TPP Negotiations Stall
The Trans- Pacific Partnership ( TPP) agreement is being hailed as the new model for trade in the 21st century and is a key component of the United States’ ‘ Pivot to Asia’ that was announced by then Secretary of State Hilary Clinton in 2010. The TPP is meant to ensure U. S. leadership in the Asia- Pacific region well into the century and is designed to allow the U. S. to continue to define the rules of global trade.
The TPP is aimed at leveling the playing field within the trade bloc by creating trade equality among member countries. The TPP would lower tariff and non- tariff barriers substantially, which would provide a boost to American exporters who have long been hindered by disproportionate tariff rates when engaging in international trade, and eliminate investment by stateowned enterprises ( SOES) that receive state subsidized or preferential rate loans, as well as provide a number of other benefits to member nations and companies.
The TPP will also significantly expand the market in which American companies can operate. U. S. multinational and export- based companies, which have long faced average tariff barriers much higher than the 1.4% average tariff barrier other countries experience in exporting to the United States, will be able to expand their market far beyond the 320 million people in the U. S. market, but to the almost 800 million person market that will be created, representing 11.4% of the total global population and 40% of total global GDP.
For all of the potential benefits of the TPP, hurdles still remain in the final passage of the agreement. The current members to the deal are at vastly different stages of economic development, from countries such as Vietnam and Peru, to the OECD countries of the U. S., Japan, or Canada. As such, much as with the World Trade Organization ( WTO), each country is seeking to gain in different ways. The needs or desired outcomes of one country are not always 100% consistent or compatible with those of other countries and the negotiating process is a finely- tuned game of give- and- take that ultimately will require concessions from all parties involved.
In July, negotiations on finalizing a deal over the Trans- Pacific Partnership in Hawaii came up short as negotiators failed to reach an agreement over a number of sticking points that are plaguing the deal that revolve around dairy, automobiles, pharmaceuticals, and agriculture.
New Zealand, the United States, and Australia are unwilling to sign any trade deal that does not liberalize the currently sheltered Canadian dairy market, while Canada has so far not been willing to loosen quotas to the extent that other bloc countries would like to see.
Japan is seeking exceptions to the existing rules that have governed automobile trade in North America on ‘ rules of origin’ requirements by requiring member coun- tries to source at least 62.5% of the final product from other member countries in order to qualify for decreased or eliminated tariffs, as it sources many of its automotive parts from Thailand, a country that is not a current party to the twelve nation negotiations. These exemptions would drastically affect the automotive industries in both Canada and Mexico, both of whom have raised objections to the deal.
The United States, for their part, is trying to impose lengthier IP requirements on biologics, medical treatments derived from biological sources, which is unpopular among every other bloc member, especially Australia, while the U. S. and Australia also squabble over sugar quotas and Japan refuses to lift restrictions on rice and beef which have long protected the Japanese agricultural sector and kept prices in Japan artificially high.
The fear moving forward is that as Canada approaches elections this October leading into the U. S. election cycle for 2016 that any possible agreement made on the deal will not occur until at least 2017 at the earliest as the new U. S. president takes office, which could potentially derail the entire agreement based upon the outcome of the United States election. The Trans- Pacific Partnership, however, has long been a cornerstone of the Obama Administration and a key component of President Obama’s foreign policy and optimism remains among the member countries that a deal will ultimately be reached and the TPP will be passed.