ADB voices concern over TPP agenda

The Asian Development Bank expressed concern Thursday over the "ambitious and wide-ranging" agenda of the Trans-Pacific Partnership, a proposed regional free trade agreement under negotiations between the United States, Japan and 10 other countries.

In the Asian Economic Integration Monitor, a semiannual review of Asia's regional economic cooperation and integration, the bank believes some will miss the year-end deadline for TPP to conclude the talks.

"Although the TPP's agenda is ambitious and wide-ranging, it remains to be seen what can be agreed on, given the diversity of its membership," says the report.

The report also casts doubt on the Association of Southeast Asian Nations' Regional Comprehensive Economic Partnership, known as the RCEP, with Australia, China, India, Japan, South Korea and New Zealand being completed by its target date of 2015.

"But this is highly unlikely given the difficulties noted earlier of folding multiple, disparate agreements into one that is region-wide," the report says.

TPP and RCEP are two major free trade agreements in the offing involving ASEAN or some ASEAN members.

Throughout the 1980s and 1990s, the report says ASEAN has embarked on a combination of multilateral and unilateral measures to reduce barriers to trade goods, services and investments.

Since 2000, however, the report says, "There has been less progress on multilateral liberalization, and domestic reform has slowed significantly as a result."

"One partial response has been the proliferation of ASEAN FTAs," says the report. However, it says a closer look at ASEAN free trade agreements shows a "shift from unilateral liberalization to preferential liberalization has not led to further external opening or domestic reforms."

Moreover, the report says the trade pacts are "weak and trade-light."

"In other words, while the agreements commit the parties to eliminating tariffs on trade between themselves, they do not effectively address regulatory barriers and other nontariff barriers like product standards and mutual recognition agreements, services, investment, intellectual property rights, government procurement or the movement of business people -- which are all more important than tariffs for regional economic integration."

Thus, the report says, the trade agreements ASEAN has concluded "hardly promote regional economic integration or ASEAN's integration with the wider Asia or the global economy."

Four ASEAN members -- Brunei, Malaysia, Singapore and Vietnam --have decided to join the TPP that also involves Australia, Canada, Chile, Japan, Mexico, New Zealand, the United States and Peru.

"The TPP involves four ASEAN members and features an agenda that is wide-ranging and demanding, more so than the RCEP or other FTAs," the report says.

But the TPP excludes six ASEAN members as well as China and South Korea, and "a significant increase in Asian membership is needed before (the TPP) could be considered a serious alternative to the RCEP," the report says.

"More generally, without participation of these economically important countries, there is serious concern that the current TPP membership satisfies the critical mass criterion," the report says. "The same concern applies to the current makeup of RCEP."

"The need to provide exemptions, or 'carve outs,' to avoid a collapse in negotiations also raises concerns over the final form the TPP will take," the report says.

It also criticizes the secrecy surrounding the TPP negotiations, "making it difficult to assess progress."

"But -- from what is known -- there is the risk of degenerating into a series of loosely tied bilateral deals," the report says. "Indications are the two largest TPP members -- the U.S. and Japan -- are proceeding along bilateral lines, threatening the demanding single-undertaking approach the TPP is supposed to adopt."

"Although the number of countries involved in these negotiations is much lower than the World Trade Organization, for instance," the report says that "it does not translate to a commensurate reduction in diversity in terms of disparate interests."

"These interests often conflict, especially in a context where the agenda is far more ambitious than any other proposed thus far."

The report also criticizes RCEP's guiding principles that include a "flexibility clause," stating it "will include appropriate forms of flexibility including provision for special and differential treatment, plus additional flexibility to the least developed ASEAN member states."

"As already seen, flexibility can both be a boon and bane. While it can help break deadlocks and protect disparate self-interests, it can also limit change or curtail progress in achieving greater liberalization," the report says.

With the RCEP, the report adds, "There is a real risk of a 'race to the bottom' where the least-common denominator prevails in order to secure consensus. Were this to occur, RCEP would simply add to the tangled regional trade landscape."