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Tag Archives: Trans Pacific Partnership

More Than a Market Correction: China in Transition

Denis Bright invites responses about the long-term significance of the structural changes in China’s economy and its global financial outreach. Future implementation of such changes can be steered by Chinese leaders themselves or imposed from outside by joining the Trans Pacific Partnership (TPP) on terms that are not completely acceptable to China. The latter option would require a more corporate-led style of economic development. Evidence of the significance of the forthcoming structural changes in the Chinese economy is far from complete. The author is open to feedback on the issues raised in this article.

Chinese financial market jitters (FT Online 28 August 2015)

Chinese financial market jitters (FT Online 28 August 2015)

As global financial markets stabilise after recent volatility, news services have rushed to offer explanations of the recent downturns in Chinese financial markets.

There is little doubt about the extent of China’s market correction. The People’s Bank of China (PBOC) and the Chinese government were ready to use up a tiny portion of accrued foreign currency reserves to prevent a free-fall in the market.

News networks around the world tried to explain the significance of China’s market correction.

Germany’s DW News on 29 July 2015 sought clarification from Dr Sandra Heep of the Mercator Institute for Chinese Studies (MERICS) in Berlin on the significance of China’s market corrections for both China and the wider global economy.

The extent of the potential market volatility put Dr Sandra Heep on the spot as the eye of a financial storm was approaching. With her expertise in longer-term economic analysis, Dr Sandra Heep was careful not to join in the guessing game to predict tomorrow’s financial markets.

 

Seeking longer term perspectives for China

Months before in 2014, Dr Sandra Heep in her prior research position at the Institute of Chinese Studies at Freiburg University was able to be more forthright about the structural changes needed to complete China’s successful transition from its current status as a developmental economy.

Dr Sandra Heep’s broad interpretations of China in transition as the world’s second largest economy are readily endorsed by the news releases from China’s leaders themselves and economic data from independent sources.

More high tech future and global financial outreach for China? (Financial Times Online (London) 25 August)

More high tech future and global financial outreach for China? (Financial Times Online (London) 25 August)

Although China is now the world’s second largest economy, it may be reaching the limits of its sustainability as a global workshop for the supply of a full array of goods and services.

China’s current status comes with great social and environmental costs as noted by Dr Sandra Heep in her interpretation of China’s capacity as a developmental state with a considerable degree of state planning in its economy.

As a developmental state, China is still identified with the suppression of the purchasing power of lower paid workers, arrested improvements in environmental quality and the sheer cost of living challenges in congested cities.

Long Island, New York: Property haven for Chinese elites? (FT Online 31 August 2015)

Long Island, New York: Property haven for Chinese elites? (FT Online 31 August 2015)

Ironically, many other developing countries within the TPP network share similar problems which are excused by advocates of the market model as a necessary transitional phase.

Mexico is a prime example despite its long-standing free trade agreement with Canada and the US under the North American Free Trade Agreement (NAFTA) since 1994.

China also lacks a fully globalized banking system on the scale of financial operations in the US and some Western European countries.

A section of Chinese economic elites are able to distance themselves from the real life problems of a transitional economy. The situation was similar in the earlier generations of industrialization in Britain, Germany and the US.

Prestige property investments in US or Australia are staked out by these economic elites as appropriate hedge assets.

The challenges of economic diversification and global financial outreach

The leaders of the real world China are probably enthusiastic about steering the economy in new directions. However, questions must remain about the appropriateness of the TPP’s market model.

China’s vast foreign currency reserves can be used to foster more dynamic forms of social market capitalism with an outreach into finance, infrastructure investment, environmental sustainability and development assistance.

Pragmatic neighbours like Russia as well as the countries of Central Asia and the Middle East are usually prepared to take advantage of China’s expanded international outreach.

Official Chinese investment could also bankroll longer-term projects in both the Australian private sector and future government sponsored sovereign wealth infrastructure funds along the lines of Temasek Holdings in Singapore.

To Australia’s credit, our support for China’s diversification is evident in the presence of Treasurer Joe Hockey at the inauguration of the expanded Asian Infrastructure Investment Bank (AIIB) in Beijing on 29 June 2015.

The extent of Australia’s role in the bank will be determined largely by the commitment of the next incoming government. AIIB will not be fully operational until 2016.

Significant for China is the presence of countries from Central Asia and the Middle East along the Silk Road Land Bridge to Europe.

Europe itself is represented by all the key economies, including the UK.

Israel has also joined the AIIB. This country has benefited from the investment of Chinese technology in urban transport.

The positive implications for peace and stability in the Middle East from this investment by Chinese infrastructure firms are immense.

There is no long-term reason for the exclusion of strife-ridden countries like Iraq and Syria from this investment outreach after UN-sanctioned peace initiatives.

Proposed Silk Road infrastructure for Central Asia (World Bulletin 2014)

Proposed Silk Road infrastructure for Central Asia (World Bulletin 2014)

Such positive commercial changes might be thwarted if China was forced to drift back to a pure market oriented financial system. Such infrastructure investment is always a long-term commitment.

This cannot be assured in a financial system which is preoccupied with short-term futures with a trickle-down capacity to benefit legitimate investment.

In this sense, the current negotiations to finalise the TPP present a dilemma for China.

While undoubtedly well informed of the TPP negotiations, China is not one of the core partners of an avowedly market oriented investment and trading network.

The challenges posed by the Trans Pacific Partnership (TPP) for China

It is for the China’s current leadership to decide just how to respond to the current TPP drafts which will greatly empower business corporations by internationalizing competition laws.

TPP drafts contain embedded assumptions about the superiority of the market model of development and of the carrots available from the trickle-down benefits of new corporate investment in each of the participating countries.

The hegemony of rogue elements in global financialization processes is also a temptation for China to take a similar path to economic diversification along the pure market model.

Professor Gerard Epstein of the Political Economy Research Institute (PERI) at the University of Massachusetts in Amherst explains the mechanisms of these financialization processes which have become the ground rules for successful international finance.

In the aftermath of the Global Financial Crisis (GFC), the late Professor Peter Gowan of the International Relations School at London Metropolitan University gave a similar but more detailed synopsis of the challenge of rogue capital flows in Crisis in the Heartland. This article is readily available online. (http://newleftreview.org/II/55/peter-gowan-crisis-in-the-heartland).

Changing the protocols for China’s global outreach

The US sponsored Trans Pacific Partnership (TPP) and a proposed Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU impose a fundamentally different style of economic development and global outreach for China.

China’s key financial institutions must operate within the prevailing rules for international finance. The more interventionist approaches of China’s Asian Investment Bank (AIIB) and the BRICS Group of Brazil, Russia, India, South Africa and China itself are still minor players on a global scale.

China’s hesitancy to join the TPP negotiations has its parallels across the Pacific Rim where the internationalization of competition laws and intellectual property rights has its own detractor in most countries.

Without the release of the TPP negotiation drafts by Wikileaks in 2013, most political leaders would still remain silent about the implications of the voluminous chapters on intellectual property rights and investment protocols.

Wikileaks Press Release (https://wikileaks.org/tpp-ip2/)

Wikileaks Press Release (https://wikileaks.org/tpp-ip2/)

In the words of WikiLeak’s Editor-in-Chief Julian Assange, “If instituted, the TPP’s IP regime would trample over individual rights and free expression, as well as ride roughshod over the intellectual and creative commons. If you read, write, publish, think, listen, dance, sing or invent; if you farm or consume food; if you’re ill now or might one day be ill, the TPP has you in its crosshairs.”

While China’s leaders might hesitate about the benefits and costs of future participation in the TPP, the proposed internationalization of competition laws in favour of business corporations across the Asia Pacific Rim has also been a divisive issue within the Obama Administration which depends on the support of organized Labor in key swing states like Ohio and Pennsylvania.

In order to gain approval for current drafts of the TPP Treaty, President Obama needs to rely on the support of conservative Republicans for endorsement of the treaty in the senate.

Writing in The National Interest on 6 July 2015, Sean Mirski with a background at the Harvard Law School made the following observations about the impact of the TPP.

At first glance, the Trans-Pacific Partnership (TPP) looks much like any other trade deal. By increasing trade and investment among its partners, the TPP sets out to stimulate a higher rate of economic growth in the United States and among many of its Pacific friends. As with similar treaties, the TPP has been the subject of controversy in the U.S. Congress, which very nearly killed a key piece of legislation necessary to America’s ratification of the agreement. But while American lawmakers attacked and defended the treaty largely in narrow economic terms, they appeared to disregard its main strategic promise.

Besides creating jobs, the TPP may also alter the balance of power in the Asia-Pacific. The treaty will increase the rate of economic growth in the United States and in an array of friendly nations while simultaneously diverting trade flows away from Washington’s greatest competitor, China. More important than any of these absolute changes in economic output, though, is the relative change in national power, itself the product of economic might. Whereas trade is often discussed in absolute terms, relative gains are more important in the often zero-sum world of international politics. If the TPP can change the trajectory of American power relative to China’s, it may be the single most important factor in whether the United States retains its “indispensable” role in the 21st Century.

The National Interest 6 July 2015 available at (http://nationalinterest.org/feature/the-trans-pacific-partnership-china-america-the-balance-13264)

These comments from an articulate writer with close links to the US intelligence community provide justification for further discussion about the geopolitical role of the TPP as a vehicle for the return of old balance of power strategies for the containment of China.

With China outside the current TPP draft deals, its business and investment agencies must ultimately compete on the terms of investment protocols decided by the TPP across the entire Pacific Basin.

Taiwan’s potential membership of the TPP provides an additional twist to the current economic diplomacy and has security implications for the stability of the Pacific Rim.

The Ministry of Foreign Affairs in Taiwan strongly endorses its unilateral participation in the TPP without reference to China:

The TPP aims to establish a comprehensive, next-generation regional agreement that liberalizes trade and investment and addresses new and traditional trade issues and 21st century challenges. It currently has 12 members, including the US, Japan, Canada, Australia, New Zealand, Singapore, Malaysia, Vietnam, Brunei, Mexico, Chile and Peru. Most of the TPP members are Taiwan’s major trading partners, accounting for over 30 percent of our foreign trade. Thus, the significance of joining the TPP cannot be overemphasized. President Ma Ying-jeou has announced our resolution to join the TPP and we have won support from the US and Japan, with both countries publicly welcoming Taiwan’s interest in joining the TPP. The Ministry of Foreign Affairs and its representative offices overseas have taken bilateral relations as the cornerstone and are making every effort to garner the support of other members pursuant to our accession to the group (Ministry of Foreign Affairs Republic of China (Taiwan) 2014)

Data from the Center for East Asia Policy Studies shows the vast economic capacity within a TPP that included Taiwan. South Korea is likely to be added to the matrix.

Center for East Asia Policy Studies 2014

Center for East Asia Policy Studies 2014

Thwarting the economic diversification of China on its own terms through the formula proposed by the TPP investment in the Pacific Rim would be a triumph of short-term politics over international peace and stability if Chinese leaders continued to be shut out of the negotiation processes.

Added to the challenges of future economic diplomacy are the separate but near identical territorial claims by both China and Taiwan over sections of the East China Sea and the South China Sea.

Under current co-operative arrangements between the ruling Kuomintang (KMT) Government in Taiwan and China, the Taiwanese proposal to resolve territorial disputes and fishing rights might gain some traction within China itself.

Such claims would be taken more seriously if both Taiwan and China presented a joint submission as part of a One China Additional Systems Approach as with the resolution of Hong Kong’s closer association with China almost 20 years ago.

The window of opportunity facing the TPP Negotiators and Australia

The window of opportunity is closing on this pragmatic arrangement with Taiwan. Local opinion polls are highly favourable to the opposition right-wing Democratic Party in Taiwan as the presidential elections approach on 16 January 2016.

President Ma Ying-jeou of Taiwan inspecting US made military hardware

President Ma Ying-jeou of Taiwan inspecting US made military hardware

President Obama will go down in history as one of the greatest of negotiators if a Win Win Win can be developed during President Xi Jinping’s visit to the US in September 2015. This trifecta would have to be a deal which is totally acceptable to China, Taiwan and the US.

Meanwhile it is in Australia’s interests as a responsible middle power to maintain an independent voice in the resolution of the problems posed by the TPP and the sensitivities of China towards the resurgence of Taiwan as a nation state.

Prime Minister Abbott’s support for the prevailing texts of the TPP is hardly Whitlamesque.

Opposition to the current draft of the TPP comes from both sides of the political spectrum across the Pacific Rim.

1973 Postcard from Beijing: A precedent for a constructive role for Australia

1973 Postcard from Beijing: A precedent for a constructive role for Australia

Rural lobbies in New Zealand and Japan are delaying the final draft from the political right.

Organized Labor in the US fears job losses in key swing states which must be won by the Democratic Party to keep the Republicans out of office in 2016. In these states, Democratic representatives and senators are cautious about opening up the domestic economy to more overseas competition.

The exclusion of China from the TPP negotiations also hinders its financial outreach across the Pacific Rim as a major economic superpower.

This locks China into its current workshop of the world status. Forcing compliance from China with TPP protocols can contain this economy’s sustainable growth rate and build-in a lower potential threshold for future Australian exports, service agreements and financial ties with a weaker than necessary China.

In this context, Australia can afford to be more proactive in seeking more Whitlamesque amendments that bring China into the TPP on fair terms and conditions. Given the pockets of discontent with the current TPP negotiators, Australia can win goodwill in most countries across the Pacific Rim by becoming a more independent player in both economic diplomacy and the containment of security concerns.

denis bright Denis Bright (pictured) is a registered teacher and a member of the Media, Entertainment and Arts Alliance (MEAA). He has recent postgraduate qualifications in journalism, public policy and international relations. His specialist interest is the impact of contemporary globalization on the delivery of progressive public policies.

 

 

Are you being served?

MOR-health-website-wide-620x349

Democratic governments provide two fundamental functions in the service of a single overriding responsibility. When a government, through the performance of its two functions, betrays the single responsibility it holds, it has lost its mandate to govern. There is a case to be made that our current Coalition government is in exactly this position.

The raison d’etre for democracy, without which the very concept of democratic government would not exist; is to provide a means for the community as a whole to configure the kind of society in which they wish to live. Inevitably this involves winners and losers: government exists primarily to put checks on the powerful and support the weak. Governance is thus about promoting equality. The cut and thrust of politics is about thresholds – how much is too much? How much is too little?

Governments fulfil this basic purpose through the actions of their two primary functions: legislation and national defence. Legislation allows a government to protect its citizenry from internal threats; national defence protects us against external threats. Since coming to power, Tony Abbott’s Coalition government has continued a long history in Australian politics of continuing and sustaining Australia’s military, and in this way the government is carrying out its remit for national defence. Good for them.

In the field of legislation against internal threats to society, their record is not so good.

The Big Bad: the Food Industry

There is a growing recognition amongst public health bodies that food manufacturing and marketing in Australia, and the west in general, is promoting unhealthy eating habits and contributing materially to public health issues such as obesity and diabetes. History has shown us that industries acting counter to the best interests of the people eventually face opposition and attempts at control and harm minimisation by societal groups, and that eventually governments come to the party and assist in such opposition. The tobacco industry is the cause celebre but alcohol and junk food are both likely to follow. It is in this light that on 14 June 2013, COAG – the Council of Australian Governments – announced the implementation of a packaging labelling scheme in Australia. This was the culmination of a long discussion and negotiation process beginning in December 2011.

The Front of Pack food star rating scheme is a compromise solution painstakingly agreed and laboriously (and expensively) developed over two years. COAG is the federal council that brings together Australian state and federal governments in a single body. The scheme, initially intended to be voluntary, will provide consumers an easily understood guide to the nutritional value of their foods. The scheme was brokered between COAG and the Public Health Association with ongoing consultation with the food industry. The food industry, represented by such bodies as “Australian Public Affairs” and the Food and Grocery Council, has cooperated in its development despite being trenchantly opposed to the scheme and seeking any means possible to delay its introduction.

The Abbott government has been accused of deliberately delaying the introduction of the scheme until after State elections in South Australia and Tasmania on 15 March, for exactly this purpose, hoping that the composition of COAG would change sufficiently to allow the cancellation of the agreement. Cancellation or amendment of a COAG agreement requires the majority of State and Federal governments and the current makeup of the council is narrowly in favour of the food labelling scheme.

Included in the star rating scheme is a food ratings website that is intended to provide consumer advice on the nutrition of packaged foods. The website also includes a calculator for food manufacturers to use to calculate the star rating for their packaged foods for voluntary inclusion in labelling. The website was completed and went live on schedule, on February 5 2014. Many public health groups and industry groups were expecting its arrival and awaiting its commencement and it seems a minor miracle that such a website, developed over two years by the public service in conjunction with the Public Health Association, should have been completed on time.

Assistant Health Minister Fiona Nash personally intervened to have the site taken offline by 8pm the same night.

Nash’s publicly stated reasons for pulling down the website is that “the website will be confusing for consumers as it uses a star rating that is not yet ‘up and running’.” She has also claimed that it was a draft put online by accident. But it was her chief of staff, married to the owner of the business lobby group Australian Public Affairs, who personally intervened to have the site unilaterally taken offline.

Protecting the interests

This is not the first example of Ms Nash protecting the interests of corporations and business lobbies at the expense of public health or public interest initiatives. It’s tempting to make personal judgements that Ms Nash is not an appropriate candidate for the position of Assistant Health Minister, but she operates within a government with a strong track record of supporting business interests rather than public good regulations that limit them.

Democratic government is designed to serve the interests of the People – not individual people, but the community as a whole. Conservative governments are wont to argue that making life easier for businesses allows them to create more jobs and thus serves the interest of the people, and there is some justification for that; however, there are cases where public interest and corporate interest clearly come into conflict. These include areas of workplace health and safety; of environmental protection; and of protection of public health against goods which, in excess, can be harmful.

In a capitalist society, companies are fighting two major opponents. The first major opponent a business faces is its competitors. Companies need to compete against other companies to turn a profit. The role of government in this is simply to be even-handed; to not preference one company at the expense of others. The litmus test should be whether any proposed change operates across the board. If competition is seen as a public good, then sympathetic treatment may be justifiable towards the underdog. The second major opponent a company faces is the community.

Companies are beholden to the public that buys their goods, but are not above manipulating and mistreating those customers. Marketing might sometimes be righteous – if people have an identified need, promoting a product which can meet that need is perfectly legitimate. But in our materialistic society with many competitors for the purchaser’s dollar, much of marketing is about creating the need prior to seeking to fulfil it.

In the context of coercive or manipulative commerce, government’s role should always fall squarely on the side of the People’s interest. Regulations and laws exist to put limits on what companies can get away with, because it will never be the companies themselves that impose limitations.

An emerging pattern

The cancellation of the food star ratings website is a clear case of corporate interests being favoured at the expense of the People, and a clear abrogation of the politician’s responsibilities. However, it is merely the latest in a long line of government actions from the Abbott government that favour the interests of corporations rather than the People. Prominent examples include:

The Trans Pacific Partnership (TPP). This is the grand-daddy of corporate interests into which both recent governments, Labor and Coalition, have been driving us headlong. Whole articles can be written about the TPP – and indeed they have been.

The National Broadband Network. It has been convincingly argued that the main reasons for the Coalition’s opposition to Labor’s model for the NBN is that it will do harm to entrenched corporate interests.

The mining tax. To attempt to redistribute some of the wealth of the largely overseas-based megacorporations involved in strip-mining this country and put it to use across the community and small businesses makes logical sense, but it goes against Coalition ideology of protecting the corporate interests of those who make profits.

An internet filter. The idea of an internet filter is not new; Steven Conroy was rightly excoriated by the left for this idea that is tantamount to censorship. George Brandis’s vision of the filter, however, is not so concerned with protection of children and our moral virtue; it is aimed directly at protecting the existing media corporations, in the guise of protecting copyright. Whilst this is an issue with some justification, you might think we would have learned by now that protecting the rights of intellectual property holders by draconian regulation always hurts both the eventual consumers of media products as well as innocent bystanders who want to use file sharing for legitimate purposes.

Attacks on unions. The Abbott government’s ideological crusade against trade unions is not really about corruption and they are not really friends to the honest worker. The primary and overt aim of the coming Royal Commission is to damage Labor – both its reputation and its source of funding. But the chief outcome in any conflict between corporations and the unions which exist to protect workers and the community from the corporations’ excesses will always be to the detriment of the community. For evidence of the government’s allegiances in this field, look no further than the recent case of SPC, where the government attempted to push SPC to reduce staff conditions to the minimum allowed by the award before any assistance would be possible. In some strange way, this equates in the government’s mind to being “best friend to the honest worker”.

Credit where credit is due

It must be said that the Abbott coalition government seems to genuinely believe that promoting the interests of corporations will be for the good of Australia; they are not being deliberately harmful to the people they govern. But there does not appear to be any kind of “public good” test being applied to decisions. Corporations have the ear of the government through lobby groups and donations, and it certainly seems that the government’s ear has been turned. But when both government and public opinion can be swayed by the corporations that government ought to be protecting the public against, the very purpose of democracy is being subverted. Whether or not the coalition government (and its predecessor in Labor) are being malicious or merely unduly influenced, whether there is corruption or nobly-held ideals, it is the community that suffers. The only question remaining is how far the imbalance will go before the people wake up to the fact that the People and the Corporations are not on the same side?