Efforts to Build TPP Support Ramp Up as Political Landscape Shifts

22 October 2015

Officials from the Trans-Pacific Partnership (TPP) countries have been ramping up their efforts in recent weeks to build domestic support for the trade deal, ahead of the expected release of its final text and the subsequent launch of domestic ratification procedures. The upcoming approval process is expected to prove difficult as national-level entities scrutinise the agreement for potential gains and losses.

The official release of the deal’s text is currently expected in early November, with the legal review of the pact now underway. In the interim, various TPP member governments have released fact sheets outlining the specific benefits for their respective economies under the agreement’s chapters, giving some initial insights into what is in the final pact in areas ranging from agriculture to dispute settlement.

Along with drawing scrutiny – and in some cases criticism – the pact has also attracted interest from various other countries in the region who may later ask to join. Notably, news of a completed TPP has also drawn attention to other trade initiatives underway both in the region and globally, with the deal widely expected to be a game-changer in the global trade arena.

Government transitions

Passing the TPP domestically is expected to be an uphill battle for the group’s 12 members, with Monday’s election win in Canada for Justin Trudeau’s Liberal Party highlighting the delicate nature of domestic politics in participating countries, especially those set to face transitions to new governments.

On Canada’s part, the TPP had been negotiated under the tenure of outgoing Prime Minister Stephen Harper, whose Conservative Party lost the election in a surprise landslide result, despite polling data in the weeks prior to the vote suggesting a three-way tie between Trudeau, Harper, and Tom Mulcair of the National Democratic Party (NDP).

The Harper government has been in place since 2006 and had been a strong advocate for the TPP since joining the talks in 2012. (See Bridges Weekly, 20 June 2012)

While Trudeau has been reported to have reservations about the Pacific Rim trade deal, he has indicated that he would first need to see the details of the completed pact before taking any next steps – a comparatively warmer response than Mulcair, who had suggested that a government under his leadership would not have been bound by the pact. (See Bridges Weekly, 8 October 2015)

Upcoming elections in other TPP countries, particularly the US general election in November and Japan’s House of Councillors’ election next summer, are also being watched closely by trade observers for their potential impact on ratification.

Several US presidential candidates from both the Republican and Democratic Parties have to date expressed reservations about the final TPP outcome, including Democratic frontrunner Hillary Clinton, who had previously backed the agreement during her tenure as US Secretary of State.

Concurrently, key lawmakers in various TPP countries, particularly the US, have already raised questions over whether the deal’s terms are worthy of approval. For example, Senator Orrin Hatch, a Utah Republican who chairs that chamber’s Finance Committee and was one of the lawmakers who led the charge to renew Trade Promotion Authority (TPA) earlier this year, has already openly questioned whether TPP in its current form can be approved in Congress.

In a speech on the Senate floor earlier this month, Hatch particularly cited intellectual property rights protections, including on biologics, as well as agricultural market access, product- and sector-specific carve-outs, and “some potential overreaching on labour commitments” as possible areas where TPP falls short of congressional objectives.

“While we can’t make final determinations on any of these issues without seeing the final text of the agreement, initial indications are that these items could be problematic when the agreement is submitted to Congress for approval,” Hatch said.

Some legislators have gone so far as to suggest that the trade deal, if deemed inadequate, could be reopened for additional negotiations. However, US Trade Representative Michael Froman appeared to largely rule out that possibility, given that such trade agreements are “infinitely more complex when you’ve got 11 other trading partners at the table.”

“This isn’t one of those agreements where, you know, you can… reopen an issue or renegotiate a provision. This is one where… every issue is tied to every other issue and every country’s outcome is balanced against every other country’s outcome,” the US trade chief said last week.

Entry into force

How ratification proceeds in the coming months will also determine when the trade deal enters into force, which could take years. According to fact sheets released by the government of New Zealand, TPP parties will have a two-year window to finish their domestic approval, legislative, and ratification processes.

Should all 12 countries have done so at that stage, the deal will enter into force 60 days following their notifications. However, should some TPP countries not finish their processes in that timeframe, an alternative approach would be to bring the deal into force 26 months after it is signed, as long as at least six countries have notified that they have completed their domestic legal procedures.

This latter approach is also conditional on those six countries making up at least 85 percent of the group’s combined GDP, under 2013 figures.

If this scenario does not occur, a third approach is available, under which the deal would enter into force 60 days after at least six TPP countries have notified that they have completed their domestic legal procedures. The same 85 percent GDP requirement would apply.

Should either the second or third option be invoked, other TPP countries which do not notify at that time would still be able to do so at a later date. Lastly, a TPP party may exit the agreement if they so choose, though they must give notice six months in advance.

Trade officials have noted that implementation and enforcement will be key challenges, even after the ratification hurdles have been overcome. USTR Froman has said that some countries will need both capacity-building and technical assistance in order to do so, while noting that TPP governments are already making the necessary preparations for that type of cooperation.

New entrants?

The prospect of more countries joining the TPP once it is ratified by the initial 12 participants has also come into focus in recent weeks, with some leaders from the Asia-Pacific region already indicating their interest.

Speaking to reporters following a 16 October meeting with US President Barack Obama, South Korean President Park Geun-Hye indicated that her country is considering requesting membership in the Pacific Rim pact.

“Korea and the US already have an FTA with very high standards. And in this respect, I believe that we make natural partners in terms of the TPP,” said the South Korean President. “Since TPP negotiations have now been concluded, we will be engaging in closer cooperation with regard to Korea’s possible participation in TPP.”

Other possible candidates for TPP entry could include the Philippines, Indonesia, and possibly Taiwan, who have all suggested that they may ask to join the deal at some stage.

The TPP is expected to be one of the items on the agenda when Indonesian President Joko Widodo visits the US next week, though whether Jakarta will express its interest more formally then is not yet clear.

While TPP members have said that the deal is open to new members, USTR Froman reiterated last week that any new TPP member will have to be approved by all existing participants, among other requirements that have been set out by the group. On the US side, he said, a vote from Congress will be needed for a new member’s approval.

“Even since Atlanta we’ve been contacted by a number of countries, some of who have been public about it, others who haven’t, who have expressed interest in seeing the facts, getting briefed up, and potentially starting consultations towards being considered ultimately for membership,” he said in a conference call hosted by the Council on Foreign Relations (CFR).

The TPP has been billed by many proponents as a way to set the rules of the road for the region, particularly ahead of other trade initiatives that may have different objectives. China, notably, is not a TPP member and is instead involved in another regional trade initiative known as the Regional Comprehensive Economic Partnership (RCEP).

Regarding the prospects for China’s possible entry, Froman said last week that while TPP is not directed against any one country in particular, it does aim “at setting high standards for the region,” and interested entrants would have to show that they would be willing to meet those same standards.

The US trade chief flagged the ongoing negotiations between Washington and Beijing on a bilateral investment treaty (BIT) as one possible way for China to show its ability to meet these types of high standards, especially given the similarities between the BIT and TPP’s investment chapter.

The BIT talks were a key focus during a recent meeting between Obama and Chinese President Xi Jinping, with both leaders agreeing to step up their work toward concluding such a deal. (See Bridges Weekly, 1 October 2015)

“[China] has, I think, a long way to go to be able to meet [TPP] standards, it’s going to have to live in a TPP world, where its neighbours are offering basic labour and environmental standards, dispute settlement, stronger intellectual property rights protections, protections against trade secret theft, disciplines on state-owned enterprises, free and open internet,” said Froman in the same CFR conference call.

ICTSD reporting; “Indonesian Leader Discusses Foreign-Investment Rules, TPP,” WALL STREET JOURNAL, 21 October 2015; “Don’t Hold Your Breath for Cheap Steaks: Here’s the TPP Timeline,” BLOOMBERG, 14 October 2015; “As Canadians head to polls, election impact on TPP unclear,” POLITICO, 19 October 2015; “China-backed trade pact playing catch-up after U.S.-led TPP deal,” REUTERS, 10 October 2015.

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