Twelve nations are negotiating the Trans Pacific Partnership (“TPP”), an agreement that would create a free trade zone in the Pacific Rim. Participating nations include the United States, Australia, Japan, Chile, Malaysia, New Zealand, Peru and Vietnam. If enacted, the TPP will be the largest free trade agreement in the world. But after three years and eighteen rounds of closed-door negotiations, the TPP still faces significant obstacles to final adoption.
Though the text for the TPP has not been officially released, several provisions and proposals have been leaked online. This information has prompted some analysts to express concern that the agreement will grant broad powers to multinational corporations at the expense of local agriculture and industry in less developed nations. As with most free trade agreements, the TPP will require local producers and farmers to compete with tariff-free imports from larger nations such as the U.S.
One problem with a tariff-free provision is that developed nations such as the U.S. provide subsidies to agricultural companies, which makes it difficult for local farmers and agricultural workers to compete with cheaper imports. Most likely, there will not be language in the TPP to protect poorer nations from these subsidized imports.
The TPP will also require that participating nations open up their markets to multi-national corporations in industries as diverse as finance, manufacturing, telecoms, utilities, and professional services. Participants must allow foreign corporations to bid on certain government projects that would otherwise go to local businesses. In all likelihood, the agreement will also place restrictions on state-owned enterprises and require government protection of foreign investors.
Another stipulation will permit any new regulations that effect an investor’s future revenues to be challenged by the investor in an international tribunal. These tribunals, which are common in trade agreements, can be costly—in 2012, an international tribunal ordered the Ecuadorian government to pay $2.3 billion to Chevron, an American oil company. Chevron alleges that Ecuador breached a trade agreement by not preventing enforcement of a $19 billion judgment against the company for pollution in Ecuador.
Activists have also pointed out other provisions of the TPP that will be detrimental to developing nations subject to the agreement. According to Citizens Trade Campaign, the leaked portions of the TPP reveal that the U.S. is supporting measures that will allow pharmaceutical companies to challenge regulations that control the costs of drugs in participatory nations. Additionally, the agreement permits longer patent terms, which will prevent other companies from developing generic medicines.
The lack of transparency in the TPP negotiations make it difficult to ascertain how developing nations will fare under the provisions of the free trade agreement. But from what has been revealed, there is little to suggest that the less developed participant nations are going to be protected from the interests of the larger nations and multi-national corporations.