The Geopolitics of the Trans-Pacific Partnership Agreement (TPPA), A US Imperial Strategy
A World-System Analysis
The President of the United States
of America, Barack Obama, in his brief sojourn to Malaysia last November
made an interesting statement on the hotly debated Trans Pacific
Partnership Agreement (TPPA).
He admitted that TPPA is more than just a trade deal
as it encourages greater transparency and accountability due to its
comprehensiveness that will benefit all members who are going to be part
of the deal.
The real question is why President
Obama hinted that it is more than just a trade agreement? Who will reap
the ultimate benefits?
For that we must refer to his earlier speech in front of the American crowd on the 8th of May, 2015 at Nike Inc. headquarter, Oregon:
“We have to make sure America writes the rules of the global economy. And we should do it today, while our economy is in the position of global strength. Because if we don’t write the rules for trade around the world – guess what – China will. And they’ll write those rules in a way that gives Chinese workers and Chinese businesses the upper hand, and locks American-made goods out.”
In front of the American audience, the
message on TPPA by President Obama was clearly a different ball game
altogether. In short, it is a trade deal that seeks to buttress the
dominant role of the United States in shaping the political and economic
world order by fending off a formidable challenger like China. At its
very core, TPPA is geopolitical.
TPPA is not an off the cuff initiative.
It is embedded within a larger regional US strategy which Senator
Hillary Clinton called “Pivot to Asia”.
As released by Wikileaks, the US diplomatic cable on Singapore circa late 2007
indicated that the genesis of TPPA was partly initiated by Singapore’s
minister mentor, the late Lee Kuan Yew, who “urged the United States to
pursue more Free Trade Agreements to give the region options besides
China” – another clear indicator it is geopolitically driven to isolate
and contain China economically in the growing Asia Pacific economies.
As European Union (EU) project seems destined to fail,
Washington has long anticipated this and prepared a strategic shift to
reprise EU’s role to the US in the form of ASEAN (Association of South
East Asian Nations). The demographic dividends of ASEAN member states already offered huge economic prospects that could easily reflect its huge growth potential – something that is too big to be ignored
by TPPA lobbyists, especially among the Multinational Corporations – as
they have been eyeing greater market access in this region.
This pivot to Asia with TPPA as a key
pillar is also part of a larger US international political economic
strategy to maintain its grip on all parts of the world. The pivot is
nothing but the revival of the US Cold War’s containment strategy against the rising superpowers like Russia and China.
The only difference this time around is
that the US not only facing its traditional rivals in the form of
Russo-Sino axis but also against the multilateral bloc in which both
Russia and China have commanding presence alongside India, Brazil and
South Africa in what is better known as BRICS.[1]
Why does the US eagerly push for TPPA?
In April 2015, US Secretary of Defense,
Ash Carter, made a compelling statement with regard to TPPA. He too
regarded the trade pact as paramount to the US national interest in
Washington’s rebalancing strategy in the Asia Pacific. To drive the
point further, he compared the TPP to the equivalent of deploying an aircraft carrier to the region.
It is not a misplaced metaphor. TPPA is a
demonstration of economic power of the Washington Consensus where its
key institutions such as International Monetary Fund (IMF) and World
Bank do play important roles in asserting the US dominance in global
arena. US Secretary of Treasury, Jacob Lew in his testimony to House
Financial Services Committee last year attested:
“Our investments in these institutions promote our strategic interests and international stability. Every dollar of our participation leverages four more from other member countries.”
The remark was made in light of new
developments pursued by rising superpowers as Russia and China that
spearheaded many new international institutions like New Development
Bank (formerly known as BRICS Development Back) and Asian Infrastructure
Investment Bank (AIIB) for which many of US traditional allies like European countries have expressed their interest to join.
TPPA is also another attempt by the US
to revive the failure of World Trade Organization (WTO) – another
Washington-led multilateral trade liberalization platform – in a more
regional scale. TPPA is meant for the emerging markets of Asia-Pacific
while another similar regional and multilateral trade agreement like the
Transatlantic Trade and Investment Partnership (TTIP) is designed
specifically for the European Union. The US is also in the midst of
concluding the Trade in Services Agreement (TISA) with the burgeoning
services’ market across the world.
At face value, TPPA, TTIP and TISA may
be viewed as multilateral trade platforms where everybody seems to be on
equal footings. But if we were to dig deeper, all of the trade
agreements are actually in essence bilateral agreements, in the garb of a
multilateralism, where the US has a huge strategic advantage and
hegemonic interest to maintain its dominance in the international arena
of the political economy.[2]
Currency as the hallmark of empire
Before we can understand the unequal
relationship between the US and its trading partners, it is incumbent
upon us to know what kind of role does the US actually plays in the
contemporary international order.
The US is for sure not an ordinary nation-state.
Its Tocquevillian special character of “American exceptionalism”
has not only shaped the American worldview but also greatly influenced
its behavior as a world leader especially after demonstrating its
prowess in helping the Allies win the war against Nazi Germany.
The US shaped and greatly influenced the
post-World War II world order through its custodianship of many major
international political, financial, monetary and economic institutions
that were established after the retreat of European imperialism from the
South.
Like an ordinary empire or hegemon in
history, it sustains its power not only through military might but also
through economic power. Just as Britain before it maintained its
political dominance through trade, the US is doing so too. This is
reflected in the three sets of agreements mentioned earlier (although
different in name they all share the same nomenclature of “trade”).
One of the most important indicators of
the strength of an empire is its currency. Britain that once ruled the
waves was also the one to create burgeoning “sterling areas” within its
dominions, colonies and protectorates that spanned across the globe,
especially during the long period of the 19th century.[3]
Dominance in currency can only be
achieved via strong balance of trade. As Britain’s finance was sapped by
two world wars, the US which was left untouched geographically by the
world wars (except at the Pearl Harbour incident) was the only
industrialized nation that possessed the necessary capability and
readiness back then to reshape and rebuild the post-World War II
international order.
Since then, the US had created numerous
plans, initiatives, institutions and trade blocs to promote and maintain
her currency – the US Dollar – as the leading international reserve
currency not only for the central banks but also for the use in
international trade among nations.[4]
Due to these efforts the US will hardly
face a balance of payment crisis like other nations as the US purchased
imports using its own currency – a strategic advantage that is unique to
the US. For other nations, they need to obtain the US Dollar prior, to
engage in international trade as it is largely being conducted by using
US Dollar. It acts as not only the dominant and favored medium of
exchange, but also as the unit of account as well as the store of value
of internationally traded-goods and services.[5]
What made the US Dollar so popular and special for international trade?
Its stability is something inherent
within the current international monetary system where the US has the
upper hand in charting its course. As explained by Alan Greenspan, the
former chairman of Federal Reserve, the US has zero probability to default
as the country can always print the US Dollar. This makes the US Dollar
a robust currency that is also liquid (easily traded) hence by
convention it is a currency of choice for global economic transactions.[6]
It’s a long history how the US Dollar
arrived at this special position especially via the Bretton Woods
Agreement in 1944. The agreement was enacted to stabilize the
international economic system in the aftermath of World War II, where
forty-four Allied nations agreed to adopt a fixed exchange rate regime
by pegging their currencies to the gold-backed US Dollar.
Although the Bretton Woods system was
abandoned by President Nixon in 1971 which in turn made the US Dollar no
longer backed by gold and floated it like any other currencies, it
still is able maintain its dominance in the international trade and as
reserve currency for the whole world.
The clout of US Dollar is so great that the former French Finance Minister, Valéry Giscard d’Estaing, called it an “exorbitant privilege”.
But such privilege can only be maintained as long as the economic
actors such as the states, corporations and consumers render their trust
and constantly clamour for the US Dollar, which as we know at present
is fast being challenged by the rise of China whose currency renminbi is now part of IMF’s Special Drawing Rights (SDR).
One of the subtle goals of TPPA is to ensure the US Dollar remain the dominant international reserve currency in the face of currency war launched by China and other global powerhouses like Japan and the European Union.
The Global Minotaur, TPPA and the role of the US in the unipolar world order
There are two interrelated points of
view based on different units of analyses on why the US pushes for TPPA:
(1) the US as a nation-state and (2) the US as an informal empire.
Textbook knowledge on international
economy will tells us that a nation must attain its balance of payment
if it wishes to be politically and economically stable, if not
prosperous. To achieve this goal, the US needs to reduce its trade
deficits in an era where China has taken a huge market share – thanks
originally to the US multinational corporations who shifted their
productions to China as part of their profit maximization strategy.
Hence it is logically sound for the US
to push for TPPA to maintain their national interest in the global
economy especially in emerging markets of Asia-Pacific where China too
is competing for the market share. This is pretty much the point of view
of why the US as a nation state pursues TPPA – a standard narrative of
many economic pundits.[7]
On the other hand, the US also plays a role as an informal empire
that governs and asserts massive influences in international order – a
fact that is rarely being discussed that is linked to the US economy and
its trade interest. Such influence can only be wielded as long as the
US maintains its economic prowess that is contingent on its global
military dominance.
The mushrooming of military bases abroad
and increasing number of joint military operations via various
organizations such as the US regional military command centers and North
Atlantic Treaty Organization (NATO) require strong financial support.[8]
All of these military installments cost a
lot of money where the US Dollar has a very important role to finance
these military expansions. Without safeguarding the supremacy of the US
Dollar as international reserve currency, it is almost impossible to
secure and safeguard the global dominance of the US military.
How does the US act as an informal empire in international political economy?
The former Greece finance minister,
Yanis Varoufakis described the US as akin to a Global Minotaur – a
metaphorical creature that is half-man half-bull from ancient Greek
mythology that collected yearly human tributes served by the people of
Crete.[9]
Varoufakis made such a reference because
the US too received “tributes” but not in the form of human flesh but
rather, the “surplus capital” from developed and industrialized nations
like Germany and Japan, who bought US Treasury bills as and reinvested
their surplus in the financial market of Wall Street.
These “tributes” are given by these
nations in order to secure good and stable returns for their capital,
which later will be ploughed into their production and trade with other
nations in the form of Foreign Direct Investments (FDI) or Foreign Portfolio Investments (FPI).[10]
The same mechanism also works for the US
Petrodollar system where oil-producing countries especially in the Arab
world would recycle back their oil profits obtained in the form of the
US Dollar to purchase US treasury bonds, equities, and weapons.[11]
The minotaur that Varoufakis referred to
is not an abstract character that has no economic reality. It is rather
central to the US national political and economic challenge as it
actually refers to the US twin deficits in its budget and balance of
trade.[12]
It is due to this privilege of not being
adversely affected by its twin deficits that the US has been able to
live in profligacy without having to face any austerity measures –
unlike other nations (a recent case is Greece) that would need to toe
their line as prescribed by IMF and World Bank.
This privilege is made possible, as
Varoufakis explains, through the surplus recycling mechanism as the US
Dollar-denominated financial instruments act as “tributes” which
continuously feed the US Global Minotaur. The US recycles its surplus
values in Germany and Japan, while in turn Germany sucks out the
finances of Greece without having any kind of recycling mechanism, as
austerity lowers consumption. Furthermore, the US, according to
Varoufakis, intentionally creates chaos around the world to position
itself as a safe haven for investment. This recycling mechanism made the
US pretty much insulated against political and economic repressions –
domestically and internationally – as the US Dollar-denominated
financial assets that are being recycled across the globe from the Wall
Street and back to the international market have helped to keep the twin
deficits afloat and its adverse effects at bay.[13]
This is why the US is the only country
in the world that could simultaneously be the largest debtor and also
the largest creditor at the same time!
This twin role could only be maintained
without the US facing any political and economic backlashes from the
international community as long as other nations have trust and willing
to incur extra cost in facilitating their trade using the US Dollar.
All nations in the world must always
trade first with the US by selling their products in order to obtain the
US Dollar. In this lopsided system, other nations in actual truth are
subsidizing the lifestyle of conspicuous consumption of US citizens at
the expense of their own environment, health and human rights. An
exorbitant privilege indeed![14]
But such privilege is not merely being
attained and maintained through “carrots” (good and stable financial
returns) but also with “sticks” (coercion).
The US Dollar in truth is the monetary
component of the US hard power. Those who tried to challenge the status
quo will have to bear the brunt of the US military. The attempts by
Saddam Hussein to use Euro for oil trading and Muammar Gaddafi for using
the gold dinar had cost themselves and their countries dearly. The
failures of Iraq and Libya have not deterred Russia, China and Iran to
do the same in decoupling their trade from the US Dollar. To avoid the
same fate of Saddam and Gaddaffi, these nations are well prepared to
cushion the threats as together they have worked very closely in various
platforms and initiatives with regard to politics, economic and
defensive cooperation.[15]
Trade pact is a lawfare
TPPA must not be viewed in isolation
from all the above contexts. Besides the 6,000 over pages of the
agreement, there is another comprehensive and brief declaration issued
by the US Treasury that will substantiate the writer’s observations
earlier.
Entitled as “Joint Declaration of the Macroeconomic Policy Authorities of Trans-Pacific Partnership Countries”
(after this refers as “Joint Declaration”), it acts as a crucial
mini-treaty that will binds and guides all TPPA members to remain in the
ambit of the Washington Consensus by honouring and maintaining the role
of US Dollar as international reserve currency.
The Joint Declaration demands the TPPA
member states to adhere to strict and disciplined fiscal and monetary
policies as stipulated by the IMF Articles of Agreements. Such a move as
explained by the US Treasury is “to promote, through transparency and
dialogue, market-determined and transparent exchange rate regimes that
allow real exchange rates to adjust to reflect underlying economic
fundamentals.”[16]
In short, TPPA member states must adhere
to the laissez-faire economic doctrine that has shaped the
international political economy, financial and monetary architecture
erected by the US through IMF, World Bank and many other international
institutions where the US wields a strong influence since the end of
World War II. They must trade in the Dollar.
Economic activities like international
trade are subjected to the rules, standards and agreements of these
institutions. TPPA is nothing but another legal conduit to retain the
participating nations so that they will continue to remain in the orbit
of US-led international rule of law, currency and trade.[17]
It is an indirect warning to countries
like Russia, China, Iran and others who aspire to be part of new
financial and monetary architecture as proposed by BRICS which already
post some serious challenges against the reigning ones as championed by
the Anglo-American world order.
The intricacies and subtleties of TPPA as a form of lawfare[18]
must never be underestimated by those who aspire to be thinking of
reaping the benefits from the best of both worlds: the US-led trade
pacts and the Eurasian-led Russo-Sino trade pacts like the New Silk Road, Eurasian Economic Union and Regional Comprehensive Economic Partnership (RCEP). By nature those two opposite trade camps are dialectical to one another especially with regard to their subtle geopolitical objectives that are embedded within the deals.[19]
As long as emerging markets are under
the clout of IMF that could enforce its rules and standards within a
treaty like TPPA, a true and genuine mutual trade where both parties
have the real freedom of choice to trade in whatever currencies and
medium of exchanges can never be materialized.
It would be very interesting to see how
the global powers like Russia and China will react to TPPA (and other
similar agreements) as their cardinal goal to revise Post-World War II
international order from a unipolar system to be a multipolar one will
surely ruffles Washington’s feathers in years to come. TPPA will be
another geopolitical flashpoint in the economic, financial and monetary
domains in the great game of the world’s powers.
Notes
[1]
Besides the US, ASEAN is also being courted by other two other global
powers pertaining to cooperation of economic matters: China through its
“Regional Comprehensive Economic Partnership” (RCEP) and Shanghai
Cooperation Organization (SCO); and Russia via Eurasian Economic Union.
See Korybko, Andrew, ASEAN And The New Cold War Battle For Eurasia’s Economic Future (I), The Oriental Review, 14December 2015, Web. 12 Jan. 2016, <http://orientalreview.org/2015/12/14/asean-and-the-new-cold-war-battle-for-eurasias-economic-future-i/>
[2]
Joseph Stiglitz viewed the present free trade agreements propelled by
the US as a new strategy of “discordant managed trade regime” to offset
the failure of WTO. See his “The New Geo-Economics”, Social Europe, 11 January 2016, Web. 12 Jan. 2016, <http://www.socialeurope.eu/2016/01/the-new-geo-economics/?utm_source=facebook&utm_medium=social&utm_campaign=SocialWarfare>
[3] See Schenk, Catherine R., Britain and the Sterling Area: From Devaluation to Convertibility in the 1950s,
(London: Routledge, 1994); also Tomlinson, Jon, ‘The
Empire/Commonwealth in British Economic Thinking and Policy’ in
Thompson, Andrew S. (ed.), Britain’s Experience of Empire in the Twentieth Century, (Oxford: Oxford University Press, 2012)
[4]
The genesis of global dollarization began in earnest after the success
of Marshall Plan in rebuilding post-War Europe. It was also intended as
containment strategy against the Soviet’s move to widen their sphere of
influence. See Hogan, Michael J. The Marshall Plan: America, Britain, and the Reconstruction of Western Europe, 1947-1952, (Cambridge: Cambridge University Press, 1987)
[5] For the history of the US Dollar’s supremacy in 20th century, see Eichengreen, Barry J., Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System, (Oxford: Oxford University Press, 2011)
[6] See Prasad, Eswar, The Dollar Trap: How the US Dollar Tightened Its Grip on Global Finance, (Princeton: Princeton University Press, 2014)
[7]
Of course TPPA is not limited to state-centric interest as the real
drivers behind the agreement are none other than the Multinational
Corporations that constantly lobby the US Congress to expedite the
approval of the bill. See Gibson, C Robert, and Taylor Channing. “Here’s How Much Corporations Paid US Senators to Fast-track the TPP Bill“, The Guardian, 27 May 2015, Web. 5 Jan. 2016, <http://www.theguardian.com/business/2015/may/27/corporations-paid-us-senators-fast-track-tpp>
[8] See Vine, David, Base Nation: How U.S. Military Bases Abroad Harm America and the World, (New York: Metropolitan Books, Henry Holt and Company, 2015); Weitsman, Patricia A, Waging War: Alliances, Coalitions, and Institutions of Interstate Violence, (Stanford: Stanford University Press, 2014)
[9] Varoufakis, Yanis, The Global Minotaur: America, Europe and the Future of the Global Economy, (London: Zed Books, 2015)
[10] For Marxist analysis on the contradictions of capital accumulation, see Harvey, David, The Enigma of Capital: And the Crises of Capitalism, (Oxford: Oxford University Press, 2010)
[11] See Clark, William R., Petrodollar Warfare: Oil, Iraq and the Future of the Dollar, (Gabriola Island: New Society, 2006)
[12] Varoufakis, The Global Minotaur, p22-3.
[13] Ibid., p115-20.
[14] See Wallerstein, Immanuel, World-systems Analysis: An Introduction,
(Durham: Duke University Press, 2004); for in-depth studies on the
historical dependency of the North to the South in world-system
framework, see Frank, Andre G, and Barry K. Gills, (eds.), The World System: Five Hundred Years or Five Thousand? (London: Routledge, 1993)
[15] See Viotti, Paul R., The Dollar and National Security: The Monetary Component of Hard Power, (Stanford: Stanford University Press, 2014)
[16] See “Joint Declaration”, p 1.
[17]
To understand how the US made use of the international law of post-War
era as a conduit for a new form of economic colonialism especially in
expropriating raw materials of the newly independent nations of the
South, see Pahuja, Sundhya, Decolonising International Law: Development, Economic Growth, and the Politics of Universality, (Cambridge: Cambridge University Press, 2011)
[18] See Kittrie, Orde F., Lawfare: Law As a Weapon of War, (New York: Oxford University Press, 2016)
[19] For big picture of geopolitical competition in economic integration see Escobar, Pepe, Empire of Chaos preparing for more fireworks in 2016, RT.com, 24 December 2015, Web. 12 January 2016, <https://www.rt.com/op-edge/326965-2016-us-syria-turkey/>
Wan Ahmad Fayhsal is currently a Putra Fellow at PBS. He holds a Bachelor of Engineering (Hons) Chemical from Universiti Teknologi Petronas (UTP), Malaysia. He was formerly an executive at Strategic Planning Department, Technology & Engineering Division, PETRONAS; senior executive of Stakeholder Management at Bumiputera Agenda Steering Unit (TERAJU) under Prime Minister’s Department and a lecturer at International Islamic College University of Selangor. He writes extensively on various topics ranging from philosophy, religion, history and geopolitics for mainstream news outlets.
Wan Ahmad Fayhsal is currently a Putra Fellow at PBS. He holds a Bachelor of Engineering (Hons) Chemical from Universiti Teknologi Petronas (UTP), Malaysia. He was formerly an executive at Strategic Planning Department, Technology & Engineering Division, PETRONAS; senior executive of Stakeholder Management at Bumiputera Agenda Steering Unit (TERAJU) under Prime Minister’s Department and a lecturer at International Islamic College University of Selangor. He writes extensively on various topics ranging from philosophy, religion, history and geopolitics for mainstream news outlets.
The original source of this article is Katehon
Copyright © Wan Fayhsal, Katehon, 2016
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