An "Escalating Face-Off"

It’s come to this: China might end up rescuing Americans from a secret treaty that threatens Internet freedom and national sovereignty.

Four months ago, we tipped you off to the Trans-Pacific Partnership (TPP) — one of those “free trade agreements” with hundreds of pages of devilish details. The United States is negotiating with a motley assortment of countries — New Zealand, Australia, Malaysia, Vietnam, Singapore, Brunei, Chile and Peru. Canada and Mexico joined up in June.

The negotiations are strictly hush-hush… but a draft proposal by the U.S. negotiators leaked earlier this year. Among the gems included…

• $150,000 fines and jail time for copyright infringement – which would be easy to violate
• Foreign multinational corporations exempted from U.S. laws
• Capital controls to keep your wealth trapped inside the U.S.

A new round of TPP negotiations begins next Monday in Auckland, New Zealand.

As it turns out, China is forming its own trade bloc… and New Zealand, a founding TPP member even before the U.S. got involved, is showing interest.

This bloc is called the Regional Comprehensive Economic Partnership (RCEP). “You never know how these things are going to play out,” said New Zealand Prime Minister John Key, “so it is always possible that TPP falters and then RECP becomes the significant trade agreement.”

To add insult to injury, Mr. Key said this on the sidelines of a summit last week in Cambodia, where President Obama was on hand. Australian Prime Minister Julia Gillard also declared herself open to the RCEP.

The countries negotiating the RCEP are China, India, South Korea, Japan, Australia and New Zealand. To be sure, there’s no guarantee the talks will work out — a longtime dispute between China and Japan over the Senkaku Islands is heating up again.

Still, the battle lines between the U.S. and China are now drawn. Almost no one in the United States is talking about it. The Washington Analysis and Assessment Service is one of the few exceptions: “This is another example of the emerging trend in U.S.-China relations where the two countries position themselves — whether consciously or by coincidence — as competitors, rather than as partners.”

In New Zealand, the talk is more bold: “[Prime Minister] Key needs a reality check,” says TPP critic and Auckland University law professor Jane Kelsey, “if he really believes New Zealand can remain best friends with both sides in the escalating face-off between the U.S. and China over the ‘most significant free trade and investment deal ever.’”

Dave Gonigam

The preceding article was excerpted from Agora Finacial’s 5 Min. Forecast. To read the entire episode, please feel free to do so here.