The TPPA saga and its Free Trade roots

It is pivotal that the adage “honesty is the best policy” adopted to ensure the most fair and best practices. How do we define honesty in the context of international trade?

A formalized approach in trade negotiations is necessary and requires a set of laws and regulations which adopt the rules of transparency in all transactions. The issue of honesty, fairness and accountability in corporate governance and public sector forces transparency in international trade more critical than ever before.

The TPPA is a clearly demarcated and to some, a polarised discourse. A person who supports it has his or her arguments supporting the TPPA. But where someone is critical of the TPPA, there are fears that the life of many of us will be affected by it. However, one needs to know what the TPPA is and what is its ideological history.

The TPPA is characterised as a trade liberalising vehicle. This is despite the fact that its scope and breadth suggest that it is more than a trade agreement. But what could possibly be the outcome of the TPPA negotiations will definitely be a regional trade agreement (RTA). Under the GATT/WTO system, there are only 3 categories of RTAs: preferential trade agreement (PTA), free trade agreement (FTA) and customs union (CU).

The TPPA will not be merely a PTA which does normally create comprehensive and intrusive commitments by states to open their market to foreign goods and services. It may not be a CU either because the TPPA will not require economic integration among its Members to the extent that they harmonise their tariffs and non-tariff barriers imposed on goods and services from non-Members.

It will be safe to say that the TPPA is an FTA. Being an FTA, the TPPA should reduce or even eliminate barriers to trade between Members of the relevant FTA (i.e. the TPPA). There is an obsession with FTAs in the world now.

Many countries have negotiated and concluded FTAs with the view that the increase of intra-FTA trade will generate mutual benefits. But we need to understand the ideological history underpinning this obsession. Having a good understanding of such history allows us to put things together in a just and appropriate manner.

Free trade was not the only ideology that had its obedient followers among laymen and the intelligentsias. At the beginning of the 16th century, when Europe began their conquests of the New World, activities of international trade were motivated by the quest of European States for military and political power.

Trade in scarce goods including spices, timber, grain, precious metals was controlled and monopolised and such monopolies which were incidental to territorial expansions led to atrocities and massacres. This was the era of mercantilism. Trade was not free. This persisted until people took interest in Adam Smith's ideas or perhaps ideals of free trade.

But are those ideals of free trade really talk about freeing peoples from subjugations and control of others. It is true that free trade principles presuppose opening the market to foreign goods and that was good according to Smith as the comparative advantage of a State will make it sell what it can produce the best and buy the one which it has no advantage of producing. The State can then specialise and everyone can be better off.

Of course the simplicity of this argument can be a little offensive to economists who have over the years devised theories to test Adam Smith’s hypotheses as well as those of his disciples.

But consider how those ideals were embedded in historical realities. The British was the first to open its market to foreign goods with the repeal of corn laws.

The laws protected corn producers in Britain and Ireland from foreign competition. But the British did the opposite with regards to the production of and trade in salt in pre-independence India.

Salt laws were introduced to allow salt produced in England to be exported to India at cheaper prices while the superior quality salt produced in India was forced to be exported to Britain.

Reportedly Indians who possessed more than a certain quantity of salt would be punished by the British authorities. If one claimed that this practice did not survive modernity, the Salt March led by Mahatma Gandhi was a stark reminder that the unjust salt laws were still in place as recently as the opening of the 20th century.

Of course the current setting is different. There is no more colonialisation by the West. But if we start allowing the developed world to dictate what we in the developing world should produce and not produce, the tragedy of salt laws in India may repeat in this country.