is Bad for Developing Countries

The TPP is supposed to create a level playing field for trade. Instead, it unfairly shackles developing economies.

BY RICK ROWDENJULY 7, 2015 - 12:58 PM
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In the photo, activists hold anti-TPP placards during U.S. President Barack Obama’s visit on April 26, 2014, to Kuala Lumpur, Malaysia.

Photo credit: Rahman Roslan/Getty Images

(TPP) — a major new trade agreementunder negotiation among 12 countries in the Asia-Pacific region — received a shot in the arm in the United States at the end of June when Congress voted to grant President Barack Obama “fast-track” authority to negotiate it. The TPP has fueled considerable dispute. Reasons for this include the secrecy with which talks have been conducted, the agreement’spotential effects on U.S. jobs and growth, and its geopolitical implications. But one issue that has received comparatively little attention is how the TPP is likely to impact the developing countries slated to join.

The United Nations designates six of the 12 TPP members — Brunei, Chile, Malaysia, Mexico, Peru, and Vietnam — as “developing countries.” If enacted, the TPP could block these countries from successfully industrializing and joining the developed world. What would this mean in practice? Blocking industrialization would mean locking these countries into low-end agricultural and extractive industries, preventing tens of millions from accessing higher-paying jobs in the manufacturing and service sectors. Domestic tax bases would stay too low to adequately finance social protection, investment in health, and education. High levels of poverty would remain. And the cost in human potential would be all but incalculable.

All of this because of a trade deal? Yes, the TPP really is that bad. Here are nine major ways the agreement would stunt the national economic development of its developing-country members:

1) The TPP forces equal rules on unequal partners.

We don’t let professional NFL teams play football against toddlers, but this basic truism is tossed out when it comes to economies in the TPP. The TPP members that are already rich and industrialized (Canada, the United States, Japan, Australia, and New Zealand) are aggressively seeking uniform tax and financial policies and low levels of regulation around the world in order to reduce operating costs for their multinational corporations — which had a hand in drafting the text of the agreement. They claim that in today’s globalizing economy, trade agreements must be based on “fairness” and “a level playing field” — premised on the idea that a government’s tax, financial, or trade policies should not provide preferential support for domestic companies.

But though the TPP’s six developing-country members are each at very different stages of economic development, what they all have in common is that their domestic firms are far less advanced and competitive than those from the more advanced economies. Correspondingly, each of these countries needs to support its domestic industries with its own unique mix of subsidies; long-term, low-interest subsidized credit; supportive technology policy; and research and development. The TPP would forbid many of these policies in the name of “fairness,” ignoring the fact that its developing and developed members are at different stages of economic development and, therefore, have diverging needs.

2)The TPP forbids using trade policy to protect domestic industries.

Going further than current World Trade Organization rules, the TPP seeks deep cuts in quotas, tariffs, and other protective trade policies, ensuring that nascent manufacturing industries in its developing members will face massive competition from far more competitive foreign firms. The TPP would also prohibit levying taxes on the export of raw materials — a policy that encourages such resources to stay at home and be available for use by domestic manufacturers. But this demand that all should play by the same rules and lower their levels of trade protection in equal measure is especially egregious because it defies the historical record and its key lessons about what developing countries must do to industrialize successfully. In fact, today’s rich countries developed their manufacturing sectors with high levels of trade protection and other state support, often for decades at a time, until they were finally able to compete in world markets. They realized, through trial and error, that trade should be liberalized only after domestic firms become competitive internationally — not before.

3)The TPP bans using government procurement to assist domestic firms.

The rich countries in the TPP negotiations are demanding that foreign corporations be allowed to compete with domestic companies for government procurement contracts. But historically, countries have used procurement as an explicit form of assistance for their domestic firms. This has led the Malay Economic Action Council to warn that “if Malaysian Government procurement was conducted on a level playing field, many Malaysian companies would go under.”

4)The TPP limits regulation of foreign investors too much.

The TPP proposes that no special regulations be allowed to apply to foreign investors, meaning they must be treated no differently from domestic companies. But this is another example of hypocrisy — most industrialized countries long used “local content” rules and other regulations to ensure that foreign investment transferred technology and purchased local goods and services to boost domestic sectors. However, according to a leaked draft of the TPP’s Investment chapter, any policies that favor local ownership would be considered “discriminatory” and prohibited.

5)The TPP undermines the sovereignty of national courts and scares countries from adopting new regulations.

To enforce the TPP’s new deregulated standards, it also proposes to radically extend the traditional definition of “unfair expropriation or nationalization” of a foreign investment to include “the expectation of gain or profit.” Thus, it allows a corporation to sue a signatory nation for enacting new regulations or laws — even those that address public-interest concerns like labor and environmental rights — if it believes these would deprive it of “expected profits.” According to this investor-to-state dispute settlement (ISDS) mechanism, already found in many recent trade and investment agreements, if a new law or regulation ends up costing foreign investors “lost planned profits,” they can sue the government to either get rid of the law or pay up to hundreds of millions of dollars in fines and penalties to the investors. The ISDS feature takes disputesout of domestic courts to secretive international tribunals that have the power to overturn judgments of national courts and offer no chance for appeal. For example, the tobacco giant Philip Morris is presently suing Uruguay because the latter’s public health regulations on cigarette advertising are hurting the sales it had “expected” there.

While rich-country trade negotiators say that such assurances for investors are needed to attract foreign investment, Nobel laureate and economist Joseph Stiglitz notes that many multinational corporations already have investment insurance through either their own governments or the World Bank’s MIGAand that the real reason for ISDS is political: to create “a chilling effect” in the less advanced TPP countries, in which the threat of lengthy, multimillion-dollar lawsuits is enough to make governments reluctant to adopt laws or regulations that may offend foreign investors. In so doing, foreign corporations seek to achieve by stealth — through secretly negotiated trade agreements — what they could not attain in an open political process. Although a growing number of developing countries around the world (Brazil, India, South Africa) refuse to allow ISDS clauses in future agreements, the TPP apparently still includes the provision.

6)The TPP makes countries more vulnerable to financial crises.

The TPP goes against new thinking onbest practices regarding capital controls — restrictions on the ability of investors to bring in or take out vast amounts of capital from countries overnight. Even the IMF reversed its long-standing opposition to capital controls in 2012, finally agreeing with mounting research showing that capital controls may be useful in ensuring financial stability in a crisis by stemming sudden outflows or disruptive inflows. Yet despite this new conventional wisdom, the TPP would block developing countries from using capital controls.

As if nothing was learned from the 2008 financial crisis, the TPP also calls for a whole range of financial liberalization rules that would block countries from regulating speculative financial activities and would further deregulate the financial services sector. Economist Anton Korinek of Johns Hopkins University explained that such excessive financial deregulation is similar to relaxing safety rules on nuclear power plants: It may reduce costs and increase profits for the nuclear industry, and may even reduce electricity rates — while increasing the risk of a nuclear meltdown. Similarly, financial deregulation increases the profits of the financial sector at great risk to the rest of society, and it threatens the financial stability of developing and developed TPP members alike.

7)The TPP undermines public health.

Many health groups such as Doctors Without Borders have campaigned against the TPP because its rules on intellectual property rights (IPR) would keep cheaper generic drugs out of reach for millions of poor people in developing countries. According to a leaked draft of the IPR chapter, the TPP would greatly extend existing patents and copyrights on essential drugs and expand the scope of patents and copyrights beyond finished products to include coverage of many components of finished goods. If enacted, such rules would considerably undermine developing countries’ ability to address public health needs — meaning that more people would die.

8)The TPP blocks companies from acquiring needed technology.

The IPR chapter would also significantly stunt the development of manufacturing firms in developing countries because it would considerably raise the costs of and create new barriers to accessing needed manufacturing technologies, therebyhampering firms’ ability to engage in reverse-engineering — a key step in the learning-by-doing process used by all rich countries when they were first developing.

9)The TPP undermines state-owned companies.

The TPP proposes breaking up state-owned enterprises (SOEs), which have been cornerstones of East Asia’s successful industrialization strategy for many decades. Not only would the proposed reforms significantly curtail state support for such firms, but they would also commercialize current SOEs in Malaysia, Vietnam, and Singapore. These countries would be locked into such constraints going forward and would be prevented from offering state support to any new or future SOEs. Once again, this blocks developing countries from using strategies that rich countries used themselves. As rich countries learned long ago, when private investors are unable or unwilling to invest in strategic sectors, the state needs to step in and play the role of “entrepreneur of last resort.”

Some developing-country policymakers in TPP countries may be agreeing to these rules in the belief that accepting them is necessary to attract foreign investment and secure participation in global value chains. Others, it is widely believed, think that signing onto the TPP will give them some added protection from China’s growing influence in the region. If so, such shortsighted strategies may come at the high price of forgoing successful long-term national economic development.

9 Ways the TPP Is Bad for Developing Countries | Foreign Policy
 
True but unless Vietnam has big ambitions to become a top tier country,then TPP is a good deal to settle for.

Any developing country will find it hard to get developed post-China‘s rise. Japan and Korea just played easy mode.
 
True but unless Vietnam has big ambitions to become a top tier country,then TPP is a good deal to settle for.

Any developing country will find it hard to get developed post-China‘s rise. Japan and Korea just played easy mode.

I think that the explanation is simpler: is there anything post 1995 from the US that Vietnamese don't like?
 
Can‘t think of any

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Maybe this? :lol:

True, haha, i think this table sum it up all, most young people around the world view US favourable, China is the widest, i guess most young people are ignorant of history, it is the old that hold the hatred, and many PDF vietnamese are young generation, so u should expected that. Soft power at work:lol:.
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And u got this map
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True but unless Vietnam has big ambitions to become a top tier country,then TPP is a good deal to settle for.

Any developing country will find it hard to get developed post-China‘s rise. Japan and Korea just played easy mode.

China rise was due to Western ideology. Giving up on Mao based Marxism–Leninism values and accepting a Neo Liberal approach. Before the Great Leap Forward, the country relied heavily on the Soviet Union for political, economic and military aid. After the failures of the Cultural Revolution, Mr. Deng Xiaoping beg the US to lift the trade embargo for investment in the 1980's. Germany, Japan and Korea on the other hand industralized much earlier because they had major aid from the US after WW II and went through democratic and economic reform.

We have to look at TPP through a cost benefit analysis. In the short term it will boost Trade and FDI. In the long term it will threaten domestic industries which will be unable to compete due to restricted rules that favour foreign companies which will lead to less marketshare, job loss and slower economic growth.

I think of TPP as a "Get Rich Quick Scheme" somewhat of a pyramid scheme. Everyone joining because the US says so, therefore it must be good but in truth theres little or no value other than sacrificing local industry for the sake of making a few bucks. Those who have sign the TPP agreement have now accepted US hegemony. The hidden motive for TPP is for the US to gain economic and geopolitical power to subdue threats like China.

I only post articles regarding TPP to remind and piss off Chinese keyboard warriors that US is here to stay in Asia :lol:
 
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So who is in here from EU loves China beside the German dude in here that I know?
 
China rise was due to Western ideology. Giving up on Mao based Marxism–Leninism values and accepting a Neo Liberal approach. Before the Great Leap Forward, the country relied heavily on the Soviet Union for political, economic and military aid. After the failures of the Cultural Revolution, Mr. Deng Xiaoping beg the US to lift the trade embargo for investment in the 1980's. Germany, Japan and Korea on the other hand industralized much earlier because they had major aid from the US after WW II and went through democratic and economic reform.

We have to look at TPP through a cost benefit analysis. In the short term it will boost Trade and FDI. In the long term it will threaten domestic industries which will be unable to compete due to restricted rules that favour foreign companies which will lead to less marketshare, job loss and slower economic growth.

I think of TPP as a "Get Rich Quick Scheme" somewhat of a pyramid scheme. Everyone joining because the US says so, therefore it must be good but in truth theres little or no value other than sacrificing local industry for the saking of making a few bucks. Those who have sign the TPP agreement have now accepted US hegemony. The hidden motive for TPP is for the US to gain economic and geopolitical power to subdue threats like China.

I only post articles regarding TPP to remind and piss off Chinese keyboard warriors that US is here to stay in Asia :lol:

US will be displaced in Asia in trade, investment, financing, as a technology provider, as a weapons provider, tourists, infrastructure construction, currency use, etc.

China as a developing country has already displaced the US in many areas not just in Asia but the world and that will only favour China as years go by as China's population size shifts the advantage in China's favour.

Whatever US can provide, China will be able to provide in favourable terms.

China doesn't have to kick the US out, China's sheer size alone will make sure American monopoly is broken and thus American power and influence diminished.

China also has the advantage of geography when trading with Asian countries that the US will never be able to overcome.

Bottom line is, as the years go by, China will increase its power and influence SIGNIFICANTLY and America will continue to lose its power and influence SIGNIFICANTLY as its monopoly positions are broken up by China's rise.
 
who can export to US, he get a benefit. who can not do it he is protested it.

True, haha, i think this table sum it up all, most young people around the world view US favourable, China is the widest, i guess most young people are ignorant of history, it is the old that hold the hatred, and many PDF vietnamese are young generation, so u should expected that. Soft power at work:lol:.

Do you know that we have big deficit in trading with China ?
 
How TPP Will Transform Southeast Asia: A Case Study Analysis


Few have paused to consider what the TPP means for the four Southeast Asian nations in negotiations: Vietnam, Malaysia, Singapore, and Brunei. A range of issues are at stake, from currency manipulation to regulation of state-owned enterprises (SOEs), which have particular relevance for Southeast Asia’s state-centric economies. The TPP could bring about significant financial and social reforms to these countries, opening the playing field to foreign investors while introducing progressive labor standards and environmental protections.

Many of the rising “tigers,” as Asian economic powers like Singapore came to be known following rapid growth in the last half-century, benefited from protectionist policies and high tariffs reducing foreign competition. Vietnam and Malaysia in particular maintain some of the world's highest tariffs and non-tariff barriers (NTBs) against foreign businesses. So why would these economies want to open their doors to change now?

According to a study by Peterson Institute, Vietnam may stand to gain the most under the TPP framework. Jack Sheehan, a partner at DFDL specializing in cross-border legal services,:

In 2012, Vietnam exported almost $7bn (£4.2bn) worth of apparel to the US, which accounted for 34% of US apparel imports. Vietnam also exported $2.4bn worth of footwear…The TPP will allow Vietnam to export apparel to the US at a 0% tariff rate, which will make Vietnamese exports even more competitive.
Phasing out high tariffs will expose domestic industries to increased competition from overseas investors, but ultimately these structural reforms will set Vietnam’s economy on stronger ground and promote innovation in local firms.



Reference: The Diplomat
 
How TPP Will Transform Southeast Asia: A Case Study Analysis


Few have paused to consider what the TPP means for the four Southeast Asian nations in negotiations: Vietnam, Malaysia, Singapore, and Brunei. A range of issues are at stake, from currency manipulation to regulation of state-owned enterprises (SOEs), which have particular relevance for Southeast Asia’s state-centric economies. The TPP could bring about significant financial and social reforms to these countries, opening the playing field to foreign investors while introducing progressive labor standards and environmental protections.

Many of the rising “tigers,” as Asian economic powers like Singapore came to be known following rapid growth in the last half-century, benefited from protectionist policies and high tariffs reducing foreign competition. Vietnam and Malaysia in particular maintain some of the world's highest tariffs and non-tariff barriers (NTBs) against foreign businesses. So why would these economies want to open their doors to change now?

According to a study by Peterson Institute, Vietnam may stand to gain the most under the TPP framework. Jack Sheehan, a partner at DFDL specializing in cross-border legal services,:

In 2012, Vietnam exported almost $7bn (£4.2bn) worth of apparel to the US, which accounted for 34% of US apparel imports. Vietnam also exported $2.4bn worth of footwear…The TPP will allow Vietnam to export apparel to the US at a 0% tariff rate, which will make Vietnamese exports even more competitive.
Phasing out high tariffs will expose domestic industries to increased competition from overseas investors, but ultimately these structural reforms will set Vietnam’s economy on stronger ground and promote innovation in local firms.



Reference: The Diplomat
It will turn Southeastern Asian country into a dumping yard.They will loose the chance to climb up towards the value chain and become some sort of colony.But I think that's the best they can get without the TPP,so anyway it doesn't matter too much.
 
It will turn Southeastern Asian country into a dumping yard.They will loose the chance to climb up towards the value chain and become some sort of colony.

As I've mentioned in the Vietnamese case, the TPP poses a strategic and economic advantage by liberalizing markets, removing tariffs and enabling Vietnam (and others) to import their goods unabated to the markets in the United States and Japan etc. We're looking at an economic integration platform , and that integration concept shouldn't be mixed with neo-colonialist feelings , which simply is not the case.

I used to be against the TPP, but after long analysis of the benefits and cost; the benefits outweigh the costs.
 
As I've mentioned in the Vietnamese case, the TPP poses a strategic and economic advantage by liberalizing markets, removing tariffs and enabling Vietnam (and others) to import their goods unabated to the markets in the United States and Japan etc. We're looking at an economic integration platform , and that integration concept shouldn't be mixed with neo-colonialist feelings , which simply is not the case.

I used to be against the TPP, but after long analysis of the benefits and cost; the benefits outweigh the costs.
It's not about feeling,it's about the hard truth.Even The third biggest LCD screen maker China need to protect his LCD screen market by high tax.No need to mention those countries whose technique are in much inferior position.It will ruin the local industries of those countries.
In order to become a technical advanced devoloped coutry,One country need some space for local firms to mature.That is a must.
 
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As I've mentioned in the Vietnamese case, the TPP poses a strategic and economic advantage by liberalizing markets, removing tariffs and enabling Vietnam (and others) to import their goods unabated to the markets in the United States and Japan etc. We're looking at an economic integration platform , and that integration concept shouldn't be mixed with neo-colonialist feelings , which simply is not the case.

I used to be against the TPP, but after long analysis of the benefits and cost; the benefits outweigh the costs.
True, just look at the bigger picture, and pple can see what JP will get in TPP.

Why S.K is not allowed to join TPP ?? Yes, coz US want Japan to take control of S.K and Taiwan again.

China will be weaken and soon will lose Taiwan to Japan once again :)
 
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