LET ME PRESENT to you an unlikely grouping: Brunei, Chile, New Zealand and Singapore. Any idea what this little cabal has in common? I imagine you don’t, and nor did I until I started following the trip to Washington of Singapore Prime Minister Lee Hsien Loong, who is visiting the US capital as I write this column.
Those four countries, which at first glance appear to have little between them other than perhaps the Lord of the Rings franchise – it being filmed in New Zealand and wildly popular everywhere else – were the first to join the Trans-Pacific Strategic Partnership Agreement, a clumsily-named free trade agreement that came into being in 2005 but was initially conceived over a game of golf between former US president Bill Clinton and his Singapore counterpart Goh Chok Tong in 2000.
It sounds obscure, but I suspect it’s rather important. In its new, enlarged incarnation, the Trans-Pacific Partnership has become the centrepiece of US President Barack Obama’s administration, and an item on which Mr Lee was able to wax lyrical on his recent visit to Washington.
He made a reference to beef burgers, a thorn in the agreement since Japan imposed tariffs on US-produced beef, in his speech to US lawmakers and, while the humour seemed rather lost on his hosts, the central plank of the talk – that the TPP should be regarded as a matter of strategic importance to all parties involved – was not.
ELEVEN COUNTRIES ARE now involved in the TPP: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The big trade partner to this ragbag of countries is the US and, if the great Adam Smith is correct, all will benefit, since free trade has been following Smith’s maxim since he first wrote over two centuries ago of its ability to add to economic growth for all parties.
Apart from the inclusion in that coterie of Brunei – a country which is about to institute a version of Sharia law that would allow for homosexuals to be stoned to death and limbs amputated for theft – the TPP will certainly add to the bottom line for Asian GDP.
I’m afraid that I have to agree with the various protests around the hotels owned by the Brunei Investment Authority, the country’s sovereign wealth fund, including the flagship Beverly Hills and Bel Air hotels in Los Angeles. The incongruence of these legendary venues being an indirect party to institutionalised human rights abuses is to be deplored, although I doubt it will have any bearing on the inclusion of Brunei in the list of countries that comprise the TPP.
Japan is at the helm of the TPP, unsurprisingly perhaps given that Prime Minister Shinzo Abe has staked his reputation – and Japan’s finances – on squirming free of the economic malaise that has dogged the country for over two decades. But, nevertheless, the absence of Asian countries such as India, Indonesia, the Philippines and Thailand, together with an array of Latin American and European countries, underlines the bespoke nature of trade pacts and the ever-elusive dream that the region could erect its own version of the eurozone. Good luck with that one.
The concept of Asia’s puffed-up leaders ceding any measure of sovereignty to a third party located in Hong Kong, Singapore, Manila, Bangkok or even Brunei is so unlikely that the very proposal of such a scheme by a dyed-in-the-wool optimist makes one want to double up in convulsed laughter. No doubt some think-tanks will make a good living out of studying its viability, and various bureaucrats will go on pleasurable junkets abroad to determine the viability of the quintessentially non-viable.
Anyone who thinks for a moment that an Asian leader with a fondness for his own image will bow down to an unelected body – let alone one chaired by a person who might look rather better and have a lower golf handicap – needs to have their head examined. Herman Van Rompuy, the rather befuddled leader of the European Council, is never going to find a double in Asia.
Asia will grow, and its capital markets will reflect this growth
THE BEST THAT can happen for now is a rather messy bespoke gathering that resembles friendly shopkeepers coming together in the village square and shaking hands on terms of business.
Any hope of a comprehensive regional free trade structure or a common currency are such pipe dreams that I would stake my entire wealth (you can guess that one) that this outcome will never – and I do mean never – happen.
Funny little trade pacts will be the way forward, and the one-sided nature of the arrangement means that the United States will come out on top. I suspect that the TPP will go through and become the cornerstone of the bragging rights that will entitle Barack Obama to his presidential library.
Asia will grow, in part as a result, and its capital markets will reflect this growth. Numerous commentators see offshore bonds from the region trading cheap in relation to their peers in the US, Europe and Latin America. As long as all else remains equal, that’s probably true. Assuming no nasty surprises when the Fed normalises interest rates, relative value is up for grabs in the region’s debt markets. The TPP is a fragmented initiative, but it’s that same imperfection that makes Asia a long-term value alternative to its global peers.
