Is the TPP the living dead?

November 15, 2016

Q: LSL mentioned he was disappointed that the TPP is dead. Is the TPP dead in your assessment given that Trump is very much against it?

A: There is a pressing need to stress this. Trump the electionaire and President are not necessarily the same person. They cannot be even if they want to be. My assessment is people take Trump too literally – even if he decides to do a 180 degree turn it would not be unprecedented – Bill Clinton for example insisted thru out the GOP he was against NAFTA. When he was elected, he switched.

Q: But Trump has said he will renegotiate NAFTA and possibly even relook the current arrangement in the TPP as well to tilt the balance in America’s favor.

A: You know both NAFTA and the TPP are negotiated trade agreements – the key word is negotiated that means compromises have been made in exchange for other benefits. Now it’s not an easy agreement to hammer out – not when you consider Japan, New Zealand, Philippines and Australia have made transformational concessions to accommodate collective buy in – I am in fact astounded what Japan is prepared to put on the table frankly. Only because agriculture is sacred to most Japanese. So I don’t really see much room for renegotiations simply because it has taken the better part of a five years and a bit to come to this point.

At this point the present architecture of the TPP is like that game where you have a pile of sticks and each player tries to pull out a stick without moving the rest – now try doing this when someone superglues all these sticks together – in my assessment there is no benefit for America to renegotiate the TPP.

As it is. The TPP already favors American corporations especially big pharmaceutical firms. I don’t see what else can be renegotiated to make the deal better for America.

Q: What do you think is likely to happen to the TPP?

A: It will be revived by the Republican realist.

Q: Why?

A: They don’t have another way to sustain the geo political status quo in the Pacific – if they want to do it the other way, it’s not only a dead end. But a very expensive jalan mati (dead end) as it would require doubling the current military commitment in the Pacific in the form of more carriers and staging locations – now without trade to cement all this. It’s doubtful the Americans can even do that. Remember always the Chinese are working furiously behind the scene to scuttle the deal – don’t for one moment think they’re giving out all these goodies to Duterte and Najib for nothing – there is a very real agenda at work here!

The TPP however is a supranational legal framework that allows the US to keep their primacy intact on the cheap without having to commit further tax dollars – it’s very expedient and I think that accounts for it’s allure to many thinkers in the US.

Q: How will the TPP come into effect?

A: Trump is likely to agree not to shelve it just like he conceded ground on Obamacare – it will go thru a superficial make over where it’s renamed the great American deal of the 21st century and within the first 100 days of the Trump administration it will be passed thru congress.

Q: Wouldn’t the American public who voted Trump in feel betrayed and cheated?

A: I think that is going to be a reoccurring theme in Trump’s tenure – he and his team better get use to this. As many of the things he promised to do when he was running for president is really so unhinged and disconnected from reality – he can really only disappoint many.

For instance the great wall of America will never built. Mexico will never pay for it. America and Russia will never be pals. Many jobs in middle America is never going to ever return. There are many things that cannot be done by Trump.

There is a very big dissonance here between what was promised and do-ability that must be factored into the whole calculation.

Q: What does Singapore stand to get out of the TPP?

A: First status quo ante – that’s already a very big competitive advantage. As the Chinese have a long term hidden agenda to shift away their reliance on ports and vessels as a means of transportation – based on their African experience – they much prefer a network of trains – the Africans of course refer to this endearingly as cho cho train diplomacy – but none the less judging from the sheer quantity of rolling stock, steel and gravel laid, it’s a very effective form of economic stimulus – as billions are invested creating in it’s wake plenty of opportunities for jobs and businesses.

I am not saying this strategy will allow the Chinese to deprioritise continuing to use the straits of Malacca or to even outflank Singapore’s dominance as a die die must stop over port – but it will certainly eat into the market share of goods and produce and people. As transporting anything by rail is very efficient and relatively fast. All this will definitely erode Singapore as a regional hub in the long term. The TPP blunts all these designs and inserts Singapore into the regional supply chain very elegantly.

The second benefit is many multinationals located in Singapore are really not held together by a coherent strategy – there was a grand design once promulgated by Philip Yeo to remake Singapore into a knowledge centre for life sciences – but it didn’t really go any where at all as that growth area didn’t really materialize many of the synergistic benefits that was anticipated.

Now many of this big pharmaceutical firms are facing cost pressures – wages are stressing profit as Singapore by comparison to let’s say Malaysia is a very high cost center – the TPP with it’s emphasize on commoditizing on patents and intellectual property will certainly open up new markers regionally.

The third factor is job creation and business opportunities.

Q: What do you see as the biggest threat to the TPP?

A: I don’t see Trump and his crew as a clear and present threat – the real threats I believe comes from those countries regionally at the periphery of the South China Seas – that may stand more to lose than gain out of this agreement – one of the paradoxes is Trump keeps harping on and on that the TPP is a bad deal for America. But from what I have been able to glean from the details – it’s all drumsticks for them. The countries that run very real social and cultural shocks from the TPP are countries like the Philippines, Malaysia and possibly one of the non signatory countries – Indonesia.

Q: Why is Indonesia opting to stay out from the TPP?

A: That’s a very good question. At one level of the analysis you can certainly say many of their sectors industrial and especially agriculture and livestock makes a lousy fit into the TPP framework.

The cost of producing food and breeding livestock in not only Indonesia but also the Philippines as well will always be higher than even the US.

US farming is incredibly efficient, productive and highly mechanized – one farmer can easily manage one hundred hectares of wheat or barley and more to spare. To exacerbate matters both Indonesia and the Philippines are archipelago’s – so that bumps up the cost of food production further as that’s all friction cost to the supply chain – I believe for those countries the incentives to be part of the TPP may not be that attractive at all.

This is especially so for the Phillipines – we are likely to see social unrest in those countries where the benefits of the TPP may not be so apparent – as one unspoken aspect of being a signatory of the TPP requires subsidies to be dismantled – so you’re really impacting the lowest wage earners in these countries at a subsistence level.

I think the architects of the TPP have not really come to terms with the social fall out in some countries where the predominant population is still living on a subsistence level – I for one cannot imagine how it’s possible to increase the price of medication significantly without affecting millions of people without incurring a social backlash.

For me my concerns about the TPP – lies in it’s implementation and enforceability rather than as it is at the talk shop conceptual stage – say what you want, but I for one cannot see how certain set pieces within the TPP can down well in some countries.

There exist an intricate network of vested interest in many countries that are premised on sectarian, religious and racial lines that needs to be harmonize when they all come under the aegis of the TPP.

Q: Can you please be more specific and give examples of these vested interest?

A: In Malaysia for example there exist quota’s that favor the indigenous Malays – it’s really a sort of affirmative action that is interwoven within the the larger framework of the national economic policy and this is very much part of the DNA of Malaysian business environment – so if you take the case of the automobile manufacturer Proton – it’s not just any car manufacturer. It’s one that operates along the lines of affirmative action specifically benefits the bumiputra firms. We are talking about many people here – possibly even whole communities.

With the TPP these type of business models will come under tremendous stress.

Q: How are some of these countries managing these stresses?

A: Some better than others I suppose – in the Philippines, Duterte has to eventually implement reforms and this means facing off with the oligarchs – the Alyala’s, Osmena’s – very powerful and influential vested interest who have historically held on the countries reins of power. Why would they want the status quo to change?

After all they are making good money as it is – why would they want things to change?

Conversely if you look at Najib in Malaysia he has already started to implement change very subtlety as far back as five years ago – by putting an end to a whole range of subsidies. Everything from fuel to most recently cooking oil – I must say I certainly have a lot of admiration for Najib and his far sightedness in this regard. Because he seems to be the only leader regionally in a third world nation pretending very hard to be a developed country to appreciate the realities of globalization and what it means to be a member of the TPP. As for the rest – they seem to be dilly dallying or vacillating with much needed economic reform and that is really quite worrisome to me – but bear in mind, all these come at real cost. Many Malaysians are not happy when necessaries such as cooking oil goes up. Even my goreng Pisang (fried banana fritters) vendor has been complaining to me – because he doesn’t understand why the price of cooking oil made from oil palm kernels needs to go up when Malaysia is the No.2 producer – so these are realities that will be significantly amplified when the TPP comes into effect.

Like I said, it’s one thing for corporations to sit around a conference table in the four seasons in their fine Italian suits and hammer out the details of a new economic order – it’s another thing entirely to roll it out in such a way where it doesn’t cause too much social and economic upheaval.

That’s really my primary concern about the TPP – that it may well be a bridge too far.

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