The TPP, The WTO, The 21st Century Global Trade Mess And The Poverty Of Nations

Here we are in 2015 and the global trade agenda is in a total mess. The 20th anniversary of the establishment of the WTO marks a narrative littered with missed deadlines, disappointments, and failed negotiations. The Doha Development Round is dead and has been for some time even though officially unacknowledged. Trade ministers continue to meet for regular rituals – next rendezvous Nairobi in December. For the WTO ministerial held in Hong Kong ten years ago, the public was warned to "calibrate their expectations" (really!). There is no need for such warnings for Nairobi, as the public has generally switched off: There are no expectations to calibrate.

As to the much-ballyhooed “mega-regionals,” the TTIP (Trans-Atlantic Trade and Investment Partnership) is stalled. The TPP (Trans-Pacific Partnership), which The Economist (and many other publications) proclaimed was going “into the home stretch” at a meeting convened in Maui, Hawaii, on July 28 to 31, in fact bit the dust due to irreconcilable differences on issues including Canadian dairy and Japanese rice. The negotiations that started five years ago have now been postponed for several months. The text of the TPP, it might be noted, is some 700 pages long, almost as long as Tolstoy's War and Peace!

The arising global threats, weaknesses and uncertainties of this global trade mess are harrowing. Whereas the world has undergone profound transformations, policy makers persist in atavistic mercantilist brinkmanship. When I attended the 2003 WTO ministerial conference in Cancún, Mexico, I was struck by the Tower of Babel effect as ministers talked and talked and talked, but not to each other. There was lots of rhetoric, but no dialogue, let alone commonality of wavelength. This was an early warning of the possible failure of globalization, which becomes increasingly menacingly a reality. The WTO has become, in the words of then-Director General Mike Moore’s expressed fear, the “League of Nations of the 21st Century World Economy”: impotent and irrelevant.

In light of the failure of the multilateral trade agenda, for which the U.S. bears a heavy responsibility, alternatives have been pushed by Washington, notably the mega-regionals TTIP and TPP.

I have been convinced from its inception, as I wrote in an article on this website in April, that the TPP is a mistake for a variety of reasons.

First among them is the TPP’s overtly China-targeted geopolitical nature. U.S. Defense Secretary Ash Carter was quoted in a speech in Arizona saying, the “TPP is as important to me as another aircraft carrier.” That is not the spirit in which trade policy should be pursued. It is the antithesis of the whole idea that fair and open trade should promote peaceful relations between states.

Barack Obama also made clear the TPP China factor: “If we don't write the new rules for free trade around the world, guess what, China will. And they'll write those rules in a way that gives Chinese workers and Chinese businesses the upper hand." Conversely, the TPP will aim to ensure that its rules will give U.S. business the upper hand. Surely, to embark in writing new trade rules without including the world’s biggest trade power is inviting trouble, potentially conflict. This will render the economic and social environment more fragile at a time of cloudy global economic, political and social horizons. Whereas world trade, if properly conducted, should promote peace and prosperity, as forcibly argued in a book edited by my son, Fabrice, and myself. But if improperly conducted, it distorts trade, creates winners and losers who can suffer considerably, and thereby jeopardizes world peace and prosperity.

Second, whereas the most important principle of the post-war multilateral global trade regime is “non-discrimination,” the TPP is overtly discriminatory. While a handful of developing country members stand to benefit, most others will suffer. As M.G. Quibria of the Policy Research Institute (Bangladesh), points out, the TPP will have a profound impact on the lives of the poor in Dhaka. In apparel, textiles, footwear and leather goods … Vietnam (a member of TPP) would soon overwhelmingly dominate the U.S. market by diverting exports from other poor Asian countries, such as Bangladesh, Laos, Cambodia, and Nepal. "Thus, the countries that will be seriously adversely affected are the least-developed countries (LDCs) of Asia: implementing the TPP would be tantamount to throwing these LDCs under the bus. Rather than fostering a more equitable global order, the TPP would foment greater poverty and inequality across countries.” Some 3 million Bangladeshis, mainly poor women, depend on the apparel and textile industry. Along with remittances, it is the country’s major source of foreign revenue for growth and development.

In that context, it may be noted that none of the mega-regionals include any African countries. Were they to materialize, Africa’s already meager share of global trade (2 to 3%) will most likely be further diminished as the population soars. Indeed, it should be stressed that the mega-regionals exclude not only Bangladesh, China and Africa, but also India, Pakistan and Indonesia, which together account for well over 50% of the world's population, and all of which, with the exception of China, face acute poverty problems while experiencing soaring populations. According to a recent UN report, the world’s current population of 7.3 billion is expected to reach 9.7 billion by 2050, and half the growth is expected to be concentrated in just nine countries: India, Nigeria, Pakistan, the Democratic Republic of Congo, Ethiopia, Tanzania, the U.S., Indonesia and Uganda. The mega-regionals, by definition, discriminate in favor of the rich nations and against the poor.

The TPP, its promoters constantly proclaim, covers 40% of global GDP. This may be true. Its combined population, however, of 806 million, more than half of which consists of two of the world's richest countries, Japan and the U.S., amounts to only 11% of the global population.

The global trade agenda is in a terrible mess at a time when the uplifting promises of the early 21st century have tragically proved false. In its June 1, 2013, edition, The Economist predicted “the end of poverty.” Just over a year later, in August 2014, the Asian Development Bank announced that due to miscalculations the number in Asia below the poverty line is not the "official figure" of 473 million, but 1.5 billion, requiring a recalibration of the Asian poverty rate from 12.7% to 41.2%. The explanation is that the officially set poverty line of $1.25 a day is too low. By increasing it by 25 cents to $1.50, the poverty figures explode exponentially. Not surprisingly, figures on the much heralded emergence of the new middle class, estimated by some at approaching 3 billion have also had to be revised downwards to 1.7 billion.

The world is much poorer than had been assumed. In contrast to the optimistic perspectives at the dawn of this century on development and rising prosperity, today pessimism is much more the order of the day. Had the spirit of the 2001 Doha Development Agenda been pursued, the planet might have been a very different place. As suggested above, by Cancún in 2003, only two years after the launch of the round, it was apparent that the spirit of Doha was dead. The poor in the poor nations have been abandoned.

In an article in the New York Times on the late July TPP ministerial meeting, we are informed that “the trade ministers gathered at the luxury hotels of Maui.” Trade ministers usually do gather at luxury hotels often in luxury resorts. It is not in the swanky surroundings of Cancún or Bali that they will be faced with and challenged by the poverty of these respective countries.

Nairobi, the venue of the next WTO ministerial has a rapidly rising population of some 3 million. Parts of the city are very attractive with nice housing, hotels, and impeccably groomed lawns. But over 60% of the population (the fastest growing part) lives in slums situated next to toxic waste dumps on 10% of the city’s surface. Kibera is the biggest. I visited another, Korogocho, a few years ago. The conditions are hard, a lot of people are squeezed into limited space, but they are also resilient, notably the many, many youngsters, who face a very uncertain future. The Nairobi WTO ministerial meeting is unlikely to improve their prospects, while the global trade agenda generally has abandoned them.

If at the forthcoming WTO ministerial meeting in Nairobi the ministers were made to face brutal realities by gathering in Korogocho (or Kibera), rather than at the luxury hotels in the swanky sectors of town (as pleasant as they are), perhaps there would be a rising consciousness of the global challenges that lie ahead, and the responsibilities of trade ministers in addressing them.

The WTO is in need of drastic and fundamental structural reform. But before reform can be properly undertaken, there is an imperative and urgent need for generating a spirit of cooperation rather than confrontation and thereby reducing the inequalities between the key national players and one which is genuinely committed to diminishing global poverty. Failing that, an intensifying climate of global conflict and impoverishment seems inevitable.