As if undermining the World Trade Organisation's Doha round of global free-trade talks was not bad enough (the last ministerial meeting in Geneva produced barely a squeak), the US has compounded folly by actively promoting the Trans-Pacific Partnership (TPP).
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Barack Obama, the US president, announced this with nine Asian countries during his recent trip to the region.
The TPP is being sold in the US to a compliant media and unsuspecting public as evidence of American leadership on trade. But the opposite is true, and it is important those who care about the global trading system know what is happening. One hopes this knowledge will trigger what I call the "Dracula effect": expose that which would prefer to remain hidden to sunlight and it will shrivel up and die.
The TPP is a testament to the ability of US industrial lobbies, Congress and presidents to obfuscate public policy. It is widely understood free-trade agreements (FTAs) are built on discrimination. That is why economists typically call them preferential-trade agreements (PTAs). And that is why the US government's public relations (PR) machine calls what is a discriminatory plurilateral FTA, a "partnership", invoking a false aura of cooperation and cosmopolitanism.
Countries are, in principle, free to join the TPP. Japan and Canada have said they plan to do so. But a closer look reveals China is not a part of this agenda. The TPP is also a political response to China's new aggressiveness, built in a spirit of confrontation and containment, not of cooperation.
The US has been establishing a template for its PTAs that includes several items unrelated to trade. So it is no surprise the TPP template includes agendas unrelated to trade such as labour standards and restraints on the use of capital-account controls, many of which preclude China's accession.
The TPP's supposed openness has been misleading. It was negotiated with the weaker countries such as Vietnam, Singapore and New Zealand, which were easily bamboozled into accepting its conditions. Only then were bigger countries such as Japan offered membership on a "take it or leave it" basis.
The PR machine then went into overdrive by saying the inclusion of these conditions made the TPP a "high-quality" trade agreement for the 21st century, when it was a rip-off by several domestic lobbies.
American regionalism closer to home shows the US is now trying to promote the Free Trade Agreement of the Americas (FTAA). But its preferred template was to expand the North America Free Trade Agreement (Canada, Mexico, and the US) to the Andean countries and include huge doses of non-trade related issues, which they swallowed. This was not acceptable to Brazil, the leading force behind the FTAA, which focuses exclusively on trade issues. Luiz Inácio Lula da Silva, Brazil's former president and one of the world's great trade union leaders, rejected the inclusion of labour standards in trade treaties and institutions.
The result of US efforts in South America, therefore, has been to fragment the region into two blocs, and the same is likely to happen in Asia. Ever since the US realised it had chosen the wrong region to be regional with, it has been trying to win a seat at the Asian table. The US finally got it with the TPP, simply because China had become aggressive in asserting its territorial claims in the South China Sea, and vis-à-vis India and Japan.
The US design for Asian trade is inspired by the goal of containing China, and the TPP template effectively excludes it, owing to the non-trade related conditions imposed by US lobbies.
The only way a Chinese merger with the TPP could gain credibility would be to make all non-trade related provisions optional. Of course, the US lobbies would have none of it.
Jagdish Bhagwati, university professor at Columbia University and senior fellow in international economics at the council on foreign relations, is the author of Termites in the Trading System: How Preferential Agreements Undermine Free Trade
* Project Syndicate
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