What’s 50 Percent More Influential than Kanye West?
Recently, rapper Kanye West declared himself (dead or alive) 50 percent more influential than Stanley Kubrick, Apostle Paul, Picasso, Pablo Escobar and any other human being for the next 1,000 years. Unfortunately, this claim is a bit difficult to substantiate. However, there is a good rule of thumb to measure influence of international trade agreements: factual statements and the collective Gross Domestic Product (GDP) to back them up.
One major selling point from the White House to finalize the Trans-Pacific Partnership (TPP) trade agreement with 11 other Pacific-Rim countries is the opportunity to “rewrite the rules of trade… because if we don’t competitors who don’t share our values, like China, will step in to fill that void”. This is closely followed by the next selling point- “nearly 40 percent” (actually it’s 36 percent) of global GDP is tied up in TPP. Certainly, by itself, this number does not guarantee success at writing new rules; it only serves as the weight count of a title boxer stepping into the ring.
The final text, as promised, pushed the region forward with higher standards not usually found in trade agreements, such as how to treat state-owned enterprises, rights to form labor unions, rules on e-commerce and access to the internet, requiring a minimum wage, protecting and extending intellectual property rights, and transparency requirements, to name a few. These new rules, dubbed the “gold standard” by then-Secretary of State Hillary Clinton, acknowledge international trade is not just about tariff reduction. While estimates of economic gains to the U.S. vary, these new rules will have a large impact in communist Vietnam, autocratic Brunei, scandal-ridden Malaysia and throughout the trading world.
Now that TPP negotiations have ended, Pacific-Rim trade negotiators have returned to their original agenda completing the Regional Comprehensive Economic Partnership (RCEP), an agreement with the Association of Southeast Asian Nations (ASEAN) and six regional partners including China, excluding the U.S. and accounting for 29 percent of world GDP. United by an increasingly contentious scenario in the South China Sea, ASEAN countries are apt to confront China with one voice as evident in the recent ASEAN-US Sunnylands Declaration made with President Obama last month. In the declaration ASEAN leaders reaffirmed their commitment to territorial integrity, the United Nations Convention of the Law of the Sea, and a rules-based ASEAN community.
RCEP includes many of the 21st century chapters found in TPP, including services, investment, cooperation, intellectual property and competition. Expected to land short of the “gold standard,” the TPP members and those who have expressed a public interest in joining TPP, including the Republic of Korea, Indonesia, Thailand and the Philippines, amount to 41 percent of RCEP’s GDP. China represents 49 percent. The TPP prospects already score better at protecting intellectual property and competitiveness than the rest of ASEAN[i] not already in TPP. Without the higher standards found in TPP, they will miss economic opportunities as global value chains and foreign investment divert to the new trade region.
In fact India, nine percent of RCEP’s GDP, is already feeling the pressure. Indian commerce minister Nirmala Sitharaman stated TPP will “affect sectors like leather goods, plastics, chemicals, textiles and clothing.” These make up 30 percent of India’s exports. Her concern extends to investment, too, as “stricter investment and labor standards under TPP may also reduce the policy space for India. We need to work toward common standards.” Lastly, Arvind Subramanian, chief economic adviser to Prime Minister Modi, has stated “TPP will bring seismic changes in the world economy and India will have to take it seriously.” India is now pressing to finish RCEP this year before TPP has its full regional impact.
Without participating in RCEP talks or ratification in any member country, TPP is already having reverberating effects throughout Asia. Meanwhile, Kanye West’s new album “The Life of Pablo” only made it to number thirteen in Denmark.
[i] See Global Intellectual Property Center International IP Index, International Property Rights Index and World Economic Forum Global Competitiveness Report.