China Liked TPP — Until U.S. Officials Opened Their Mouths (ForeignPolicy.com)

[JonLP24]

Chinese were once eager to latch onto the massive trade pact as a lever for internal reform. But with harsh U.S. rhetoric rising, that ship has sailed.

After a brief but frightening setback for proponents, U.S. congressional leaders looked set on May 13 to pass legislation for an eventual up-or-down (“fast-track”) vote on what would be one of the world’s largest trade accords, the U.S-led Trans-Pacific Partnership (TPP). The accord, a project behind which U.S. President Barack Obama has thrown his full support, would originally join together 12 countries bordering the Pacific Ocean. Significantly, China isn’t on that list; in fact, in the months leading up to fast-track voting, U.S. officials have been selling the pact internationally and domestically as a deal to counter Chinese influence. But whether TPP becomes reality or not, China has already moved on. And the anti-China rhetoric the United States has deployed has ultimately done more harm than good.

TPP is more than just a trade agreement, at least to hear the Obama administration tell it. In recent months, U.S. officials seeking to win domestic support among skeptical democrats have promoted it as a geostrategic cudgel to fend off a rising China. In an interview with The Wall Street Journal on April 27, President Barack Obama asserted, “If we do not write the rules, China will write the rules out in that region,” meaning the Asia-Pacific. “We will be shut out.” When Japanese Prime Minister Shinzo Abe met President Obama to discuss TPP, their explicit and implicit messages were “all about China,” according to Patrick L. Smith, a long-time correspondent in Tokyo.

<snip>

As recently as two years ago, China was nervous about being shut out of the TPP. Li Xiangyang, dean of the Global Strategy Institute at the Chinese Academy of Social Sciences, a top government-linked think tank, remarked in 2012 that “TPP represents the gravest challenge China faces” on its upward trajectory, given its popularity in Asia and its exclusion of China. Scholar Fan Libo also argued in an article published in December 2012 that “the benefits of joining TPP outweigh the costs for China.” In May 2013, the Chinese Ministry of Commerce announced that China would “assiduously study” the pros and cons of TPP. Then in March 2014, at the conclusion of China’s National Party’s Congress and National People’s Congress, an annual event that directs major policy moves, Minister of Commerce Gao Hucheng spoke to domestic and international reporters. “We think the TPP is an important negotiation, and also a high-quality trade regime,” Gao said. “China is always open and accommodating to regional cooperation.” He also made it clear that China was well-informed of TPP negotiations through Sino-U.S bilateral dialogue mechanisms.

When the United States spun the TPP as a high-standard trade regime, with its inclusion of rigorous labor and environmental clauses, it also resonated with those wishing to push China to reform. Long Yongtu, the former Chinese trade minister who negotiated the country’s entry into the WTO, argued in November 2014 that “TPP has to include China sooner or later.” Long and other reformists saw the TPP’s standards as potentially creating an external lever to, as Long wrote, “help China’s badly-needed reform in the state sector, labor, and environmental areas.” In November 2014, China announced a landmark climate accord with the United States. And the Xi administration has designated “deepening market reform” a top policy in the coming years – a fine fit for the TPP’s requirements.

https://foreignpolicy.com/2015/05/15/china-liked-trans-pacific-partnership-until-u-s-officials-opened-their-mouths-trade-agreement-rhetoric-fail/

Aside from making CEO's rich, TPP has long appeared to me to be some sort of geopolitical move by noticeable leaving China or India out and it was originally a US-EU proposal. The article has some useful info but not much, ends a few paragraphs later but one of the sentences links to this article which I think gives a better picture of the US-China rivalry.

Washington’s Big China Screw-up

U.S. efforts to oppose a $50 billion China-led infrastructure bank have backfired. Experts explain why.

In March alone, France, Italy, Germany, and the United Kingdom have now all agreed to join a major, China-led initiative that could one day rival the U.S.-led World Bank in size and influence. It’s called the Asia Infrastructure Investment Bank (AIIB), and since China formally established the bank in October 2014, it’s attracted dozens of member nations. It’s also raised hackles in the United States, whose officials initially attempted to dissuade countries like the U.K. from joining. But on March 22, U.S. Treasury Undersecretary for International Affairs Nathan Sheets told the Wall Street Journal that his country “would welcome new multilateral institutions that strengthen the international financial architecture.” Is the damage to U.S.-China relations nevertheless done? And how might a China-led AIIB shape the world moving forward? ChinaFile asked several experts to opine. –The Editors

Stephen Roach, Senior Fellow, Jackson Institute of Global Affairs:

In 2005, then-U.S. Deputy Secretary of State Robert Zoellick famously called on China to be a “responsible stakeholder.” He meant that China needed not only to comply with its international commitments, but also to provide public goods to the international community. Well, be careful what you wish for.

Since then China has become much more active in global governance. Chinese occupy leadership positions in a wide range of institutions. In 2013, China helped broker an interim deal in the World Trade Organization’s Doha Round, and in November 2014, China, along with the United States, made a new pledge to limit carbon emissions, creating momentum heading into the United Nations meeting in Paris later this year. But the AIIB is China’s first signature contribution.

China certainly could have done a better job of selling the need for a new development bank. It is still unclear why it would be impossible to improve the quality and quantity of development assistance in Asia through either the Asian Development Bank (ADB) or the World Bank. The arguments that those banks were un-fixable and not open to a greater Chinese role or that China deserves pride of place in a new institution given how much it is contributing leave the impression that the AIIB is a vanity piece or a disguised cash register for Chinese state-owned enterprises.

That said, the United States has performed even worse. Although joining the AIIB was not an option since Congress would not have allocated the funds, the U.S. could have adopted the posture of a friendly outside voice. Instead, it discouraged others from joining in the hope the initiative would collapse or leave China with a small coalition of the willing. They argued that the bank would not follow international best practices, but in reality it appears the U.S. opposed the AIIB simply because it was a Chinese initiative, full stop.
https://foreignpolicy.com/2015/03/26/washingtons-big-china-screw-up-aiib-asia-infrastructure-investment-bank-china-containment-chinafile/

One of the cleared advisers to the TPP negotiations that stuck out to me

Ms. Erin L. Ennis
Vice President
The U.S.-China Business Council

http://keionline.org/blogs/2009/03/13/who-are-cleared-advisors

Trade deal seems to be more about China than the countries that are party to the negotiations.

[djean111]

1. "Trade deal seems to be more about China than the countries that are party to the negotiations."

Seems to me to be more about China, and also corporate power OVER the signatory countries.

Always seemed funny to me that the US would consider that the IMF and World Bank followed international best practices - yeah, if austerity and privatization are considered international best practices. Probably would have been better to step back from trying to get other countries from investing in the AIIB and get ignored - globalization, baby! The AIIB may well turn out to be just as bad to borrowers and the IMF and World Banks, but that is for other countries to decide.

No doubt, China does bad things. But IMO they are being used as a diversion in order to set global corporate sovereignty in stone. The countries in the TPP are not the issue at all.

[JonLP24]

2. China for me personally doesn't rank all that up there as countries to be concerned about

they seem to be more into global economy power than being a US-type of country using double standards, tough rhetoric, except for the human rights violators they back. They may be a bit oppressive when it comes to politics, freedom of speech (though their constitution says they have it but you know that goes), etc but it seems most of these one-party communist states eventually become capitalists like in Vietnam as well.

Its somewhat easy to see with the manufacturing sectors, particularly in electronics & plastics in Malaysia & Singapore with the cloth & food agricultural in Vietnam. Oil production is thriving in those countries as well, the countries already do trade with each other (with US in trade deficits) on that front I get that much. Malaysia has thriving prescription industry that have pharmacies everywhere providing low cost as well equipped with necessary regulations. The copyright thing has me thinking the US wants a piece of that but pushing out the generic drug companies with only US-approved manufactures therefore turning into a US monopoly for US pharmaceuticals.

Much more than that it becomes harder to figure out with things like currency manipulation which I'm not familiar with how it all works, a reason why China purchase US debt holdings is for currency reasons for both sides. I don't know if they still are but Japan recently moved past China to become the top country of US debt holdings but it is a very close #1 & #2. TPP stands to benefit for US & Japan companies with the "no tariffs" thing and the industries of both countries & the countries they are looking at makes sense but I do think there is strategy at play here with China.

Malaysia offers some manufacturing benefits over China (from 2012)

Summary:Global electronics manufacturer Flextronics says Malaysia can be more cost-effective than China with its lower tax and stricter intellectual property protection regimes, but rising wages a potential concern.

China might be known as the port of call for manufacturing, but global electronics company Flextronics believes Malaysia offers benefits in certain areas its Asian counterpart currently does not offer.

Mark Shandley, the company's vice president for supply chain management, noted during a recent interview that a good number of its customers do express a preference for manufacturing their products in Malaysia over China.

"Some of them are more comfortable with Malaysia because of the perception of intellectual protection, or what they believe is the lack of, in China," he explained. The executive declined to reveal the names of his customers due to non-disclosure agreements, but ZDNet Asia understands some of its clientele include global companies such as Apple and Hewlett-Packard.

<snip>

Cost-efficiency differences
Despite the common perception of cheaper production costs in China, Shandley pointed out that it can be more cost-effective to consider manufacturing in Malaysia to reach Asian markets for some products.

Clean room facility in Flextronic's Penang factory

China's labor costs might be relatively cheaper but Malaysia offers cost savings from other areas, which then leads to a better overall cost of a few cents per unit, he said. "One key reason is the taxes, such as China's value-added tax, which is charged on non-China companies and can be at about 4 percent. That is something which Malaysia doesn't have," he pointed out.

However, manufacturers in Malaysia will have to monitor its rising wage cost level in order to remain competitive. According to Shandley, Flextronics Malaysia has witnessed over 20 percent year-on-year increase in overall wages for both direct and non-direct labor, and this is before the impact of the country's new minimum wage law kicks in.

Two weeks ago, Malaysia introduced a minimum wage aimed at helping the lowest paid workers meet the rising cost of living. The new law would see workers receive a minimum wage of least 800 ringgit to 900 ringgit (US$255 to US$287), and would take effect for most companies in six months' time.

"There will be a little impact from the minimum wage but we'll look at it more closely in six months' time," the executive said.

High labor attrition rate in China
China, on the other hand, has to combat other labor-related difficulties beyond wages, the Flextronics executive pointed out. For instance, the industry's attrition rate after the Lunar New Year holidays is high as many of the production workers don't come back after returning home. Some of the reasons for this include people finding a new job or being homesick, he explained.

Shandley noted that, on average, the industry see as little as 30 percent their labor force return after the holiday. Flextronics used to suffer from a similar problem but has managed to bring down the overall rate over the past few years and now sees more than 98 percent of its workers return, he said.

This was partly due to human resource efforts in which the company invested in building a community on its campuses to integrate its migrant workers. Such efforts include partnering non-government organizations for welfare program supports, establishing career development plans, and having onsite counselors for employees, the executive shared.

According to Flextronics, high labor attrition is a problem more pronounced in China than Malaysia because migrant workers in the country often came from cities much further away and might face a steeper adjustment due to differences in culture.

http://www.zdnet.com/article/malaysia-offers-some-manufacturing-benefits-over-china/

The last couple of paragraphs I began to see a picture of a portion of the labor force which the US department of defense has experience with (Halliburton & KBR) & they profit handsomely from it by doing worse on labor rights. I could post some horror stories but it is mainly Saudi Arabia-Kuwait-Qatar's labor system.

I'm not sure what the strategy is but I think there is a geopolitical strategic play here

Essentially, it’s a US-Japan bilateral trade treaty that might complement the US-Japan security treaty.

<snip>

Furthermore, it added, the architects of the post-World War II trade régime sought to de-geo-politicise trade. “It is probably impossible to do so completely. TPP, however, is highly geopolitical and highly geopolitically divisive.”

Both communities, points out Forbes, ASEAN and the Pacific Alliance, should continue to focus on solidifying their intra-regional institutions and ties, rather than seeking to expand to inter-regional, let alone inter-continental, dimensions.

That is, as things currently stand, a bridge too far and a distraction from more immediate priorities, it states. “In the jargon of the profession, TPP would definitely feature among the ‘stumbling blocks’, not building blocks, to greater global economic integration, peace, equity and prosperity.”

<snip>

TPP was a really strange mélange of 12 members including five from the Americas (Canada, Chile, Mexico, Peru and the US), five from Asia (Brunei, Japan, Malaysia, Singapore and Vietnam), along with Australia and New Zealand.

Missing are large Asian economies, notably South Korea, India and Indonesia, all three members of the G20.

Also missing of course is China; but that would seem to be deliberate, the economic arsenal of Washington’s (supposedly) strategic pivot to Asia, the fundamental aim of which is to contain China. “Thus TPP is above all a geopolitical ploy with trade as a decoy,” said Forbes.

<snip>

TTIP was indeed a proposed agreement between two parties, the US and the EU.

It does not include other Atlantic nations such as Canada and Mexico, which are both members, with the US, of the North Atlantic Free Trade (NAFTA). Nor does it include non-EU member European states such as Iceland, Norway, Switzerland or Turkey. By currently common consent, TTIP negotiations appear to have got bogged down in bureaucratic technicalities and would seem to be going nowhere.

There are hopes however that TPP might be concluded if President Obama can secure Trade Promotion Authority (TPA) from Congress.

http://www.freemalaysiatoday.com/category/nation/2015/04/10/tpp-makes-no-economic-sense/

There was one more thing on the currency manipulation -- like I said -- don't know how it all works but the currency manipulation was the reason why Ford Motor Company came out against TPP.

This was Malaysia's water deal with Singapore

In his blog post two days ago, Dr Mahathir went at length to talk about the pacts that have not benefitted Malaysia including the Malaysia-Singapore water agreements.

"The first agreement lapsed in 2011 and we did not renegotiate at all. The next agreement will lapse in 2060. So we will be getting 3 sen per 1,000 gallons of raw water when the cost of living has probably gone up many-many times.

"Today, the Singapore dollar is 21/2 times the value of the Malaysian ringgit. At the time of the agreement it was one to one. Are we receiving payment in Singapore dollars or Malaysian ringgit? Or is this a secret also?" he asked.

The question is why has the Singapore dollar strengthened and the ringgit weakened to that extent when both currencies were at parity when the two countries separated in 1965.

Do we still want to be known as a low-cost producing nation when the government is pushing for a high-income economy by 2020? Will we do it at the expense of weakening our ringgit and by looking for low-cost labour and exempting them from minimum wage policies?
- See more at: http://www.themalaysianinsider.com/malaysia/article/tppa-protest-reflects-malaysias-fall-from-grace#sthash.99Qk9DZb.dpuf

This is probably a variation of multiple geopolitical strategies here rather than just a simple free trade deal, it is interesting Singapore already signed on and Malaysia is still in the negotiations stage, it is quite difficult to see who is getting fucked over by who as Malaysia could be hesitant to be part of it with Singapore but each country ranks as one of their top trade partners. It is difficult to guess the ulterior motives here but potential currency manipulation, copyright, increasing the cost of medicine by limiting the suppliers & probably ways to screw China or find a manufacturing alternate to China. The debt deals are part of a strategy that benefits both countries and as a way for China to gain a bit of leverage but not much since having a fire sale would be suicide but I think there is something long-term there. China also regularly trades with the Asian countries too so I factor into that consideration but leaving China out.

Also Japan joining the negotiations was heralded as some sort of victory (meaning the corporate lobbyists had their media connections praise the benefits)

[djean111]

3. Great post. Thanks.