Trade ministers gather in Singapore this week to resume talks on the controversial Trans-Pacific Partnership (TPP). The TPP, which started in 2005 as a multilateral trade agreement among Brunei, Chile, New Zealand, and Singapore, is a mega trade deal in negotiation, which now includes 12 countries, whose combined GDP comprises 38% of the total GDP worldwide. If ratified, it will create a massive Asia Pacific regional trading bloc that excludes China. South Korea is not yet a party to the TPP. But since the South Korean government’s announcement last November of its intention to participate, South Korean farmers and workers have vowed to join others around the world to defeat the TPP. Here are ten reason why-
1. The TPP will wipe out South Korea’s rice farmers. Trade liberalization policies since the Uruguay Round of the World Trade Organization (WTO) have dealt a series of setbacks for South Korea’s farmers. Farmers, who made up half the country’s population in the 1970s, now represent only 6.2 percent. South Korea’s self-sufficiency in grain production dropped from 70 percent to 20 percent in the past four decades. With the expiration of rice import quotas this year, South Korea has to choose between either opening up its rice sector to the world or continuing to import a fixed quota of rice annually from countries like the United States, China, and Thailand. The South Korean government says if it opts for eliminating import quotas, it will follow Japan’s example of maintaining high tariffs of 500% to protect rice. But if it joins the TPP, which prevents high tariffs, cheap imported rice will flood South Korea’s market and completely destroy the foundation of rice farming in South Korea.
2. The TPP will also devastate South Korea’s beef industry. As a precondition to joining the TPP, South Korea recently signed a bilateral trade deal with Australia, which will completely eliminate South Korea’s 40% beef tariff for Australian imports by 2015. South Korea is also negotiating free trade agreements (FTAs) with agricultural powerhouses Canada and New Zealand, which will demand the further opening of South Korea’s beef and agricultural markets. Last November, the U.S. Department of Agriculture announced that it will ease foreign beef import regulations according to the standards of the Office of International Trade. In anticipation of the TPP, the United States is opening up its own beef market so that it can demand other countries do the same. In the case of South Korea, it currently only imports beef that is less than 30 months old, but the United States is expected to pressure South Korea to loosen this restriction.
3. South Korea has to make drastic concessions even before joining the TPP. As a precondition to joining the TPP, South Korea is required to meet market-opening demands of each TPP member country. As a case in point, South Korea-Australia FTA negotiations had been shelved since 2010 due to South Korea’s refusal to accept Australia’s demands on easing beef tariffs. In December 2013, however, within one week of South Korea’s announcement of its intention to join the TPP, South Korea abruptly changed its mind and decided to relax its tariffs for Australian beef, and the South Korea-Australia FTA was rushed to ratification. In this way, South Korea will have to pay an “entrance fee” to each of the TPP member countries in order to join. The United States, Australia, New Zealand, and Canada are expected to demand the further opening of South Korea’s beef and agricultural markets; Japan will demand an expanded market for its auto and electronic products; and Mexico will try to protect its own market from South Korea’s auto and electronic exports.*
4. The TPP can wipe out South Korea’s auto and electronics manufacturing. South Korea currently has bilateral FTAs with 8 of the 12 TPP member countries and is in the process of negotiating with the rest. The only major economy with which South Korea does not yet have an FTA is Japan. For all intents and purposes, therefore, joining the TPP, for South Korea, would essentially be like signing an FTA with Japan, i.e. opening up South Korea’s market to Japan’s competitive products. South Korea’s current account balance with Japan has consistently recorded a trade deficit for the past ten years – $31.7 billion in 2010, $18.8 billion in 2012, and on average $20 billion a year.* Eliminating what little tariffs remain for Japanese imports will be disastrous for South Korea’s manufacturing base, especially in auto, machinery, and electronic parts, in which South Korea is at a relative disadvantage. Perhaps as a forewarning, immediately after South Korea announced its intention to join the TPP, Hyundai Auto shares plummeted 5%. Even the Korea Institute for International Economic Policy warns that the TPP will bring about the same result as a bilateral with Japan and it can mean serious damage to South Korea’s auto, parts and material, and machinery industries.
5. The South Korean government makes false promises of GDP growth. To promote the Korea-US FTA, which went into implementation in 2012, the South Korean government guaranteed an increased GDP growth rate. In the first year of Korea-US FTA implementation, however, its GDP only increased 2%, lower than the previous year’s growth of 3.6%. In other words, the growth rate actually dropped after implementation of the FTA. According to data provided by the U.S. International Trade Commission, US-bound exports of the top 10 U.S. trading partners increased 4.85% in 2013, while South Korea’s exports to the United States only increased 3.3%. In other words, countries without FTAs with the United States exported more to the United States than South Korea, which has an FTA with the United States. After ratifying an FTA with the European Union (EU), South Korea’s exports to the EU recorded a growth rate of -11.4% in 2012. To promote the TPP, the South Korean government promises a 2.5% GDP increase in 10 years, in other words an average annual increase of 0.25%, approximately $2.5 billion. Considering Samsung Electronics’ export in 2012 alone was $201 billion and its net profit $23 billion, the logic of opening up South Korea’s electronics and auto markets for a mere $2.5 billion that is not even guaranteed just doesn’t add up.*
6. The TPP will weaken labor protections and deteriorate conditions for workers. The TPP is not just about trade. Of the 29 chapters of the TPP – on investment, financial services, domestic regulations, government procurement, investor-state dispute settlement, intellectual property, tariffs on commodities – only five chapters are actually about trade. The rest are about subjects that go way beyond the traditional notion of trade. Its broad reach will impact all aspects of people’s lives, including access to medicine, internet freedom, and everyday working conditions. In the South Korea-Japan FTA negotiations, started in 2004 then stalled, Japanese corporations demanded guarantee of stable labor-management relations, elimination of mandatory vacation pay, the principle of no work no pay, and clauses related to restricting the labor movement. Japan can make the same demands through the TPP and curtail workers’ right to organize.
7. The TPP will undermine democracy and destroy the environment. The investor-state dispute settlement (ISDS) clause of the TPP increases corporate control. If a local government passes a law requiring that genetically modified crops be identified, for example, the TPP will allow a panel of corporate representatives outside the country to overrule the law. Without the ability to pass binding laws, governments have no ability to restrict corporate behavior. According to New Zealand law professor Jane Kelsey, “The vast majority of investment arbitrations under similar agreements involve natural resources, especially mining, and have resulted in billions of dollars of damages against governments for measures designed to protect the environment from harm caused by foreign corporations.”
8. The TPP will curtail internet freedom and increase the cost of life-saving medicine. According to The Guardian, the intellectual property chapter of TPP, published last year by WikiLeaks, contains “proposals to increase the term of patents, including medical patents, beyond 20 years, and lower global standards for patentability” and “also pushes for aggressive measures to prevent hackers breaking copyright protection.” Notably, however, it makes an exception for “lawfully authorized activities carried out by government employees, agents, or contractors for the purpose of law enforcement, intelligence, essential security, or similar governmental purposes.”
9. The TPP will undermine government ability to regulate big banks. The TPP proposes to liberalize investment and financial services and limit the ability of domestic governments to regulate the operation of financial firms. The TPP allows foreign financial firms to sue local governments in foreign tribunals empowered to order payment of fines on the grounds that local laws undermine corporate profits. The TPP would also ban the use of capital controls designed to prevent the destabilizing floods of speculative money in and out of countries; this means national economies will become even more vulnerable to volatile capital flows.
10. The TPP is politically divisive. The United States is pushing the TPP as a counter to the Regional Comprehensive Economic Partnership (RCEP), a trade deal first proposed by the Association of Southeast Asian Nations (ASEAN) in November 2011 and including all ten ASEAN nations plus 6 others (China, Japan, South Korea, Australia, New Zealand, and India). Concerned that an Asian regional bloc that excludes the United States will mean it will lose its political and economic leverage in Asia, the United States is pursuing the TPP not simply for trade and tariff elimination but as a “21st century gold standard” for all future trade deals to be modeled after and to create a U.S.-led trade order in the trans-Pacific region. The United States sees the TPP as a step in regional economic integration on the path toward establishing a Free Trade Area of the Asia Pacific (FTAAP), which would include all 21 Asia Pacific Economic Cooperation (APEC) countries. The TPP, aimed as a counter to China’s rise in the region, is based on a spirit of hegemonic competition, not partnership.
*Source – Ten Questions and Answers – Understanding the TPP (in Korean), National Task Force against TPP/FTA (South Korea)