«Battle for Globalisations? BRICS and US Mega-Regional Trade Agreements in a Changing World Order MARKO JUUTINEN AND JYRKI KÄKÖNEN © 2016 Observer ...»
Democracy promotion and responsibility to protect (R2P) is another dimension within the theme of sovereignty. BRICS “insist that international law provides tools for achieving international justice, based on principles of good faith and sovereign equality.” They “emphasise the need for universal adherence to principle and rules of international law in their interrelation and integrity, discarding the resort to 'double standards' and avoiding placing interest of some countries above some others.” At a discursive level it appears that the BRICS regard UN principles such as the R2P as a mere subordinate to the principle of state sovereignty. Further, there seems to exist antipathy towards democracy promotion or the categorisation of states according to their adherence to democratic principles. Russian and Chinese positions on Syria further emphasise this, but also the BRICS statements lend some support to this idea. This is also the interpretation by, for example, Oliver Stuenkel143 and the expressed opinion of former Indian UN ambassador Hardeep Puri.144
Mega-Regional Trade Deals I n 2010, a year after the first BRIC Summit, the US and 11 Pacific states embarked on negotiations for a comprehensive and ambitious free trade agreement, the Trans-Pacific Partnership (TPP). Some years after, in 2013, negotiations between the EU and US on the Transatlantic Trade and Investment Partnership (TTIP) were launched. The TPP countries constitute the largest export market for US goods and services, representing 44 percent of US goods exports, 85 percent of US agriculture exports, and 27 percent of US private services exports. The combined TPP countries' share of total world GDP is about 40 percent, and the combined EU and US (TTIP) share is nearly 50 percent. Moreover, transatlantic trade accounts for about 30 percent of world trade.145 Together, TPP and TTIP countries would account for some 60 percent of world GDP while the BRICS' share of total GDP is only 20 percent.146 The official objectives of the TPP and TTIP are to boost transatlantic and transpacific trade, increase economic growth, and create new jobs. The instruments for achieving these goals include three different forms of liberalisation. The first cluster relates to issues of market access – that is, the opening of new markets and enhancement of access to existing ones. The second cluster relates to regulatory cooperation and so-called 'non-tariff' barriers to trade. A final group of issues relates to rules and standards. Most of these matters are covered by WTO agreements, but the negotiating parties have expressed their commitment to going beyond these with an ambitious WTO-plus agenda.
This section situates the two trade deals into the context of globalisation. As has been illustrated in earlier sections, BRICS can hardly be interpreted as an alliance for a singular globalisation. Instead, BRICS cooperation appears to Mega-Regional Trade Deals stand for increased plurality. Does the same hold for the two trade deals? To answer this question, the following issues are examined.
(i) Economic liberalisation (ii) Rebalancing of economic power (iii) Integration of the West MRTAs and Economic Liberalisation The negotiating parties believe that the opening of new markets in services and procurement is economically promising.148 Certainly, the services sector is the largest employer in advanced economies while procurement accounts for a significant share of GDP. In the EU, for instance, 16 percent of GDP is accounted for by government procurement. The aim of the negotiating parties is to achieve the most ambitious possible liberalisation of services. In official statements of negotiating objectives, no exclusions are made in indicating that all WTO sectors – health, education, insurance and so on – are on the table (other than those services supplied on a non-commercial basis or non-competitively). With regard to procurement, laws requiring local content (like the Buy American Act) are to be relaxed, and threshold values for international bidding contests are to be lowered.150 Along with the opening of new markets, TPP and TTIP tackle a broad range of non-tariff or 'behind the border' barriers. All of these originate in government regulation, for different purposes such as consumer safety and environmental protection. Safety regulations, procedures for safety assessments, quality controls and licensing impose preconditions for market access that must be met, thus creating costs for companies. Different sets of regulatory systems impose additional costs through multiple sets of requirements, thus multiplying the administrative costs. While these issues are covered by WTO agreements they are also subject to safeguards and exceptions. For example, the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) has not prevented a battle between the EU and the US at the WTO's dispute settlement body over the safety of genetically modified foods and pathogen treatments.151 The WTO-plus agenda includes mechanisms to help overcome such longstanding disputes both in old and new issues, aside from reducing the cost for
doing business. 152 The mechanisms include regulatory cooperation, harmonisation, mutual recognition, promoting common standards, promoting international standards, exchange of information on upcoming regulatory changes, and ensuring that these reforms do not build new trade barriers. Due to the open-ended character of regulatory cooperation (in contrast to a fixed set of rules), negotiating parties speak of 'living agreements.’ For the purpose of regulatory cooperation, TPP includes 16 regulatory committees and a TPP Commission. Committees are responsible for ensuring that cooperation takes place, obligations of the agreement are followed, and that information on new potential obstacles and areas for integration are mediated to the TPP Commission. As an intergovernmental body, TPP Commission has the ultimate right to decide upon new and upcoming changes, to supervise and to oversee the implementation of the agreement.
TPP Commission does not, however, function as a dispute settlement body.
Both state-to-state disputes and investor-state disputes are separated from the inter-governmental authority of TPP Commission. Compared to WTO, this is significant difference in the governance structure of the new MRTA. It is also proposed to be part of the TTIP agreement. Table 3 lists the different regulatory bodies of the TPP.
Mega-Regional Trade Deals TPP and TTIP also address non-trade issues that include intellectual property rights (IPRs) and labour and environmental standards.155 IPRs encompass controversial issues like pharmaceutical patents and rules on generic drugs as well as the illicit distribution of software and other copyrighted material on the Internet. A framework agreement for IP already exists within the WTO, but even here, there is scope and willingness to go further. For example, De Micco argues that, in the EU alone, nearly 200,000 jobs were lost in 2008 due to copyright infringements. In line with the ACTA agreement158 there is an interest to increase the possibilities to control and inhibit criminal use of copyrighted material on the net. Secondly, TPP includes US provisions on the patentability of new uses of known substances and extension of the patent protection time. While this benefits patent holders and the research and development (R & D) sector, it weakens the competitive advantages of the generics industry—something which, in a country like India, brings immense benefits to the poor majority.
Labour standards such as the right to union membership are an extra-WTO issue. According to Bhagwati et al.,159 China, India, and Brazil have strictly opposed further inclusion of non-trade issues within the WTO. The necessity to develop and raise not only labour and environmental standards but also other regulatory standards appears to be widely accepted among industries, as well as a section of analysts, for example, Indian think-tanks. The reason for opposing their inclusion in the current trade regime is rather based on timing.
Standards will be raised with the due order along with economic development.
If imposed now, these analysts contend, these regulations threaten to inhibit economic development by posing additional costs for domestic industries.
From the perspective of a developing country, non-trade issues and higher regulatory standards can be seen as mercantilist measures.
Moving Beyond the WTO
TPP and TTIP build on the WTO which itself is the result of multilateral trade negotiations. It emerged from the political battles of the Uruguay Round, with no single country—not even the US—having been able to dictate the results and with most countries conceding to different levels of liberalisation. Like IMF and World Bank, WTO is one of the three core institution of global economic governance. But unlike with the IMF and World Bank, the decisionmaking at the WTO is based on consensus. It can be seen both as an Battle for Globalisations?
acknowledgement of and safeguard for the diverse political perceptions, interests and needs concerning the scope and depth of global trade system among the members of the organisation. WTO was born incomplete in many ways. The Agreement Establishing the World Trade Organisation entering in force in 1995 likely encapsulates more trade-related issues than anyone can conceive of as being such. Yet alongside the ambitious multilateral agreements, WTO legal texts comprise less ambitious and varying national agreements (country-specific concessions/ commitments). Moreover, various arrangements were put in place to protect interests other than trade through safeguards and exceptions, and developed countries were granted special treatment.162 Liberalisation of services very well illustrates this gap between general objectives and outcomes. Only 39 percent of the signatories of the General Agreement on Services (GATS) liberalised services in health care, social services and education. Table 4 shows that in spite of an extensive coverage on the level of the general agreement, the actual coverage of services liberalisation at the national level was modest.
Government procurement (GP) further illustrates the partial success of WTO.
The plurilateral agreement on GP was not even signed by all WTO members – not even as a general framework agreement to which they could make specific concessions and derogations. Even within advanced countries (EU and US included) GP remains protected to this day and regulations relating to local content and high threshold values for international bidding contests continue Mega-Regional Trade Deals to inhibit competition.163 Opening of new markets through services and GP is one key element of the Western MRTAs. It is part of the broader trade policy goal of going beyond and expanding the existing level of liberalisation in the WTO and other bilateral or regional trade agreements.
This WTO-plus approach in TPP and TTIP means ambitious trade opening through increased market access, regulatory cooperation, reduction of nontariff barriers, and the establishment of new rules and standards. To this end, negotiating parties will have to yield portions of their sovereignty in favor of common rules. This happens in all international agreements that are implemented as binding international law. In WTO, however, the intergovernmental nature of WTO's highest decisionmaking bodies (i.e., the Ministerial Conference and the WTO Council), imply that ultimately the states have retained their right even not to abide with their own commitments.
(In practice that right is not exercised, because common rules and predictability have generally proved useful.) Common rules can be seen as a precondition of an orderly social interaction and indeed that is one of the corner stones in for instance Hobbesian theory of social contract. Any type of common rules will suffice for orderly social interaction, but for certain types of interaction, only a certain type of rules will do. Interactions between vendors and consumers often involve asymmetry of information, and this type of social interaction requires a mechanism to protect the consumer from risky products, placebos or surcharges. This is accomplished through regulation.
Not all regulation is always beneficial. For export companies different types and levels of regulation between different countries will likely seem more of a cost than benefit. Excessive regulation is an unnecessary cost for most people, and unnecessary regulation is both about costs for people and obstacles for their interaction. It is thus useful to promote international regulatory cooperation along with dismantling of unnecessary regulation on all levels of governance. This is what the MRTAs attempt to do. Their objective is to lessen the burdens that regulation sometimes causes on companies through strengthening market-oriented framework for regulation.
regulatory bureaucracy (through regulatory cooperation, see Table 3). This is politically sensitive. High safety regulations always imply relatively high costs for companies arising from, for example, more costly safety assessments. At the same time, high safety regulation protects consumers and environment from risks. Sometimes what is cost for somebody can be a benefit for another, and vice versa. How then to reconcile the two perspectives? In democracies, this is usually done through some forms of democratic processes and political battles.
The politics of, for instance, safety regulation is merely about the acceptable level of risks. For companies the cheapest option may sometimes be the most risky for consumers. And for consumers the best option may sometimes be the one without any risks. For this reason, TTIP and TPP have raised extensive debates and opposition even within the West. In the EU over three million citizens have signed a petition calling for a stop in the ongoing negotiations between the transatlantic federations. This is also a significant issue for the BRICS. If the BRICS indeed are divergent in terms of political economy, as suggested above and as indicated by the CREP as a less ambitious trade agreement, then the question of scope and regulatory depth in the MRTAs relates to the scope and depth of economic globalisation.