The Future of the Trans-Pacific Partnership

David Smellie & Zachary Simon

Vol. 39 Associate Editors

History and Overview of the TPP

Signed in February 2016, the Trans-Pacific Partnership (TPP) was meant to be a watershed moment for trade in the Pacific. The twelve signatories to the agreement, all of whom border the Pacific Ocean, collectively account for 40 percent of global GDP and one-third of global trade.[1] The goal of the agreement was straightforward: to strengthen economic ties between Pacific nations by slashing tariffs and boosting trade. In fact, it was crafted with the eventual goal of creating a single market between the signatory countries.[2] The TPP was also widely seen as a measure to counter the rising influence of China in the region. The TPP was notable for its labor and environmental protections. Specifically, it required consistency plans for Vietnam, Malaysia, and Brunei, which all have spotty labor records.[3] For the most part, the plans make it easier for workers to form unions, strengthen protections against discrimination in the workplace, and improve rights for migrant and temporary workers. In addition to its labor protections, the agreement also restricts trade in illegal wildlife, includes provisions to combat deforestation and overfishing, and redoubles each country’s commitment to conservation efforts.[4] That the agreement even happened in the first place is a remarkable achievement given that the signatories have vastly different economies and interests. The TPP has its origins in another agreement consummated in 2006 called the Trans-Pacific Strategic Economic Partnership, or the P(4). The P(4), which was signed by Brunei, Chile, Singapore, and New Zealand, had much the same aim as the TPP, though on a far smaller scale. What eventually became the TPP originally began as talks to expand the P(4), though it quickly became clear that these talks were laying the groundwork for an entirely new agreement. The lynchpin of that new agreement was the United States, as access to the world’s largest economy and its 250 million consumers was a tantalizing prospect for the other eleven nations.

U.S. Withdrawal

Though the agreement was touted by the Obama administration as a major accomplishment, it was decidedly less popular at home. Donald Trump, Hillary Clinton, and Bernie Sanders all claimed to have opposed it during the 2016 presidential election. The Trump Administration has since withdrawn from the agreement. Donald Trump’s reasons for withdrawing from the deal have always been somewhat nebulous and difficult to discern. During a Republican primary debate in 2015, for instance, Trump said, “[The TPP is] a deal that was designed for China to come in, as they always do, through the back door and totally take advantage of everyone.”[5] This statement, however, ignores the fact that one of the motivations behind TPP was to counter China’s influence, not bolster it. During a speech in June 2016, Trump stated, “[The TPP] would make it easier for our trading competitors to ship cheap subsidized goods into U.S. markets—while allowing foreign countries to continue putting barriers in front of our exports.”[6] By all accounts, the TPP would have done just the opposite by limiting the ability of state-run enterprises to subsidize cheap goods that undercut U.S. competitiveness. While the Obama Administration claimed that the pact would create jobs, Trump asserted it would lead to an outflow of jobs from the United States, which is a sentiment that was shared by Bernie Sanders and, to a lesser extent, Hillary Clinton. The extent to which it would do either is unclear. One independent study predicted that it would boost exports and incomes but that the overall level of jobs would remain the same.[7] Regardless of its reasons for withdrawing, without the United States, most observers have considered the agreement effectively dead for two key reasons. First, in order to take effect, the pact had to be ratified by at least six countries accounting at least 85 percent of the group’s economic output, which is impossible without the United States’ participation. Second, given that easier access to the United States’ markets was the most enticing carrot used to corral support for the TPP, many doubt that the remaining eleven signatories will have the motivation to put together another deal.

Going Forward

The remaining eleven signatories have, however, expressed an interest in continuing with the TPP in some form, and they aimed to finalize an agreement before the Asia-Pacific Economic Cooperation (APEC) meeting that took place on November 10-11 this year.[8] Given that the United State’s withdrawal prevents the TPP from going into effect in its current form, the TPP-11 must negotiate a brand new treaty. Currently, there is disagreement over whether the TPP should be adopted wholesale or renegotiated. Some countries, like Malaysia, are advocate renegotiating the agreement entirely.[9] Others would prefer to mold the agreement to better suit the needs of the TPP-11 in the absence of the U.S. One possibly that the TPP-11 is currently discussing is to freeze parts of the original agreement, particularly in the areas of intellectual property, pharmaceutical data, and other legal measures. When the TPP-11 met in Tokyo in late September, they drafted a list of items that could potentially be frozen and winnowed it down to about 50 items, with a goal of narrowing it even further.[10] The most contentious of these include rules on state-owned enterprises, liberalization of government procurement, and tariffs on apparel products, all of which are all still under debate.[11] The Intellectual Property provisions contained in Chapter 18 of the agreement have been especially contentious.[12] Several of the more contentious provisions include a five-year grant of data exclusivity for pharmaceutical patents, a provision setting the copyright duration at the term of life of the author plus 70 years, and certain patent linkages.[13] (MY NOTE: what are “patent linkages”??) The rules extending the length of patent protection for biomedicine products to eight years has already been shelved.[14]

Internal Politics

The United States is not the only country that has faced internal political tumult vis-à-vis the TPP. Several countries are also facing elections and other internal political pressure that may challenge their commitment to renegotiating the TPP. The single biggest question hanging over the TPP-11 has been what the outcome of its snap-election would be. Given that Japan has been a driving force behind the push to renegotiate the TPP, observers feared that a poor showing for Prime Minister’s Abe’s ruling party would be the end of nascent talks to reopen negotiations. On October 22, however, Prime Minister Abe’s party won a commanding majority in the National Diet[15], meaning that the TPP-11 talks are likely to continue—at least for now. New Zealand, which is also one of the countries that has led the charge among the TPP-11, has experienced political uncertainty in recent weeks. The country held a general election on September 23 from which no party emerged victorious. The nationalist New Zealand First Party, which held the position of kingmaker, threw its support behind the Labour Party, allowing Labour, New Zealand First, and the Greens to form a coalition government.[16] Historically, both Labour and New Zealand First have been supportive of free trade. Labour, however, would like to renegotiate the TPP to “accommodate its proposed ban on foreign ownership of existing properties.”[17] New Zealand First and the Green Party have also advocated tinkering with the deal. Observers worry that if the governing coalition presses these demands, other countries may begin making fresh demands as well. Though Canada has not held an election recently, it has had to respond to concerns from several of its domestic industries, including the lumber, auto parts, agriculture, fisheries, and seafood industries.[18] One worry observers have is that any changes made to NAFTA may affect how these industries view the TPP, which could affect their level of support for a negotiated deal. With these challenges and limitations in mind, the next discussions towards a new TPP will take place during the Asia-Pacific Economic Cooperation (APEC) in Vietnam next month. Depending on how those discussions go, we could see a rough framework emerge within the next several weeks.

[1] Kevin Granville, What Is TPP? Behind the Trade Deal That Died, N.Y. Times (Jan. 23, 2017), https://www.nytimes.com/interactive/2016/business/tpp-explained-what-is-trans-pacific-partnership.html?_r=0. [2] TPP: What is it and why does it matter? BBC (Jan. 23, 2017), http://www.bbc.com/news/business-32498715. [3] Alana Semuels, The TPP’s Uneven Attempt at Labor Protection, The Atlantic (Jan. 22, 2016), https://www.theatlantic.com/business/archive/2016/01/tpp-mexico-labor-rights/426501/. [4] Rachael Bale, How the Trans-Pacific Partnership Will—and Won’t—Protect Wildlife, National Geographic (Nov. 5, 2015), https://news.nationalgeographic.com/2015/11/151105-TPP-free-trade-wildlife-trafficking-conservation-cites/. [5] Robert D. Blackwill & Theodore Rappleye, Trump’s Five Mistaken Reasons for Withdrawing from the Trans-Pacific Partnership, Foreign Policy (Jun. 22, 2017, 10:56 AM), http://foreignpolicy.com/2017/06/22/trumps-five-mistaken-reasons-for-withdrawing-from-the-trans-pacific-partnership-china-trade-economics/. [6] Id. [7] Jackie Calmes, Trans-Pacific Trade Pact Would Lift U.S. Incomes, but Not Jobs Overall, Study Says, N.Y. Times (Jan. 25, 2016), https://www.nytimes.com/2016/01/26/business/international/trans-pacific-pact-would-lift-us-incomes-but-not-jobs-overall-study-says.html. [8] Dirección General de Relaciones Económicas Internacionales, Ministerial Statement: Trans-Pacific Partnership (TPP) Agreement (May 21, 2017), https://www.direcon.gob.cl/2017/05/ministerial-statement-trans-pacific-partnership-tpp-agreement/. [9] East Asia Forum, Malaysia Eyes TPP-11, But on Its Terms, AEC News (Oct. 10, 2017), https://aecnewstoday.com/2017/malaysia-eyes-tpp-11-but-on-its-terms/. [10] Shotaro Tani, ‘TPP 11’ should preserve all agreed-upon rules: ex-US trade chief, Nikkei Asian Review (Oct. 13, 2017, 12:37 PM), https://asia.nikkei.com/Politics-Economy/International-Relations/TPP-11-should-preserve-all-agreed-upon-rules-ex-US-trade-chief. [11] TPP members whittle list of rules to shelve with US gone, Nikkei Asian Review (Sept. 22, 2017, 6:02 AM), https://asia.nikkei.com/Politics-Economy/International-Relations/TPP-members-whittle-list-of-rules-to-shelve-with-US-gone. [12] Daniel J. Ikenson, Simon Lester, Scott Lincicome, Daniel R. Pearson, & K. William Watson, Should Free Traders Support the TransPacific Partnership? An Assessment of America’s Largest Preferential Trade Agreement, (The Cato Inst., Cato Working Paper No. 39, 2016), https://object.cato.org/sites/cato.org/files/pubs/pdf/working-paper-39_3.pdf. [13] TPP members whittle list of rules to shelve with US gone, supra note 11. [14] Jun Yamazaki, ‘TPP 11’ to freeze drug data protection demanded by US, Nikkei Asian Review (Aug. 31, 2017, 3:58 AM), https://asia.nikkei.com/Politics-Economy/International-Relations/TPP-11-to-freeze-drug-data-protection-demanded-by-US. [15] Motoko Rich, Japan Election Vindicates Shinzo Abe as His Party Wins Big, N.Y. Times (Oct. 22, 2017), https://www.nytimes.com/2017/10/22/world/asia/japan-election-shinzo-abe.html?_r=0. [16] Eleanor Ainge Roy, Jacinda Ardern to be New Zealand’s next PM after Labour coalition deal, The Guardian (Oct. 19, 2017, 7:17 AM), https://www.theguardian.com/world/2017/oct/19/jacinda-ardern-new-zealand-prime-minister-labour-coalition-deal-winston-peters. [17] New Zealand votes in election that could thwart TPP deal, Today (Sept. 21, 2017), http://www.todayonline.com/world/new-zealand-votes-election-could-thwart-tpp-deal. [18] Marie-Danielle Smith, Japanese eager for Trans-Pacific Partnership with all eyes, including theirs, on NAFTA, The National Post (Oct. 3, 2017, 10:16 AM), http://nationalpost.com/news/politics/japanese-keen-to-move-on-trans-pacific-partnership-with-all-eyes-including-theirs-on-nafta.