TPP-11 Trade Talks Approach Finish Line Under a New Name

16 November 2017

Trade ministers from the 11 remaining Trans-Pacific Partnership (TPP) countries announced last week that they are within striking distance of a plan to bring the trade agreement into force, which they will then be able to submit for signature and domestic ratification.

While stopping short of confirming a final accord, ministers affirmed on Friday 10 November that they have reached consensus on its “core elements,” following months of technical work and negotiations. The process kicked off earlier this year, after the Asia-Pacific coalition agreed to find a path for bringing the deal into force after US President Donald Trump withdrew his country within days of taking office. (See Bridges Weekly, 26 January 2017 and 24 May 2017)

The 11 remaining TPP members have also rebranded the accord as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), explaining that this version is meant to keep the original TPP’s “high standards, overall balance, and integrity… while ensuring the commercial and other interests of all participants and preserving our inherent right to regulate, including the flexibility of the parties to set legislative and regulatory priorities.”

Along with releasing a joint ministerial statement, they also circulated two annexes – one which features an outline of the CPTPP, and another listing which provisions of the original TPP have been suspended and which are pending further negotiation.

“Ministers confirm that the legal instrument proposed for the CPTPP allows the participants to act decisively in a timely manner to advance their shared objectives. Ministers reaffirm that the CPTPP demonstrates their firm commitment to open markets, to combatting protectionism, and to advancing regional economic integration,” the statement said.

The document did not confirm a timeframe for finalising the remaining details. It also noted that the completed version of the CPTPP will still require legal verification and translation before members can move forward on signature and ratification.

The 11 countries involved are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam – a coalition of varying economic weights and levels of development. They together are home to nearly 500 million people, and their economies add up to over US$10 trillion, or over 13 percent of global GDP, according to statistics cited by the Canadian government.

“This agreement has substantial strategic significance because it will maintain the high-level content of the TPP Agreement while building a free and fair economic order for sharing prosperity in the Asia-Pacific region, where there has been remarkable growth, as well as create the foundation for further expanding that order,” said Japanese Foreign Minister Taro Kono in a formal statement.

Deal or no deal?

Earlier this year, ministers agreed that they would aim to put together options for leaders’ consideration on the future of the Trans-Pacific pact. The target date was set for November, on the sidelines of a larger gathering of ministers and leaders from the Asia-Pacific Economic Cooperation (APEC) coalition, held in Da Nang, Vietnam. (See Bridges Weekly, 24 May 2017, and related story, this edition).

Heading into last week’s talks, whether ministers would be able to meet that target was not fully confirmed. Ultimately, the CPTPP announcement last Friday capped a tumultuous few days which included initial reports that a deal had been reached at ministers’ level, only for that assessment to be revised after Canada raised objections.

A planned meeting of leaders to announce a completed deal hit a last-minute roadblock after Canadian Prime Minister Justin Trudeau reportedly decided not to attend. The move came after Trudeau raised some outstanding concerns in a meeting with Japanese Prime Minister Shinzo Abe, who served as the gathering’s co-chair.
“We are pleased that progress is being made towards a possible agreement, but there is still some work to be done,” said Canadian Minister of International Trade François-Philippe Champagne. The government statement also said that Ottawa “will not be rushed into an agreement that is not in the interest of Canada.”

Public statements from some other CPTPP officials suggested that more progress could be made before year’s end, while similarly not committing to a timeline.

Australian Trade Minister Steven Ciobo told ABC Insiders that the WTO ministerial conference next month in Buenos Aires, Argentina, could serve as a chance to advance further on these outstanding issues, according to a transcript provided by his office.

“That’s certainly something that we’ll work towards, but realistically, having lost a little bit momentum now off the back of the decision by the Canadians not to attend the leaders’ meeting on the TPP-11, we will just have to keep working methodically through it, that’s what it comes down to,” Ciobo added.

Deal outline, suspended provisions

The annexes released by ministers last week includes a CPTPP outline with seven articles, involving TPP incorporation; suspension of select provisions; entry into force; withdrawal; accession; review of the CPTPP; and authentic texts.

Drafting new terms for bringing the accord into force had been an important procedural issue for moving forward. The TPP’s chapter on “final provisions” had required that all 12 original signatories ratify within two years from when they signed the deal. Should that threshold not be met, the TPP had required that at least six of the original signatories accounting for 85 percent of the group’s combined GDP from 2013 ratify for the deal to enter into force.

Given the US’ status as the TPP’s largest economy, its withdrawal meant that the remaining signatories would not be able to meet that 85 percent GDP threshold.

The CPTPP has now revised its ratification terms, with entry into force after at least six members have ratified, according to multiple media reports. Ministers also noted that the various side letters that were previously agreed under the TPP will remain in place, “in principle,” though the countries involved in those bilateral agreements can move to change them.
The 11 countries have also chosen to suspend 20 provisions from the original accord. These cover areas such as telecommunications, investment, and the timeframe for reviewing the market access coverage under the government procurement chapter, among others. The 20 items themselves are individual articles, or even article or annex sub-paragraphs or footnotes, meaning that the vast bulk of the deal, including all of its market access schedules, remain intact.

Eleven of the 20 suspended items are found within the TPP’s intellectual property chapter. For example, they have agreed to suspend Article 18.5, which deals specifically with protecting new biologics. That article, which involves drugs derived from a biological origin, had required “the protection of undisclosed test or other data” for a five to eight-year period from when a TPP party had first given marketing approval, subject to certain conditions.

The US had been a vocal proponent of longer data exclusivity periods for biologic drugs, which had proven to be one of the most contentious requests in the final phases of the original TPP negotiations. (See Bridges Weekly, 8 October 2015)

On copyright, the group has suspended an article on setting the copyright protection period for works or performances for at least 70 years from when their author dies, or if not based on a person’s lifespan, then at least 70 years from when the work’s “first authorised publication.” Other provisions relating to some specific patent issues were also suspended.

Other changes involve certain aspects of the original deal’s investment chapter, including its investor-state dispute settlement mechanism (ISDS), partly in response to requests from New Zealand.

A new government took office in the Oceanic nation last month and had flagged ISDS, as well as the potential for housing speculation by foreign buyers, among the areas they wanted to see changed. While the latter issue was ultimately addressed under domestic legislation, the former was raised at the TPP negotiating table.

“We have… retained the reciprocal agreement with Australia, which is the source of 80 percent of our overseas investment from this new grouping, that ISDS clauses will not apply between our countries,” said David Parker, New Zealand’s Minister for Trade and Export Growth, in a statement explaining the changes.

This refers specifically to a side letter previously agreed between the two countries, which said that New Zealand investors would not have access to ISDS under TPP when doing business in Australia, and vice versa.

“We continue to seek similar agreements with the other countries in this new agreement. In addition, the scope to make ISDS claims has also been narrowed,” the New Zealand trade official said.

A social media recap by New Zealand Prime Minister Jacinda Ardern this week explained some of the changes in greater detail. For example, she said that ISDS will no longer apply to foreign investment screening and private contracts between government and foreign companies – bringing it more in line with similar provisions in existing FTAs that Wellington has with some other regional partners.

“We have the view that we don’t want ISDS used in agreements at all, but in the meantime, we came in late to this agreement, we gave it our all, and we made good solid changes,” said Ardern.

The CPTPP also envisions a process for reviewing when to lift the 20 above-mentioned suspensions, which Ardern referred to in her social media video statement.

“Some people have said that these are just suspended clauses, so if America comes in it’s all on again. Well actually, there is the ability in three years’ time to review all of the agreement, including ISDS, and if America do come in, it’s all open for renegotiation again as well. It’s not automatic,” she said.

Items pending

There are still four items that ministers say need resolution before they can sign a deal and move on to ratification. These issues have been listed in the second annex, with notes explaining which countries have lingering concerns.

These include the cultural exception issue raised by Canada. “For Canada, the main issue that they have raised is in relation to a cultural exception, they would like to be able to carve out elements of their broadcast policy, for example, to allow for French speaking language,” said Australian Trade Minister Steven Ciobo to ABC Insiders.

Also on the list is the country-specific annex for Malaysia involving state-owned enterprises. Meanwhile, Vietnam has raised the article within the TPP’s dispute settlement chapter on retaliation in response to non-implementation.

Brunei, for its part, has raised a provision within its country-specific annex on “cross-border trade in services and investment non-confirming measures” related specifically to new “non-conforming measures” involving the use and development of its coal sector by foreign nationals or enterprises.

ICTSD reporting; “TPP 11 trade agreement is a deal to build on,” NIKKEI, 14 November 2017.

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