TPPA and ‘free trade’

Some critics of the Trans Pacific Partnership Agreement point out that it isn’t a free trade agreement. Blazer commented here yesterday:

when will you figure out that its NOT ABOUT FREE TRADE?

From The Standard:

katipo:

from Obamas ‘State of the Union Address’ yesterday…

“With TPP, China does not set the rules in that region; we do. You want to show our strength in this new century? Approve this agreement. Give us the tools to enforce it. It’s the right thing to do.

Paul:

So not a free trade deal.
A geopolitical strategy.
And we are the pawns.

Paul doesn’t address why he claims it isn’t also a free trade deal, he just states it isn’t. This pretty much parrots the big guns aiming at the TPPA.

Jane Kelsey is one of the most prominent critics and opponents and has written a book about it -see Jane Kelsey New Book On TPPA – Hidden Agendas:

Hidden Agendas
What We Need to Know about the TPPA.
Jane Kelsey

Forget the label “free trade agreement”. The TPPA, under negotiation between New Zealand, the USA and ten other countries, is a direct assault on our right to decide our own future.

Some irony in “hidden agendas”, not just in arguing against “free trade” label.

While it can be quibbled about whether the TPPA is a “free trade” agreement – most trade involves money or an exchange of something of value so is not free – I think there is no doubt one of the aims of the TPPA is to free up trade impediments.

Today’s Otago Daily Times editorial TPP vote, then wait to ratify it points out that tarriff reductions are a significant part of the TPPA.

Tariffs are a persistent brake on growth in global trade and it is encouraging the 12 member countries of the TPP will cut tariffs on more than $US500billion ($NZ772 billion) of trade annually, according to HSBC senior trade economist Douglas Lippoldt.

“In most cases, they will eliminate import duties altogether. But before the TPP comes into force, it has to be ratified – an uncertain process that may take a year or more.”

One-third of TPP trade, about $US630billion a year, was currently subject to tariffs.

Although the average tariff rate among TPP members was 3% or less, some trade flows faced double-digit duties, he said.

Of the TPP trade currently subject to duties, some 85% would be liberalised up front.

Countries such as Australia, Chile, New Zealand, Peru or the US would liberalise 90% or more.

HSBC estimated duty cuts for another 5% of that trade would phase in over the next seven years.

The remainder concerned trade items that might be economically or politically sensitive, such as agricultural or apparel products.

For those products, duties would phase out over longer periods or they would face continued duties, Mr Lippoldt said.

Tariff elimination was controversial because it increased the exposure of specific domestic, import-competing industries to foreign competition.

“This often politicises trade negotiations and contributes to the controversy surrounding free trade agreements, even when it is clear a proposed agreement could bring welfare gains in the aggregate. The TPP, being so ambitious is in its liberalisation agenda, is no exception.”

The TPP agreement aimed to eliminate substantially all tariffs, though subject to some exceptions.

The market access chapter affirmed each TPP country was to grant national treatment to the goods of the other TPP countries, he said.

That removed most potential discrimination in the application of tariffs.

The agreement specified no TPP country might increase existing customs duties or adopt a new one, although again subject to some exceptions.

The agreement also established clear rules for transparency in the use of the tariff rate quotas and the related allocation procedures.

Reducing tariffs in effect frees up trade and will make it easier for New Zealand to trade competitively.

While ‘free trade’ could be argued reducing tariffs can mean ‘less restrained trade’.

Existing trade agreements means that trade between some countries in the TPPA is already fairly free or unrestrained by tariffs:

  • CER between Australia and New Zealand
  • All of Singapore’s trade with all TPP countries is already duty free
  • The North American Free Trade Agreement (Nafta) had provided for extensive duty-free trade among Canada, Mexico and the US.

‘Duty-free trade’ is more explanatory than ‘free trade’ and difficult to argue against.

HSBC estimated New Zealand would gain $US7.62billion from tariff liberalisation under TPP.

New Zealand imported $US18.14billion from TPP countries, or 43% of the country’s total imports.

Australia would gain $US30.5billion.

The country imports $US78.1billion from TPP countries, or 34% of total imports.

Significant amounts, so significant potential trade gains for us and Australia.

The HSBC assessment of the TPP highlighted the substantial progress the agreement made in reducing or eliminating tariffs – a trade barrier that had proven to be persistent, he said.

The persistence reflected the sensitivity of liberalisation for the products concerned, as various interests succeeded in maintaining a degree for that type of trade protection, he said.

“The TPP negotiators’ success in eliminating most of the remaining tariffs across the TPP region, albeit with some exceptions and limitations, is a notable achievement.

“The reduction in trade costs associated with tariffs might be expected to deliver meaningful expansion of trade – not only from growth in existing trade flows as taxes are reduced, but also from the opening of new potential trade corridors not currently active due to prohibitive tariffs,” he said.

Claiming the TPPA is not a ‘free trade’ agreement may be semantically correct on it’s own it is ignorant or dishonest. And it is contrary to what is commonly referred to as a ‘free trade’ agreement.

New Zealand Foreign Affairs and Trade states:

The Trans-Pacific Partnership (TPP) is a free trade agreement that will liberalise trade and investment between 12 Pacific-rim countries: New Zealand, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore, the United States and Viet Nam.

It’s obvious from Wikipedia’s many references that ‘free trade’ is a widely used and accepted term.

Claiming the TPPA is not a free trade agreement without explanation or qualification is just opposing without an argument.