TPP’s greatly exaggerated death

Donald Trump permanently fractured the Trans-Pacific Partnership (TPP) by announcing his intent to end U.S. participation. Without the U.S. and its lucrative market, political leaders from the other 11 signatory countries, including Canada, were quick to write its obituary. “TPP is meaningless without the United States,” reacted Shinzo Abe, the prime minister of Japan. Canada’s minister of trade, Chrystia Freeland, shared similar statements, calling the TPP deal, in its current form, impassable without the U.S.

The notion that the TPP is kaput without the U.S. originates from the treaty itself. Article 30.5 requires all 12 original signatories to ratify the trade agreement within a two-year window after the October 2015 signing date. If any country fails to do so within this time period, the remaining countries can agree upon themselves to continue with the TPP, but only if six or more countries ratify the agreement and these countries must account for at least 85 per cent of the combined GDP of the original 12. The U.S. represents 60 per cent of that GDP. Therefore, if the U.S. refuses to ratify, there is no TPP.

However, the TPP is not necessarily dead — even with the GDP rule. There are two possible scenarios in which the trade agreement can survive. First, Trump could change his mind and work with Congress to ratify the treaty. Second, the other 11 countries can work around Article 30.5 and find a way to ratify the agreement.

The first scenario is not impossible, primarily because the TPP is a very good deal for the U.S., economically and geopolitically. Trump must appease business interests and Republicans at large, most of whom support trade.

There also is space for Trump to change his mind and lead a charge to ratify the TPP. Only one year of the allotted ratification window has expired, leaving time for lastminute side additions to the treaty. Conceivably, the U.S. could demand trade protections in this form without exposing the existing text to a litany of edits. The signatory countries would then only have to sign off on the supplementary material for the TPP to endure. It’s been done before. Bill Clinton, in 1994, advocated for labour and environmental additions that were not part of the original North American Free Trade Agreement. Those provisions came at the last minute, with both Canada and Mexico giving their approval. The treaty was ratified shortly afterward.

Moreover, an erased U.S. signature does not mean the end of the TPP. It is possible that the other 11 countries can move forward with the agreement, the 85 per cent of GDP implementation rule notwithstanding.

The agreement evolved from four countries to 12 over eight years of negotiation. All have signed and are at various stages of ratification, believing in its economic benefits. Although America was the anchor, there are ways for the remaining countries to continue. Reforming the implementation section to exclude the GDP rule and tabling the same agreement could work. The agreement already establishes a process for new members to join. In four years, or eight, the U.S. may reverse its decision on the TPP and become the 12th member again. This idea has been floated by some U.S. economists and has been espoused by leaders in Australia and New Zealand, who are driving forces behind the TPP.

Whatever president-elect Trump’s position, the best course of action is for the 11 remaining signatories to move on with the business of free trade. The treaty still may not survive, but there is considerable appetite within the U.S. business community and the Republican Party to find a way to ratify this agreement that could allow Trump to put his stamp on it. Meanwhile, Australia and New Zealand want to move forward with the agreement and others like Japan are coming around to this idea. The TPP is an important agreement for Canada, even without the U.S., and it is an opportunity to show leadership on the trade agenda.