As TPP ratification faces uphill battle in Washington, questions build for RCEP timing

9 September 2016

The prospects for the US Congress to ratify the Trans-Pacific Partnership (TPP) Agreement are looking increasingly dim this year, despite continued efforts by the White House to build support for the deal in a fraught election climate.

Meanwhile, efforts to advance negotiations for another Asia-Pacific deal – the Regional Comprehensive Economic Partnership (RCEP), which does not include the US – are also reportedly facing strong headwinds, with some officials suggesting that plans to conclude talks this year are becoming less likely.

The relationship between the two trade deals – which have some overlap in membership – has already been hotly debated, with some suggesting that they can be complementary, while others suggesting that they could lead to very different approaches to trade rule-making in the region.

Indeed, the advances and struggles in both trade pacts are expected to be watched closely in the months to come, particularly amid continued discussions among members of the Asia-Pacific Economic Cooperation (APEC) forum for a future Free Trade Area of the Asia-Pacific (FTAAP).
 

TPP prospects in Washington, Tokyo

Over six months after the TPP was signed in Auckland, New Zealand, the mammoth mega-regional deal with rules on areas ranging from environment to e-commerce is now facing an uncertain fate in the ratification stage.

In order to enter into force, the agreement must first be ratified domestically by at least six countries representing 85 percent of the group’s total GDP. Therefore, both the United States Congress and the Japanese Diet must approve the agreement for TPP to move forward, which is set to be a challenging task for both legislatures.

For the moment, it is unclear whether TPP ratification will be a casualty of the US elections. However, a “lame duck” vote following the November polls seems increasingly unlikely, having been ruled out by congressional leaders in both chambers of the US legislature, citing both problems with the pact’s content – such as with the data exclusivity period for biologic drugs – along with the difficult election dynamic, particularly regarding trade.

Looking to 2017, both Republican Party candidate Donald Trump and Democratic Party candidate Hillary Clinton have declared that they oppose the TPP in its current form, leaving the pact’s future uncertain in the next Administration as well.

In Japan, the government has already finalised a bill seeking ratification of TPP and has created a committee to this effect, with a vote in the Diet now slated for this autumn. The debate in the Asian economic giant is expected to be contentious, particularly when it comes to the deal’s provisions on agricultural liberalisation, which have long been a sensitive subject in Japanese politics.
 

RCEP talks may miss December 2016 target

Meanwhile, on the RCEP front, ministers from participating economies convened in Vientiane, Laos, in early August in a bid to iron out some points of contention in the 16-country talks. The meeting was followed by a negotiating round the following week in Ho Chi Minh City, Vietnam.

Comprised of the 10 members of the Association of Southeast Asian Nations (ASEAN) and its six free trade agreement partners – Australia, China, India, Japan, South Korea, and New Zealand – the proposed RCEP would cover a combined GDP of over US$22.6 trillion and a population approaching 3.5 billion.

The negotiations themselves include, among other subjects, trade in goods and services, investment, competition, intellectual property, and dispute settlement.

Calls to speed negotiations along have been repeatedly issued by ministers, where talks have reportedly made limited progress since August 2015 when members finalised the initial offers for tariff liberalisation of goods.

Indeed, Indian Commerce and Industry Minister Nirmala Sitharaman conceded last month that the talks may miss the December 2016 target, which already represents an extension from the initial goal of end-2015. The fifteenth round of negotiations is scheduled for 11-22 October in Tianjin, China.

Despite the difficult process, last month’s meetings did reportedly lead to some convergence on certain key issues, such as market access in goods, along with advances on some intellectual property rights-related disagreements.

For example, regarding the former, RCEP participants have reportedly agreed to pursue a single-tier system of tariff reduction – granting the same cuts to all participants – in lieu of the proposed three-tier system, for which India had been one of the key proponents. In the previous three-tier arrangement, ASEAN countries would receive the greatest market access improvements, followed by countries with which India had already signed an FTA – specifically, South Korea and Japan. The countries with which India had no earlier FTA – China, Australia, and New Zealand – would see the lowest cuts.

Analysts say that the disagreement around the three-tier system is symptomatic of a greater issue, that of varying and sometimes conflicting interests among members with different economic sizes and strengths.
 

APEC meet coming up

Since the earliest vision of FTAAP was raised in the APEC forum in 2006, and the first concrete steps began to manifest themselves from 2010 when “Pathways to FTAAP” called for a strategic study on the subject, there has been an ongoing examination under APEC on how to leverage regional initiatives for the realisation of an FTAAP.

More recently, the Beijing Roadmap for APEC’s Contribution to the Realization of the FTAAP, issued in 2014, has explicitly encouraged “greater efforts…to concluding the possible pathways to the FTAAP, including the TPP and RCEP.” APEC heads of state reaffirmed their commitment to an FTAAP built on regional undertakings in last year’s APEC Leaders Declaration.

For this November’s leaders’ meeting, Peru has placed “advancing regional economic integration,” including the adoption of the strategic study on the FTAAP, as one of its strategic priorities. Given the state of play of TPP and RCEP – both of which have been floated as possible pathways to a broader Asia-Pacific free trade zone – how this may affect the pace and nature of those discussions will likely be followed closely going into the Lima meet.

 

ICTSD reporting; “Diet Control,” THE ECONOMIST, 16 July 2016; “RCEP talks may miss December 2016 deadline,enter 2017: Nirmala,” THE BUSINESS STANDARD, 24 August 2016; “There’s Only a Slim Chance TPP Will Be Ratified This Year,” FORTUNE, 5 May 2016; “Call to remove IP clauses from trade pact,” THE HINDU, 15 August 2016;  “Ministers push for conclusion of RCEP talks,” BANGKOK POST, 9 August 2016; “India may offer China different terms in new RCEP structure,” ECONOMIC TIMES, 23 August 2016; “Obama’s TPP deal won’t get Senate vote this year: McConnell,” REUTERS, 25 August 2016; “Japan’s Diet prepares for renewed sparring over TPP,” NIKKEI ASIAN REVIEW, 1 September 2016.

This article first appeared in Bridges Weekly, 7 September 2016.

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