The Significance of the Trans-Pacific Partnership Negotiations
January 24, 2012
Q1: What is the Trans-Pacific Partnership?
A1: The Trans-Pacific Partnership (TPP) refers to ongoing negotiations among nine countries of the Asia Pacific—Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, and the United States. TPP began as a modest arrangement, which came into force in 2006, to eliminate all tariffs among Brunei, Chile, New Zealand, and Singapore. The United States joined in March 2008, a move that significantly increased interest from other countries. Vietnam and Malaysia joined in 2010. TPP is meant to be a “living agreement” that new members can join in the future, even after the agreement is in force.
In a recent speech at CSIS, Deputy National Security Adviser Michael Froman said the administration embraced TPP because the United States faces the prospect of being “locked out of Asia,” due to the daunting number of preferential trade agreements being signed in the Asia-Pacific region without the participation of the United States. In fact, there are 175 of these agreements in effect and 70 more under negotiation or awaiting implementation. The Obama administration has committed to make TPP a “21st century trade agreement,” based on high standards for all member countries. Many countries examining their options in the trading system may view TPP as the preferred road to further regional integration and as a platform to launch a potential Free Trade Area of the Asia Pacific (FTAAP) with additional Asia-Pacific countries.
Q2: What does it mean to say TPP will be a “21st century” trade agreement?
A2: It will contain chapters that go beyond traditional tariff rate reduction measures to cover issues of cross-border services trade, standards, labor and environment, and intellectual property rights. The agreement will address cross-cutting issues such as the harmonization of rules of origin, supply chain management, competition policy, state-owned enterprises, government procurement, technical barriers to trade, regulatory coherence, competitiveness, and expanded opportunities for small and medium-sized enterprises.
Arguably, TPP is the most ambitious trade negotiation to date. Member countries intend for the agreement to incorporate state-of-the-art trade disciplines, positioning TPP to be the model for future agreements in the region. Following congressional approval last October of the U.S. bilateral free trade agreements (FTAs) with South Korea, Colombia, and Panama, the United States has become more credible as a future FTA partner. As a result, TPP negotiations recently garnered increased attention from outside parties, including Japan, Canada, and Mexico, which announced their interest in joining TPP at the Asia-Pacific Economic Cooperation (APEC) meetings in Honolulu in November 2011. Other countries such as the Philippines are expected to give consideration to joining the talks if they progress.
Q3: What are the implications of Japan’s interest in TPP?
A3: U.S. trade representative (USTR) Ron Kirk welcomed the interest of Japan, Canada, and Mexico to join and has begun a consultation process with Congress and the private sector to determine if there is support in the United States for new TPP partners. USTR requested public comments on the three potential new negotiating partners, which were due by January 13, 2012.
If Japan were to join TPP negotiations, it would make the agreement much more commercially significant. The eight current TPP negotiating partners, as a combined entity, would constitute the fourth-largest trading partner for the United States. If Japan enters the negotiations, TPP would rank as the second-largest trading partner of the United States and represent 36 percent of global GDP.
Many in the U.S. administration, Congress, and the business community are concerned about whether there is the necessary political consensus in Japan to follow through on a tough trade negotiation that would open the historically closed Japanese market to foreign competition. U.S.-Japan trade relations have been marked by friction, particularly regarding issues of agriculture, automobiles, drugs and medical devices, and insurance, which are all politically sensitive sectors in Japan.
Another issue is the timing of Japan’s accession to the negotiations. At APEC meetings in Honolulu, the nine current negotiating countries announced a desire to finalize an agreement during 2012. The current negotiating countries, including the United States, have said that the talks cannot slow down for new negotiating partners and that new entrants must accept all the terms that have been negotiated thus far.
USTR has described TPP negotiations as proceeding on two tracks. Japan’s potential entry into negotiations is on a different track than TPP negotiations, for which a broad outline of an agreement has already been announced. It is too early to tell when those two tracks might converge.
Q4: What distinguishes TPP from existing Asia-Pacific agreements?
A4: A key element of U.S. foreign policy, as outlined by President Barack Obama, is the “rebalancing” of U.S. policy toward the Asia Pacific. Security and economic arrangements in East Asia and the Asia Pacific have been proliferating and include agreements within APEC, the Association of Southeast Asian Nations (ASEAN), ASEAN+3 (the 10 ASEAN countries plus China, Japan, and South Korea) and +6 (adding Australia, India, and New Zealand), and the East Asia Summit (EAS), among others. Until recently, the lack of a forward-leaning U.S. policy of economic engagement with the region was worrisome to some Asia-Pacific countries, because China’s presence and influence has been growing rapidly. In fact, China already has an FTA with the ASEAN countries, which it is seeking to expand to include Japan and South Korea. This is the economic arrangement “ASEAN +3,” which is most likely to compete with TPP, should TPP negotiations falter.
Meredith Broadbent is a senior adviser and holds the William M. Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Murray Hiebert is a senior fellow and deputy director of the CSIS Southeast Asia Program. Lindsay Ross is a research assistant with the CSIS Scholl Chair.
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