What’s Next for the Trans- Pa­cific Part­ner­ship?

Is it a his­toric trade deal in the mak­ing or just trou­bled po­lit­i­cal poi­son?

Thai-American Business (T-AB) Magazine - - Contents - Writ­ten by: Jonathan Blaine

Al­though it’s be­ing touted as the first of sev­eral trade deals which look to fur­ther drive for­ward the global free trade agenda, the Trans- Pa­cific Part­ner­ship or TPP has re­cently come un­der fire from many di­rec­tions, in­clud­ing be­ing caught in the cross­fire of the U. S. pres­i­den­tial elec­tion.

Both Hil­lary Clin­ton and Don­ald Trump have on the cam­paign trail ex­pressed their op­po­si­tion to the trade deal and have pledged not to en­act it. This stance is in stark con­trast to the broader sup­port the agree­ment has from the busi­ness com­mu­nity writ large as ex­pressed through busi­ness ad­vo­cacy groups such as the U. S. Cham­ber of Com­merce and many oth­ers.

This ten­sion has left many scratch­ing their heads as to the fu­ture of the TPP and guessing as to whether the deal will even­tu­ally ever be im­ple­mented in its cur­rent form, and if so, when and by whom.

GOLD STAN­DARD OR WORST DEAL SINCE NAFTA?

When con­cluded in Oc­to­ber 2015, the TPP was hailed by some as a next wave in glob­al­iza­tion and as a model for trade deals go­ing for­ward. With its broad geo­graphic and eco­nomic cov­er­age, it was to her­ald a sort of NAFTA- iza­tion of the Asia- Pa­cific and is an in­te­gral part of the Obama Ad­min­is­tra­tion’s pivot to­ward Asia. The 12 coun­tries con­clud­ing the agree­ment in­clude Aus­tralia, Brunei, Canada, Chile, Japan, Malaysia, Mex­ico, New Zealand, Peru, Sin­ga­pore, the United States and Viet­nam, with oth­ers such as Indonesia, Korea and the Philippines also ex­press­ing an in­ter­est in eventu- ally join­ing. The com­bined eco­nomic power of th­ese 12 na­tions rep­re­sents about 40% of all trade be­tween th­ese coun­tries and a whop­ping 36% of global trade.

The deal it­self is also com­pre­hen­sive in that it takes aim at low­er­ing tar­iffs on over 18,000 items cov­er­ing both agri­cul­tural prod­ucts and industrial goods as well as tex­tiles and cloth­ing. It also cov­ers trade and ser­vices in­clud­ing ex­pan­sions of in­tel­lec­tual prop­erty pro­tec­tions, na­tional treat­ment for var­i­ous ser­vices such as fi­nan­cial ser­vices and gov­ern­ment pro­cure­ment, and in­vest­ment pro­tec­tions.

The agree­ment also pro­vides for a dis­pute set­tle­ment mech­a­nism which by­passes the court sys­tems of the coun­tries in­volved. This pro­vi­sion has turned out to be one of the more con­tro­ver­sial and con­tentious as­pects of the agree­ment and has given rise to sig­nif­i­cant op­po­si­tion to the deal. This op­po­si­tion is man­i­fest, most notably but not solely, by the ma­jor party can­di­dates for the U. S. Pres­i­dency with both Clin­ton and Trump hav­ing ex­pressed not just non- sup­port for the TPP but di­rect op­po­si­tion to it.

In Don­ald Trump’s case, he has taken on the pop­ulist man­tle owned early on in the pri­mary sea­son by none other than Bernie San­ders. Through his ex­press op­po­si­tion to not just TPP but to all pre­vi­ous trade deals in­clud­ing NAFTA and CAFTA, Trump has gar­nered strong sup­port from those in­di­vid­u­als who are of­ten dis­placed or marginal­ized, how­ever tem­po­rary, by changes in do­mes­tic eco­nomic mar­kets due to in­creas­ing trade.

Mr. Trump has vowed to rip up the TPP and start the ne­go­ti­a­tions afresh, while also pledg­ing to ei­ther rene­go­ti­ate NAFTA and CAFTA or scrap them al­to­gether and start anew. If taken at his word, there will be no TPP.

Trump will also take aim at other agree­ments cur­rently be­ing ne­go­ti­ated, namely, the Transat­lantic Trade and In­vest­ment Part­ner­ship ( TTIP) and the Trade in Ser­vices Agree­ment ( TISA) and ei­ther change the ne­go­ti­a­tion strat­egy mid­stream or com­pletely reini­ti­ate them. Mr. Trump, a man whose businesses have been the ben­e­fi­cia­ries of th­ese trade deals over the years, hardly seems the ap­pro­pri­ate mes­sen­ger to carry this man­tle and his com­mit­ment to op­po­si­tion is ques­tion­able.

Thus, while he has taken a strong stance dur­ing the cam­paign, we may see him soften his po­si­tion a bit on th­ese deals once the shack­les of the of­fice are set upon him. This as­sumes of course that he wins.

Hil­lary Clin­ton’s stance against the TPP in its cur­rently agreed form is newly- found. Her sup­port of the agree­ment dur­ing its ne­go­ti­a­tion is well doc­u­mented. How­ever, in re­sponse to cries from la­bor and en­vi­ron­men­tal fac­tions on the left as ex­pressed through Bernie San­ders dur­ing the pri­maries, Clin­ton has mod­i­fied her po­si­tion and moved sig­nif­i­cantly away from her strong free trade roots into the op­po­si­tion camp. Given her shift­ing po­si­tion, some also question her com­mit­ment to op­pos­ing the TPP.

Clin­ton may well be able to have her cake and eat it, too. While ex­press­ing open hos­til­ity to the TPP, she may be able to rely on Pres­i­dent Obama to force a “lame duck” Congress to push through fi­nal­iza­tion and sign­ing prior to her tak-

ing of­fice, thus pro­vid­ing her the shel­ter she needs po­lit­i­cally, while achiev­ing the goal of its im­ple­men­ta­tion.

Given where the polls cur­rently stand, this lat­ter sce­nario is a likely out­come, es­pe­cially if many free trade Republicans lose seats on Novem­ber 8 as they will have noth­ing to lose po­lit­i­cally by sup­port­ing its pas­sage on the way out the door.

WHAT’S NEXT?

So where does all this leave the agree­ment? It stands in limbo for the time be­ing and not just in the U. S. The un­cer­tainty around whether the U. S. will be able to push through the agree­ment is gen­er­at­ing con­cern and lead­ing to a slow­ing of the rat­i­fi­ca­tion process as other coun­tries have taken note of the po­lit­i­cal un­cer­tainty sur­round­ing the TPP in the U. S. They too have put their ne­go­ti­a­tions or rat­i­fi­ca­tions on hold.

On Septem­ber 16, Viet­nam’s Na­tional Assem­bly agreed to de­fer rat­i­fi­ca­tion of the agree­ment. The Ja­panese Diet is also con­sid­er­ing a de­lay in rat­i­fi­ca­tion with none other than the son of for­mer Prime Min­is­ter, Koichi Koizumi, lead­ing the calls for ad­di­tional time to con­sider the agree­ment. Ad­di­tion­ally, cer­tain non- mem­ber Asian Pa­cific coun­tries who had ex­pressed an in­ter­est in join­ing, such as Indonesia and the Philippines, ap­pear to be pulling back on their in­ter­est. Philip­pine Pres­i­dent Duterte, fresh off a visit with Chi­nese Pres­i­dent Xi Jin­ping, has as­serted his coun­try’s “sep­a­ra­tion” from the U. S. call­ing into question whether the pre­vi­ously ex­pressed de­sire to jump on board still ex­ists at all.

Thai­land has specif­i­cally not joined the TPP and while con­sid­er­a­tion of the TPP has been dis­cussed openly in the me­dia and else­where, Thai­land does not look po­si­tioned to join for the time be­ing. This is par­tially based on the grow­ing re­la­tion­ship with China, who sees the TPP as a po­ten­tial threat to Chi­nese in­flu­ence over Asian trade, and also Thai­land’s own in­ter­nal sit­u­a­tion.

Fail­ure to join TPP could mean that Thai­land and oth­ers are less com­pet­i­tive in th­ese mar­kets and could re­sult in sig­nif­i­cant mi­gra­tion of in­vest­ment by TPP mem­ber states out of non- par­tic­i­pat­ing coun­tries and into par­tic­i­pat­ing ones. For ex­am­ple, Thai­land could see a sig­nif­i­cant amount of Ja­panese and U. S. in­vest­ment mi­grate to Viet­nam, where do­mes­tic pro­duc­tion costs would be rel­a­tively lower. Yet, all is not lost. The TPP took a num­ber of years to ne­go­ti­ate and fi­nal agree­ment was even­tu­ally reached. Such in­vest­ments of time and re­sources are not eas­ily cut adrift. And rene­go­ti­a­tion is not a re­al­is­tic op­tion given that it would in­volve bring­ing all 12 play­ers back to the ta­ble and a sig­nif­i­cant ef­fort by each gov­ern­ment and ad­di­tional in­vest­ment, which is likely not de­sir­able. Ac­cord­ingly, de­spite all the un­cer­tainty around when the agree­ment will be rat­i­fied in var­i­ous coun­tries, we may well see the TPP rat­i­fied within the next 12 months.

Im­ple­men­ta­tion of this agree­ment will be a huge boost to in­ter­na­tional trade and in­vest­ment through­out the Asi­aPa­cific and those play­ers who have signed on will see sig­nif­i­cant de­vel­op­men­tal ben­e­fits which come from free trade. Those who do not sign on may find them­selves los­ing out to strength­en­ing trade re­la­tion­ships among the TPP mem­bers and could see tra­di­tional trad­ing re­la­tion­ships dis­rupted, all at a cost to their own so­ci­eties’ growth and fu­ture de­vel­op­ment plans.

Trade del­e­gates at the sign­ing of the Trans- Pa­cific Part­ner­ship Agree­ment in New Zealand in Oc­to­ber 2015.

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