TPP Trade Ministers Get Close, but No Deal in Singapore
December 10, 2013
Trade ministers from the 12 partner economies of the Trans-Pacific Partnership (TPP) met in Singapore on December 7-10, following the WTO Ministerial Conference in Bali, in an attempt to meet the stated goal of concluding the trade agreement by the end of 2013. Ministers worked diligently to resolve differences but were unable to reach a deal, likely extending the talks for at least several months. Since TPP is the economic centerpiece of the Obama administration’s rebalancing strategy toward Asia, the delay will likely raise new questions about the durability of that strategy.
Q1: Why were negotiators unable to reach a deal in Singapore?
A1: This meeting was an opportunity to find a “landing zone” for the outstanding issues which require careful political trade-offs to deliver an agreement which offers benefit to all parties. Concluding TPP is extraordinarily challenging given the diversity of the partners and the high level of ambition for the agreement. Every economy has sensitivities, and each party must be able to “declare victory” to its domestic constituencies. A further complication was likely the late inclusion of Japan in the TPP negotiations. Japan is a large, complex economy and has most-favored-nation (MFN) trade relations with most other TPP parties, meaning Japan entered the talks with much work to do on market access issues, especially in the agriculture sector.
The ministers’ statement reflected the fact that work remains on both the text of the agreement, in which the basic principles and disciplines are enumerated, and the attached market access schedules, in which countries spell out exceptions to full liberalization. The most controversial text sections are likely intellectual property, investment, and new disciplines like treatment of state-owned enterprises and digital economy issues. Sensitive market access issues (beyond Japan) are likely sugar, apparel, and footwear for the United States, dairy in the United States and Canada, and heavily protected sectors in other economies.
The United States itself is not fully prepared for an end-game due to the lack of a formal agreement with Congress about how to treat implementing legislation. The absence of “trade promotion authority” (TPA, formerly “fast track”) puts U.S. Trade Representative Michael Froman and his team in a double bind: they must make complicated judgments about the content of a deal that can deliver a working majority of the Congress instead of relying on formal authority, while persuading trading partners that any difficult concessions they make now will not be subject to renegotiation once the deal is exposed to Congressional scrutiny. Given the skepticism of the other parties about the U.S. ability to deliver on its commitments, a final agreement is unlikely without TPA.
Q2: What is the likely path forward for TPP?
A2: TPP negotiations will now likely go on into 2014. In the meantime, the Obama administration must engage with Congress and secure a grant of TPA. The chairmen of the House Ways and Means Committee and the Senate Finance Committee are close to agreement on a bipartisan bill. An agreement in Congress would make otherwise tricky political maneuverings somewhat easier, but ultimately will depend on the substance of the legislation. A TPA bill will need to appeal to both parties: since trade policy is an issue that typically divides Democrats, President Obama must seek to win substantial Republican support. The President needs to make this issue his own and exert leadership to get the bill enacted before summer 2014 when the election season kicks into high gear.
The ministers’ statement from Singapore was upbeat, underscoring the fact that TPP partners are prepared to work toward a conclusion. The statement reaffirmed their commitment to a high-standard, comprehensive, and ambitious outcome and implied commitment to a work plan to resolve remaining issues. While no timetable was mentioned, negotiators are no doubt conscious of President Obama’s planned visit to Asia in April 2014.
Q3: How important is TPP to the Obama administration’s strategy of “rebalancing” to Asia, and what happens if it fails?
A3: TPP is at the heart of the rebalancing strategy, which is a multifaceted effort to highlight and reinforce the United States’ enduring interests in the critical Asia-Pacific region. In addition to its economic benefits of expanded growth and jobs, a TPP agreement would more firmly anchor the United States in the region and underscore U.S. leadership as a Pacific power. Asians are looking to the United States not only to uphold peace and security in the region through its strong military presence, but also to promote shared prosperity through deeper trade and investment ties.
A modest delay in concluding the TPP negotiations beyond the end of 2013 is not fatal, but failure to reach an eventual deal would be a serious blow to the rebalancing strategy. Beyond the lost economic opportunities, lack of a TPP agreement would feed perceptions in Asia that the rebalance is mainly about military positioning. It would also raise questions about the U.S. ability to champion the rules of the road in economic affairs. For these reasons, it is likely that the administration will redouble its efforts to conclude a successful TPP agreement in the first half of 2014 and to spend an increasing amount of political capital trying to win congressional approval of TPA and TPP itself.
Scott Miller holds the Scholl Chair in International Business, and Matthew P. Goodman the Simon Chair in Political Economy, at the Center for Strategic and International Studies in Washington, D.C.
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