How will TPP impact global investment?

The TPP deal is nearly coming to a close, but far from clear are the rules and regulations governing global investment moving forward. TPP is more of an investment treaty than a typical trade agreement. While it still covers trade-related issues like reducing tariffs and non tariff barriers, a sizeable portion of its 29 chapters are directly related to investment law. There are roughly 2900 bilateral and plurilateral investment agreements in existence. Between these treaties, the panels are often directed to resolve disputes and have emerged “rules of the game” governing foreign investment. Will these be changed or bolstered if the TPP passes?

http://globalriskinsights.com/2015/07/how-will-tpp-impact-global-investment-rules/

By the size of TPP which is 40% of the world’s GDP, it will have enormous impact on later investment agreements because the ratified trade and investment treaties serve as a template for future negotiations. For instance in 2012 the US was not immune to growing backlash over ISDS transparency and shortage of treaty clauses. It also learned effects of global recession and desired to protect itself from any investment claims regarding prudential financial controls. Therefore, the US updated its model Bilateral Investment Treaty (BIT) that year, and those changes have laid groundwork for today’s investment negotiations.

A more technical means of multilateralizing investment provisions is via MFN. These equalizing clauses have been generously inserted into a range of international agreements. The TPP’s leaked investment chapter contains an MFN clause, which means that investors from TPP countries may benefit even more than the agreement’s provisions indicate. Furthermore, states still have access to an additional method by which the TPP acts to liberalize the investment regime.

The indications are that TPP might actually result in a divergence in global investment regulation particularly in the recent backlash against BITs from a number of emerging economies. Lauge Poulsen, a lecturer in international political economy at the University College London says that the strong opposition to investment treaties in South Africa and Indonesia and the adoption of TPP will establish a growing divide in the international investment regime.

Similar to the Asian Investment Bank initiative by China, which emerges a rival to world bank, the RCEP (Regional Comprehensive Economic Partnership) has already brought together China, India, Australia and ASEAN countries to counterbalance US-directed TPP. Like the TPP negotiations, much depends on whether the talks finish before next year’s presidential elections which is TPP’s biggest test yet.

One thought on “How will TPP impact global investment?

  1. You’re right about the TPP being more of an investment treaty rather than a trade agreement. I don’t think the agreement will be signed before the next presidential election. I feel the agreement will come down to some of the countries involved having to take a loss in some of the commodities being traded. The United States will definitely be one of the most stubborn in this situation. It would be nice to see some papers get signed as opposed to just reading articles about being “one step closer” without knowing the full scope of the details.

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