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Professor: Free-trade agreement hampered by lack of transparency

Wed, 05/07/2014

LAWRENCE — The Trans-Pacific Partnership has the potential to be the most economically and politically significant free trade agreement in the Asia-Pacific region, but it is being hindered by a nontransparent drafting process and perceptions of favoring American corporate interests over poverty alleviation, according to a new article by a University of Kansas international trade law expert.

Raj Bhala, associate dean for International and Comparative Law and Rice Distinguished Professor at the School of Law, has authored “Trans-Pacific Partnership or Trampling Poor Partners? A Tentative Critical Review.” The article was published in the Manchester Journal of International Economic Law the same week President Barack Obama toured Asia discussing the agreement and other issues. The piece, listed in three different top-10, most-downloaded Social Science Research Resources Network categories, outlines problems that have stalled adoption of the agreement among the United States and 11 other nations that account for 40 percent of global gross domestic product.

“I didn’t start out seeking to criticize this agreement. I needed to be familiar with it to write the new edition of my next textbook and stay current in the classroom when teaching my students,” Bhala said. “As I learned more I became more skeptical and had more concerns. It became clear we are thinking too much about the wealthy elite, that our trade policy is ever-more corporatized, and we are also hearing these concerns from some of our closest friends and allies abroad.”

The Trans-Pacific Partnership, commonly known as TPP, was conceived in 2006 among four nations and has since expanded to 12. It is part of a growing trend among the U.S. and many other members of the World Trade Organization to form free-trade agreements, especially given the failure of the Doha Round to yield a comprehensive, ambitious and balanced multilateral deal. The U.S. alone has free-trade agreements with 20 nations, Korea, Colombia and Panama being the most recent.

One of the primary problems with the TPP is the lack of transparency in its drafting, Bhala said. Draft texts of free-trade agreements are generally made available to journalists and the public. Just two of the 29 TPP chapters were made available to the public. Those sections, addressing environmental and intellectual property law, only became so when they were leaked to WikiLeaks. Bhala’s scholarship draws from journalistic coverage of the leaked sections and analyses of domestic and foreign legal, governmental and nongovernmental organizations directly familiar with TPP talks.

American involvement in TPP makes economic sense, but also is driven by a strategic shift in focus from the seemingly easily troubled Middle East to the dynamic, entrepreneurial Asia-Pacific region, Bhala said. That strategic shift also means, if TPP takes effect, solidifying economic and political alliances to help contain China, even though the administration prefers not to make that admission. It is reminiscent of agreements the U.S. had with Western European nations to contain the Soviet Union during the Cold War. Even if China ultimately joins TPP, the U.S. and its allies already will have written rules on key issues of importance to China, such as duty-free, quota-free treatment for almost all traded goods, services sector liberalization, the behavior of state-owned enterprises and rules of origin for textiles and apparel merchandise. TPP then will be a “take it or leave it” proposition for China.

“Bluntly put, TPP and the pivot toward Asia is certainly justified by economic and demographic realities and projections. But the biggest reason is containing China,” Bhala said. “And setting rules of a big regional trade club before China joins, if it ever does, thus constraining it to play by those rules.”

However, in writing TPP rules, the U.S. and its trading partners have had profound disagreements. The perception is that American demands are simply too harsh, lack empathy and overtly favor American corporate interests over the most pressing matter in the Asia-Pacific region: poverty alleviation for those earning less than a dollar a day, and economic security for the fragile new middle class earning between $2 and $20 a day.

Two examples are opening Japanese agricultural markets to more imports from the U.S. and the sourcing of fabric for Vietnamese textiles, that country’s biggest industry. There are also disagreements on making Japanese markets more open to American cars and significant disputes on intellectual property. In the case of the latter, patents for pharmaceuticals, such as HIV/AIDS medications, are especially contentious. While American interests push for longer patent protection for medications, data exclusivity and so-called “evergreening,” Southeast Asian countries and NGOs argue that doing so only protects bloated corporations and stifles innovation while locals continue to die.

Those arguments are just a few of the problems holding up successful conclusion of TPP. Despite the differences among negotiating parties and political backlog in Washington, D.C., that has hampered American trade influence, Bhala believes there is still a good chance the parties will resolve their differences and finalize the free-trade agreement. That could be a boon not only to the nations involved in the agreement, but also to students in KU Law’s international trade courses. KU Law grads are practicing in 18 countries, including several Asian nations involved in TPP. The agreement could present many more opportunities for them, Bhala said.

“Essentially, this free-trade agreement is born of failure at the WTO level and the strategic shift to Asia,” Bhala said. “It’s bogged down by political gridlock in D.C., and a potpourri of disagreements on ancient issues such as farming and 21st century issues such as intellectual property, and the U.S. cannot bully its way to get a deal. I’m optimistic the U.S. will appreciate that sometimes helping our trading partners in the short term helps American in the long term.”



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