The Trans-Pacific Partnership (TPP) agreement signed on February 4, 2016 among 12 Pacific Rim countries that includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam is rightly being seen the world over as a move by the US to firmly counter the rise of China on the global economic and political front. And one would readily agree with the opinion expressed by Business Recorder in its editorial "Countering China" on February 16 that with the rise of Chinese economy to claim an important place on the global economic scene, the anxieties of developed nations continue to grow and that the TPP "aims to slash tariffs and trade barriers for an enormous 40 percent of the global economy excluding China."
How much China would be hurt by the TPP and how it would try to meet the challenge would certainly be an engrossing global concern in the coming years as the TPP would come up for ratification by the member countries over the next two years. And how it is going to impact the economies of developing countries like Pakistan is also likely to be debated by concerned quarters as the TPP comes into operation.
Here is what some of the global thinkers believe how the TPP is likely to adversely impact the economies of developing countries: Nobel laureate, Joseph Stiglitz commented that TPP "may turn out to be the worst trade agreement in decades. In 2016, we should hope for the TPP's defeat and the beginning of the new era of trade agreements that don't reward the powerful and punish the weak". In 2014, Noam Chomsky warned that the TPP is "designed to carry forward the neoliberal project to maximise profit and domination, and to set the working people in the world in competition with one another so as to lower wages to increase insecurity."
US Presidential candidate Senator Bernie Sanders has stated that trade agreements like the TPP "have ended up devastating working families and enriching large corporations." Another Nobel Prize-winning economist, Paul Krugman, said: "... there isn't a compelling case for this deal, from either a global or a national point of view." Krugman also noted the absence of "anything like a political consensus in favour, abroad or at home." Economist Robert Reich contends that the TPP is a "Trojan horse in a global race to the bottom, giving big corporations and Wall Street banks a way to eliminate any and all laws and regulations that get in the way of their profits. The Friends of the Earth have spoken out against the TPP.
The TPP is a multidimensional pact but it would be in Pakistan's interest, especially in the interest of our textile tycoons - the members of All Pakistan Textile Manufacturers Association (APTMA) - to go through rather minutely the TPP's chapter on Textiles and Apparel. According to the chapter's overview, the TPP will create export opportunities for Made-in-America clothes, fabrics, and yarns and support jobs in the United States. Here is the central theme of the chapter: This objective (export opportunities for made-in-America textiles) is advanced by a "yarn-forward" approach that requires use of yarns and fabrics from TPP countries in end products qualifying for preferential treatment under TPP. The yarn-forward approach, according to the deal, also will help to develop a regionally-integrated supply chain that will promote long-term growth and investment in this sector in the United States.
Pakistan is the world's third largest supplier of yarn. And most of our textiles are exported to the US (30% plus), Canada (1.4%) and Australia (0.9%) - all TPP members. South Korea (1%) is also expected to join TPP soon. So should not we be worried enough to study rather closely this particular TPP chapter to see how it would impact our textile exports, if at all?
To ensure that the benefits of TPP go to TPP workers and businesses, TPP requires a "yarn forward" rule of origin, which means that to get the lower tariffs offered in TPP, goods must be made within the free trade area using US or other TPP country's yarns and fabrics. This again needs to be closely studied by Pakistan as our exports are mainly made up of yarn, thread and fabric. There is also a special feature for Vietnam (which is becoming a vital market for textile lately), linking improved access to the US market for cotton pants to the purchase of US-made cotton fabric.
The Textiles and Apparel chapter's strong enforcement provisions and customs cooperation commitments would enable US Customs officers to work with other TPP countries to make sure that when traders claim their goods should get the lower tariffs and better treatment available under TPP, those claims are genuine. This includes authority for US Customs officials to work with TPP counterparts to fight customs offences, such as duty evasion, smuggling, and fraud.
The Textiles and Apparel chapter also secures close customs cooperation among TPP Parties to facilitate effective enforcement of the rules. TPP will eliminate tariffs on US exports of textiles and apparel to the other TPP markets, with many tariffs going to zero on day one, and others being phased out.
Some special commitments include protections for the US exporters and producers to ensure that they have a fair chance to show their goods meet the rules and therefore qualify for the lower tariffs and better treatment available under TPP. According to a US claim its textile and apparel industry is 'a major US manufacturing employer, with employment in the US totalling more than 370,000 jobs on average in 2014, and the value of industry shipments rising from $48.7 billion in 2009 to $56.7 billion in 2014. US textile and apparel manufacturers sold nearly $11 billion worth of products to TPP countries in 2014, an increase of around 50 percent from 2009, helping to make the US the world's fourth-largest exporter of textile products.'
It is further claimed by Washington that the textile and apparel industries in the TPP region would require 'many of the high-technology textile products in which US producers are most competitive, including those using composite materials and carbon fibers.'