How the TPP Rose from the Dead
When President Donald Trump pulled the United States out of the Trans-Pacific Partnership on his first full day on the job, it seemed as if the 12-nation regional trade bloc was dead and buried. It is now likely to be resurrected by the 11 surviving member countries, creating a giant common market that will leave the US at a disadvantage.
Even Japan’s Prime Minister Shinzo Abe, otherwise a strong proponent of the pact, said in the after math of the withdrawal that TPP was “meaningless” without the direct participation of the United States.
The original TPP had encompassed 12 Asia-Pacific nations plus the US: Australia, Brunei, New Zealand, Japan, Canada, Mexico, Peru, Chile, Malaysia, Vietnam and Singapore and would have eliminated 98 percent of the tariffs in an enormous common market.
One year later the 11 surviving “partners” are preparing to meet on March 8 in Chile to sign an agreement, now formally called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or TPP-11 for short. That leaves the world’s two biggest economies – the United States and China – on the outside, looking in on a US$14 trillion market involving 500 million people that accounts for about 15 percent of global trade.
Originally conceived during the administration of President George W. Bush, it was tailored to US interests and designed to keep China out. Economists forecast it would have increased US exports by more than US$120 billion and would have benefited the nation’s farmers as well as the machinery, technology, car and plastics industries in particular, removing 18,000 tariffs placed on US goods to other countries.
Trump’s decision to take the US out of the pact is regarded by most economists as a foolish and impetuous step aimed at diminishing the accomplishments of his predecessor, Barack Obama, who during the eight years of his presidency made the TPP a major goal.
When at least six members representing 85 percent of the bloc’s gross domestic product clear necessary legislative hurdles at home it should go into effect early next year.
How did they do it?
For several months following Trump’s action the remaining 11 floundered, uncertain what to do. Australia and New Zealand were almost alone in advocating that the remaining go it alone. Others, such as Malaysia and Vietnam, were skeptical.
The key to going forward alone was basically in Japan’s court, having by far the largest economy of the remaining 11 partners.
It wasn’t until mid-year that opinion began to coalesce around the idea the countries could go it alone and resurrect the trading region agreement.
The decisive move occurred at a meeting of trade ministers at the Japanese resort of Hakone in July. The attendees “achieved mutual understanding on the path forward,” said Kazuyoshi Umemoto, who was recalled from his post as Ambassador to Italy to lead the negotiations.
Meeting with reporters last week, Umemoto said “this was the first time for Japan to take a leading role in any kind of trade negotiations.” In previous trade negotiations, Tokyo was always on the defensive, he said, overwhelmingly focused on in preserving Japan’s special interest groups, such as farmers.
In this case Japan’s negotiators efforts to negotiate compromises on the often-divisive issues focused on resolving trade disputes that were not necessarily relevant to Japan itself.
One key to making an agreement was a decision to suspend enforcement of certain highly technical rules on such issues as resolving knotty issues as telecommunication or pharmaceutical disputes.
In many cases the smaller partners, such as Vietnam had only grudgingly agreed to rule changes in exchange for market opening efforts, especially with the US.
Roughly half of the 22 suspended provisions are in the realm of intellectual property protections, which is a major concern for the United States, not so much for the other nations in the trading bloc.
These suspensions are seen as a kind of inducement for the US to re-enter the TPP as many of them, like intellectual property protections, are major concerns for Washington.
At the World Economic Forum in Davos Switzerland President Donald Trump dropped some hints that the US might be interested in rejoining the trading bloc. According to the Washington Post half of the Republicans in the Senate want Trump to reconsider his decision to yank the US out of TPP.
“I would do TPP if we were able to make a substantially better deal,” the president was quoted as saying at the economic summit. But if he is looking to undo the work on TPP-11, he will face resistance from remaining bloc members.
Having endured more than five years of intensive negotiations, first to agree to the original TPP and later to work out a replacement, the remaining participants might not be so willing to re-open the talks.
Japan’s Umemoto, for one, didn’t sound like he was eager to get back to the negotiating table. “The frustrations and stress of the negotiation are over.”
“It is the first major international trade agreement of the 21st Century,” said Umemoto. It substantially updates and extends the international trade infrastructure to serve as a foundation for the future of the Asia-Pacific Region.