The Trans-Pacific Partnership (TPP) is more than a Free Trade Agreement aimed at reducing tariffs among the participants. The TPP is an ambitious, 21 st century “comprehensive and high-standard” Free Trade Agreement that aims to liberalize trade in nearly all goods and services, including beyond those currently established in the World Trade Organization (WTO) and remove Technical Barriers to Trade (TBT’s).
TPP PARTICIPATING COUNTRIES
The TPP participants are: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam. Notably missing are China and Korea. Nonetheless, the region is home to 40% of the world’s population, produces nearly 60% of global GDP, and includes some of the fastest growing economies in the world. Including Canada, Mexico, and Japan, TPP negotiating partners made up 40% of U.S. goods trade in 2012, and the Asia-Pacific economies as a whole made up over 62%. The TPP would be the largest U.S. FTA to date by trade value. (1)
The scope of the proposed agreement is huge and could influence the shape and path of U.S. trade policy for the foreseeable future. Twenty-nine chapters in the agreement are under discussion. The United States is negotiating market access for goods, services, and agriculture with countries with which it does not currently have FTAs: Brunei, Japan, Malaysia, New Zealand, and Vietnam. Negotiations are also being conducted on disciplines to intellectual property rights, trade in services, government procurement, investment, rules of origin, competition, labor, and environmental standards and other issues. In many cases, the rules being negotiated are intended to be more rigorous than comparable rules found in the WTO. Some topics, such as state-owned enterprises, regulatory coherence, and supply chain competitiveness, may break new ground in FTA negotiations. As the countries that make up the TPP negotiating partners include advanced industrialized, middle income, and developing economies, the TPP, if implemented, may involve substantial restructuring of the economies of some participants. (2)
OBSTACLES TO CONCLUDING AN AGREEMENT
The massive scope of the agreement is a significant factor preventing an expeditious conclusion to the negotiations. Another factor is the failure of the US Congress to renew Trade Promotion Authority (TPA), also known as “Fast-Track.” “Fast-Track” facilitates passage of any trade deals that reach the Congress by giving lawmakers simply an up or down vote. “Fast-Track” also provides a degree of confidence among negotiating partners that agreements reached after years of difficult and politically sensitive negotiations will not change when introduced to the Congress. Arguments against Congressional reinstatement of “fast track” authority are: (a) that it places too much power in the executive branch and (b) the lack of transparency in the TPP trade discussions. But there is considerable pressure from business groups to reinstate “Fast-Track” authority. On November 12, 2014, a group of 200 business and agriculture entities sent a letter to congressional leadership demanding quick action on the reinstatement of “fast-track” authority. The group stated that “fast-track” is needed to “help ensure high-standard outcomes in the Trans-Pacific Partnership (TPP) negotiations, and also help ensure strong outcomes in the other ongoing talks on the Transatlantic Trade and Investment Partnership (T-TIP), the Trade in Services Agreement (TiSA), and an agreement to eliminate tariffs on environmental goods.” (3)
SECRECY CONCEALS AGREEMENT DETAILS
The secrecy in which the TPP discussions are conducted has been controversial. Few people, even within the negotiating countries’ governments, have access to the full text of the draft agreement and the public, who it will affect most, has none at all. Large corporations, however, are able to see portions of the text, generating a powerful lobby to effect changes on behalf of these groups while the public at large gets no say. TPP critic Senator Elizabeth Warren said, “I actually have had supporters of the deal say to me, ‘They have to be secret, because if the American people knew what was actually in them, they would be opposed.'”(4) On the other hand, “[a]s soon as you reveal your position and put it in print, then it’s much more difficult to modify it and be flexible later,” explains Gary Hufbauer, senior fellow at the Peterson Institute for International Economics. “It’s a negotiation, and everyone has to compromise to some extent.” (5)
The US joined TPP negotiations in 2008, and the first TPP deadline was in 2012. That deadline and others have slipped since then. The meeting of TPP leaders on Monday, November 10, 2014 again failed to yield any concrete signal that the talks are nearing conclusion. But there was one notable detail in the TPP ministers’ report that may have removed an obstacle to an agreement. There was an apparent endorsement of the goal of establishing labor and environmental obligations that are enforceable, which has long been a major U.S. demand but has faced resistance from other countries. (6)
But many sticking points remain. Because of the secrecy surrounding the discussions, it is difficult to know what’s been resolved since the details aren’t public, but anonymously sourced reports and leaked texts suggest that the following continue to be the biggest remaining issues: (7, 8)
- Intellectual property: The leaked intellectual property chapter revealed that the U.S. has been pushing stronger copyright protections for music and film, as well as broader and longer-lasting applicability of patents. It would also make the approval process more difficult for generic drug makers and extend protections for biologic medicines, which has concerned several members of Congress.
- State-owned enterprises: Many TPP governments, in particular Vietnam, Singapore and Malaysia, essentially own large parts of their economies. Negotiations have aimed to limit public support for these companies in order to foster competition with the private sector, but given the U.S.’ own governmentsponsored enterprises — Fannie Mae, Freddie Mac, the U.S. Postal Service — they probably won’t go too far.
- Market access: Though the treaty envisions dropping all tariffs over time, tensions remain between the U.S. and Japan over support for both of their agricultural sectors, as well as Japan’s willingness to accept U.S.-made automobiles.
- Investor-state dispute resolution: Most modern free trade agreements include some mechanism for investor parties to sue governments directly for failing to abide by the terms of the agreement, which some public interest advocates worry will have a chilling effect on domestic regulation aimed at consumer and environmental protection.
- Tobacco: Originally, the U.S. had proposed that tobacco be treated differently than other kinds of goods, in that countries would have permission to restrict its importation and sale. This summer, it executed something of an about-face, which alarmed anti-smoking advocates who worry that tobacco companies will continue to sue nations for passing laws that heavily tax cigarettes or ban certain kinds of advertising.
PROSPECTS FOR AN AGREEMENT
According to Gary Hufbauer of the Peterson Institute for International Economics, the Republican midterm election landslide improves the prospects of reinstating TPA, or “fast track” authority and approving both the Trans-Pacific Partnership (TPP), and the Trans-Atlantic Trade and Investment Partnership (TTIP). According to Hufbauer, there are four reasons for this assessment: (9)
- Mitch McConnell (R-KY), a staunch supporter of trade agreements replaces Harry Reid (D-NV), a traditional opponent of trade deals, as Senate President.
- The Republican Party needs to shed its obstructionist image, and one thing that both Obama and Republicans agree on is trade liberalization.
- Now that Republicans control the Senate as well as the House, the GOP will have no excuse to offer its business supporters if trade deals die in the legislative chambers.
- Finally, while President Obama may be gearing up for confrontations with a Republican Congress over budget, health care, environment, immigration, and other issues, he badly wants a legacy of some accomplishment for his second term. The Republicans will likely have no objection to giving him TPA, TPP, and TTIP legacies as long as they can share in the credit and run against the legacy of Obamacare and other government interventionist policies in 2016.
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1 Trans‐Pacific Partnership (TPP) Countries: Comparative Trade and Economic Analysis, Congressional Research Service (June 10, 2013)
2 The Trans‐Pacific Partnership (TPP): Negotiations and Issues for Congress, Congressional Research Service (December 13, 2013)