Trans-Pacific Partnership Agreement: The Endgame Approaches

 While trade agreements are nominally made at the international level, their legitimacy is based on the support of a country’s domestic interests. Today, trade agreements are primarily a vehicle to improve the welfare of consumers and the competitiveness of home-country producers, and consequently domestic buy-in is a practical requirement. The Trans-Pacific Partnership (TPP) has reached the stage at which its adequacy will be tested among the parties to the deal and the domestic constituencies they represent.

U.S. negotiators will meet next with their 11 TPP negotiating partners at informal talks in Hanoi, September 1–10. The so-called landing zones, or trial solutions for resolving sensitive issues, have been identified for some time now, leading many commentators to believe negotiations are near conclusion. Speculation about an “endgame” will no doubt increase as November approaches, mainly due to midterm elections in the United States and President Obama’s extended visit to Asia, which includes leaders meetings for APEC (November 10–11), the East Asia Summit (November 11–12), and the G20 (November 15–16). U.S. officials face two problems: first, how to conclude the agreement in a way that comports with the promise of high ambition but allows each economy to cope with political sensitivities; and second, how to accelerate engagement with the U.S. Congress.

Agriculture Market Access: The Core Political Sensitivity

The negotiations became more complex following Japan’s entry into the talks in early 2013, forcing the parties to integrate the world’s third-largest economy. Of all the issues, high tariffs on five groups of agricultural products in Japan (rice, wheat & barley, beef, pork, and dairy) were known to be difficult. While Japan has offered to reduce tariffs on these agricultural products, the Japanese government has resisted further concessions due to strong opposition from the domestic agricultural lobby. At the same time, many U.S. agricultural groups want Japan to commit to eliminating these tariffs completely. Likewise, negotiations with Canada have stalled due to the practice of supply management in the dairy and poultry sectors. In recent weeks, some U.S. agricultural groups and members of Congress have even suggested to continue negotiations without Japan and Canada if those nations fail to commit to phasing out tariffs/supply management regimes on the aforementioned food and agricultural products to zero over a specified period. Leaving two of the United States’ largest trading partners out of TPP does not make economic or strategic sense and is contrary to the agreement’s ambition to create the “free trade area of the Asia Pacific.”

The administration thus has two options to resolve the contentious endgame issues in agriculture. The first would be to require other trading partners to eliminate tariffs and tariff rate quotas (TRQs) on agricultural products, but it would be difficult for the United States to commit to this itself given U.S. sensitivities in sugar and dairy. The second option would be to recognize the political realities in Japan, Canada, and the United States regarding key sensitive agricultural products by not insisting on tariff elimination and instead negotiating phased reduction of tariffs and safeguards. In our view, the second option recognizes that each trading partner, including the United States, has its own “sacred cows” to protect. TPP would be a good deal if it achieves meaningful new market access for U.S. exporters to these key markets, even if some trade barriers remain.

Getting a TPP Deal through the Congress

There has been much speculation about the “landing zones” on agriculture market access, as well as “rules” chapters like intellectual property and state-owned enterprises. But how well calibrated are the administration’s landing zones with the U.S. Congress and the public?

In the past, legislation authorizing Trade Promotion Authority (TPA) was used as a tool for political coalition building. Yet the Obama administration made a crucial calculation in early 2014 to postpone building the coalition of 60 senators and 218 House members needed to pass a TPP-implementing bill. TPA bills were introduced in the House (H.R.3830) and Senate (S.1900) in January, with no subsequent action in either chamber. Officials from the Office of the U.S. Trade Representative and other agencies have diligently consulted with members of Congress, but to be blunt, it’s a long way from consultation to political commitment. Absent leaders building public support and moving legislation, the political vacuum has been filled by members staking out positions for or against various features of TPP. Despite evidence of general support for the agreement, the domestic politics for passage are no better (and possibly worse) than they were a year ago.

Concluding TPP in the absence of either a mandate like TPA or overwhelming political support is a high-risk tactic. If the administration signs TPP without an advance agreement with Congress, members will receive the “gift” of being able to have it “both ways”: they can claim to support TPP in the abstract, but find some point of disagreement in the text that lets them withhold their vote. The administration would then find itself forced to renegotiate the agreement or engage in some other complicated maneuver to garner adequate support. Matters become even more complicated if an implementing bill reaches the Senate floor without TPA-style protections, since revenue measures are subject to unlimited amendment.

In our view, a successful conclusion requires the administration to exercise decisive leadership on both fronts: it must press its TPP partners to deliver on the stated ambition of a high-standard, comprehensive deal, and it must build domestic political support for passage of an ambitious deal in the Congress. There are no shortcuts.

Ambassador Islam Siddiqui is a senior adviser with the Global Food Security Project at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Scott Miller is a senior adviser and holds the William M. Scholl Chair in International Business at CSIS.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy position. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the authors.

© 2014 by the Center for Strategic and International Studies. All rights are reserved.

Scott Miller
Senior Mentor (Non-resident), Executive Education

Islam A. Siddiqui