Despite President Barack Obama’s charm offensive in the region, Pacific nations are well-advised to remain wary of the U.S. government’s position on the Trans-Pacific Partnership agreement.

If U.S. trade negotiators got their way, the Pacific Rim would reap surprisingly few gains — while taking on big risk.

Until the United States starts to see Asia as a true trading partner, rather than as a region to patronize, it is right to hold out on the TPP.

The rosiest projections — from an unsuspecting report at the Peterson Institute for International Economics — say that the TPP will raise incomes among the parties to the treaty by a mere 0.3 percent of GDP in 2025.

Many economists see these projections as gross over-estimates. For one, they heroically assume that a doubling of exports automatically leads to more than a doubling of income.

Yet even if these estimates are taken at face value, they amount to just over one penny per day per person way out in 2025 for TPP nations.

In exchange for these small benefits, America’s partners in Asia and Latin America have to take on big risks. One big risk that may be a deal breaker is U.S. insistence that TPP partners surrender their right to regulate global finance.

Through its financial services and investment provisions, the TPP would allow Wall Street banks to move into TPP countries’ financial services sectors

To do what? If you can believe it, it’s to push the very financial products that triggered the biggest global financial crisis since the Great Depression.

That is not progress. That’s regress, given what the world now knows about these often toxic instruments.

What is more, if U.S. trade negotiators, acting at the behest of U.S. industry, got their way, the deal would prohibit the ability of these banks to be regulated to prevent and mitigate a financial crisis. They would be “free” to re-create the mess all over again.

In the early 1990s, Chile showed the path to resilience. It put in place regulations on surges in the inflow of financial flows that can trigger financial crises. Such regulations have been broadly credited in helping Chile avoid some of the worst impacts of the Latin American financial crises of the 1990s.

Likewise, Malaysia was among the least hard hit during the 1998 East Asian financial crisis because it put in place regulations on the outflow of financial flows after the crisis came. Malaysia’s measures helped its economy rebound by 5.4 percent the year after the crisis.

Such measures may be considered impolitic in Washington and New York, where it is always preferred that capital — especially U.S. capital — can always move in and out of a country without any restrictions.

The wisdom of such precautions is now even understood in the erstwhile citadel of financial orthodoxy, the International Monetary Fund. In its official view on regulating global financial flows, the IMF expressed concern that agreements like the TPP “do not provide appropriate safeguards.” The same cannot be said for the U.S. Trade Representative’s office. As a result, regulating the inflow and outflow of financial flows would not be permitted under the TPP — if the U.S. side got its way.

What is perhaps most risky for America’s TPP partners is that the foreign banks themselves will be able to directly sue governments for violations of the agreement.

That puts the other governments at a natural disadvantage, given the zealousness, might and cost of Washington and New York City lawyers. As specialists in such proceedings, they are always on the prowl for business.

Indeed, Malaysia knows this all too well. Under a treaty similar to the now proposed TPP that Malaysia had with tiny Luxembourg, a private investor there attempted to sue Malaysia for its post-crisis regulations on financial flows. At the time, Malaysia was lucky that the case was thrown out on jurisdictional grounds.

The case shows that foreign firms are ready to pounce on such regulations if given the opportunity. And when the suing party is based in the U.S., the TPP partners might not be so lucky.

It is in the well-understood self-interest of Chile, Malaysia and other TPP countries to continue to push back on Obama’s proposals to de-regulate financial services and investment. It is also in the interest of financial prudence and international fairness.

In light of that, it is disconcerting to find a recent study that shows that these nations have been able to safeguard the ability to regulate finance in treaties with other nations such as the European Union, Canada and China, but that the U.S. is the one now pushing back with great determination.

Thankfully there are important voices in the U.S. as well who are pushing President Barack Obama to act with more prudence than the U.S. financial industry wants him to do. Americans are also painfully aware that financial crises hurt U.S. jobs and financial stability.

U.S. Rep. Sander Levin, a Michigan Democrat, and others have been pressuring the Obama administration to ensure that trade deals don’t trump regulating global finance.

In 2011, more than 250 economists from across the world urged Obama to make trade deals consistent with financial reform as well.

With so little reward on the negotiating table, Obama will be hard pressed to get a TPP agreement from the Pacific Rim nations. They are better off to remain holdouts until the U.S. government gives up its rather extreme, risk-enhancing negotiating position on finance.

The fate of its own economy in recent years, still on the ropes from the fallout of the last financial crisis, would certainly suggest much more caution than U.S. negotiators are currently pursuing in their dealings with the TPP partner countries.

Kevin P. Gallagher is a professor of international relations at Boston University and a regular contributor to The Globalist, where this article initially appeared. He is the author of “Free Trade and the Environment: Mexico, NAFTA, and Beyond.” © 2014 The Globalist

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