TPP, SDGs: Friends or foes?

Many would agree that 2015 was a historic year for multilateralism. Two significant international and regional agreements have been announced with far reaching impact. First, the United Nations Sustainable Development Goals (SDGs) was approved by 193 countries on Sept 25 last year. This hallmark global consensus consists of a set of 17 universal goals with 169 targets pledged to leave no one behind. A week later, 12 Pacific Rim countries concluded the Trans-Pacific Partnership (TPP), the largest mega-regional trade agreement in history after seven years of negotiations.

The SDGs is a tall order by most counts. Its implementation requires collaborative partnerships and recognition of the unique national circumstances. Meanwhile, the TPP is described as a “comprehensive and high standard” free trade agreement covering 30 chapters that includes trade and trade-related issues, such as investment, services, environment and labour. Its 12 signatories account for 40 per cent of global gross domestic product. Unsurprisingly, this omnibus trade deal has polarised different groups within those countries.

Issues that were perceived to be negative and positive for the national interest were analysed in the National Impact Analysis (NIA), carried out by Institute of Strategic and International Studies (ISIS) Malaysia since Sept 2013. The report puts forward that the TPP — on balance — falls within the national interest.

A deeper look into Malaysia’s performance on SDGs reveals that it varies and is uneven, not only between the different goals but also within. The shift from achieving basic needs to higher order goals requires an integrated lens rather than for it be seen in isolation.

Now, the crux of the matter is: to what extent will the TPP bolster or undercut the SDGs in Malaysia? Has this new standard of global trade agreement incorporated the inter-generational issues? The answer is, it depends.

As a whole, whether TPP will contribute or undermine SDGs will depend on how Malaysia implements the framework and secures its future in engaging, advancing and defending its interests. Three key points can be viewed as either contributing or undermining sustainable development efforts.

FIRST, no major trade agreement before this one has gone as far as embedding development and environment commitments in the core text of the agreement. TPP has embedded the principles of SDGs in its “Development” chapter. Article 23:1 (5) indicates that “…Parties to reinforce efforts to achieve sustainable development goals”. This truly reflects the fundamental of development in enhancing societal welfare through inclusive and sustainable economic growth.

Also in this chapter, a Development Committee will be established to facilitate the exchange of information on formulation and implementation of national policies. This begs for strong integration among stakeholders who are addressing issues from other chapters to streamline their activities.

Notably, in cases of absence in policy consistency between the development chapter and other chapters, the latter will be given a higher priority. This means each country will have to step up towards synergising strategies in achieving a positive sum game in dealing with the trade-offs that are inherent.

SECOND, although TPP aims to create sustainable growth mechanism by promoting trade for growth while strengthening environment, the issue on enforcement mechanisms is rather weak.

For sure, voluntary mechanisms in the environment chapter are inadequate and could potentially lead to a regulatory race to the bottom.

In retrospect, however, Canada’s withdrawal from the Kyoto Protocol has indicated that a legally-binding deal does not necessarily guarantee that countries will adhere to their commitments.

And, none of the countries that failed to meet their commitments under Kyoto have been sanctioned, despite it being a legally-binding international treaty.

Additionally, TPP stands out from other agreements as citizens have the right to request for investigations and this must be given due consideration in accordance to domestic law. This provision in environment is worth noting if serious domestic reform in institutional frameworks and changes in legislation is introduced in a manner of pursuing trade and investment while keeping sustainable development in mind.

THIRD, high standards in TPP will complement other sustainable development goals by emphasising good governance, anti-corruption measures, promoting transparency, and co-operation at all levels that are aligned with SDGs 16 and 17 on the means of implementation and effective partnership. While SDG 17 is the backbone of realising sustainable development, it has also been identified as the bottleneck in moving sustainability forward.

Garrett Hardin’s 1968 essay on “Tragedy of the Common” or more widely discussed as the “Tragedy of Unregulated Commons” finds its relevance in today’s sustainability dilemma.

Ethical impasse in the traditional law system that is “poorly suited to governing the complex, crowded and changeable world” has to be tempered in tandem with a set of renewed statutory and administrative law. Only then, the classical economic maxim of dog-eats-dog world can redirect its focus on conscientious stewardship.

As he puts it, “The devil is in the details. But with an unmanaged commons, you can forget about the devil”.

There are opportunities for both TPP and SDGs frameworks to be used as tools for transformation to initiate policy and institutional reform. Indeed, the need for policy integration has never been timelier as the country marches towards achieving developed nation status.

Whether the glass is half full or half empty depends on the mindset of the person looking at it.

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Climate change and ethics

A revisit of 2015 reveals some of the most appealing and appalling climate change stories that were grabbing the global media headlines. It is no great exaggeration to say that climate change is real and deserves serious attention.

Beginning with an optimistic note, 2015 indeed ended with a bang, as a climate deal of 195 nations was sealed in the United Nations Climate Change Conference in December at the COP 21 in Paris. This deal was touted symbolic and hailed as the world’s greatest diplomatic success.

Also in 2015, two of the world’s biggest carbon emitters, China and the United States, have committed themselves to the decarbonisation of their economies over the course of this century. While China will be introducing market-based emission trading scheme (ETS) nationally by 2017, President Barack Obama’s launch of the Clean Power Plan is closer to a performance standards system backed by hundreds of big businesses, including eBay, Nestlé, Unilever, L’Oréal and Levi Strauss.

Even Pope Francis had stepped out to make an ethical case for action on climate change in his encyclical, Loudata Si: On Care for our Common Home, that was released in June last year. He strongly emphasised on the “the ethical and spiritual roots of environmental problems”.

On the flipside, last year also highlights some of the most shocking corporate scandals relating to climate disaster in the history of mankind.

In September, a new investigation by Pulitzer prize-winning website Inside Climate News has shed unwanted light on ExxonMobil — the world’s fourth largest oil company was aware of the environmental effects of burning fossil fuels as early as the mid-1980s.

The corporation, however, had chosen to systematically spearhead and fund campaigns on the faux to climate change instead of alerting the public. Under its leadership in Global Climate Coalition, this group of fossil fuel corporations successfully lobbied the United States government against the rectification of the international agreement Kyoto Protocol to limit greenhouse gas emissions in 1997.

In the same month, German carmaker Volkswagen (VW) was embroiled in “diesel dupe” scandal. VW admitted to installing emissions test cheating software in up to 11 million of its diesel cars. VW’s defective vehicles could be responsible for nearly a million tonnes of air pollution every year, equivalent to all of the United Kingdom’s nitrogen oxide emissions from power stations, vehicles, industry and agriculture.

Closer to home, raging blazes caused by slash-and-burn peatland and forest clearance in Indonesia has left the region shrouded by reeking smog and haze. This annual recurrence of fires and blame game is a result of nothing but a “collective negligence” of companies, smallholders and government. A World Bank report estimated that the cost of forest fires to the Indonesian economy last year is around US$16 billion (RM68.8 billion), equivalent to 1.9 per cent of its predicted gross domestic product.

That being said, corporate ethics are now being called into question around the world.

Earth has entered into a new geological epoch. Evidence from a new study provides one of the strongest cases that the arrival of the “Anthropocene” — one defined by humanity’s imprint on the planet — would mark the end of the Holocene, which began around 12,000 years ago.

This certainly brings back the discourse of ethics associated with capitalism by Adam Smith, which has interestingly enough relevance for individual conduct of the bourgeois commercial order in contemporary economic liberalism. The notion “invisible hands” coined by Smith in Wealth of the Nation in 1776 asserted that powerful forces of self-interest will guide resources to their most efficient uses.

In general, both business theory and practices enshrined in economics often neglect the relations between organisation objectives and its broader societal obligations.

Smith’s complex discussion, as such, is reduced to a plea for free trade economies. Partly, this narrative is used to justify an egocentric attitude and a market viewed in the absence of ethical reflection. In contrast, far from that, his earlier work on Theory of Moral Sentiments in 1759 indicates that civic role cannot be separated from the economic endeavour and implies responsibilities in the business sphere.

Now, this has profound implications in economics and in applied ethics. Climate change actions can be prompted, only with an increasing convergence around a sense of connectedness and responsibility in solving societal challenges.

This begs the question: How various stakeholders are internalising their negative externalities as an integral part of their corporate culture and management system?

The pertinent issue here is to invent a new model that connects corporate and societal value creation. Externalities cost can no longer be viewed in isolation from financial performance.

The reason for this is straightforward: climate change will impact the key drivers of corporate value: revenues, costs and risk. Not only are the effects of negative externalities of climate change are becoming impossible to ignore, the public awareness and understanding of corporate externalities have also grown tremendously.

For the people who embrace change, “the test of a first-rate intelligence”, as Scott Fitzegerald stupendously wrote, is “the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function”.

Although last year has offered us both sense of hope and hopelessness, it is true grit that will turn hopelessness into otherwise for this year and beyond.

The writer is an analyst with the technology, innovation, environment and sustainability division at the Institute of Strategic and International Studies (ISIS) Malaysia

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