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Talking Trade blog

McConnell’s better TPP plan for 2017?


Published 31 August 2016

Last week, Republican Senator Mitch McConnell appeared to slam shut the door on passage of the Trans-Pacific Partnership (TPP) trade agreement in the Senate in 2016. In a speech at the Kentucky Farm Bureau, he reportedly said , “The current agreement, the Trans-Pacific [Partnership], which has some serious flaws, will not be acted upon this year.”

Given that McConnell is the current Senate Majority leader and that the Senate is expected to vote first on the TPP, this is a substantial blow to TPP prospects in the United States.

He went on to say that, "It will still be around. It can be massaged, changed, worked on during the next administration."

The TPP may still be around, but whatever changes McConnell thinks may somehow be made to the agreement next year would probably make passage through Congress less likely, instead of more likely. Just as important, these changes would make the final TPP agreement less favorable to McConnell's Farm Bureau audience.

Before getting into this, however, it may be worth noting that many statements made by US elected representatives in the heat of a tight election may not reflect the actual prospects for a vote in 2016. 

McConnell’s statement was made in front of the Kentucky Farm Bureau—an organization perhaps less enthusiastic about TPP than most, given the dominance of tobacco growers, the peculiar economics of this sector, and one specific, unfavorable, provision in the TPP for their industry.  Note too that McConnell’s counterpart in the House, Paul Ryan, has been more circumspect about vote timing, saying only that it depends on how well the White House addresses Congressional concerns.

The primary complaints raised by members of Congress thus far about the TPP after its release can be grouped into four issues:  data flow issues for financial services; patent protection length for one class of pharmaceutical products; one element of the investor-state dispute settlement (ISDS) provision where tobacco products are excluded from coverage; and a broader concern about ensuring that TPP members will fully implement the extensive commitments under the agreement.

Most of these have been addressed in previous Talking Trade blog posts.  Rather than repeat the specific complaints, the focus here might be on what, exactly, a future administration might do to fix these issues that is not being done right now or that cannot be handled in 2016.

The current administration has spent a great deal of time and effort meeting with individual member countries to discuss specific implementation plans at the domestic level.  These meetings may address some of the problem areas, as members of Congress see exactly how TPP countries intend to follow through on pledges under the agreement.

But here we have a chicken-and-egg problem.  While existing TPP member countries are still proceeding with rather impressive enthusiasm towards TPP ratification and implementation at the domestic level, day after day of less-than-positive statements like McConnell’s from Washington makes it harder and harder for member governments to continue to push for tough outcomes at home.  The less that TPP governments fight for domestic level ratification, the more McConnell and his colleagues will argue that TPP members are not enthusiastic enough about implementation.

If the US does not proceed to approve the TPP any time soon, then momentum towards implementation in other members will also slow or even stop.  Hence by 2017, Congressional complaints about enthusiasm by other partners will be louder and not softer.  TPP approval in Congress will be harder to obtain next year over this issue than this year.

Some of the other issues that McConnell seems to think can be addressed by a new administration largely require that the agreement be reopened. Currently, most of the TPP countries have declared repeatedly that this is a non-starter.

But, let’s assume that the next administration wants to try this route.  McConnell and his colleagues should note that some of his counterparts in the Japanese Diet are already suggesting that Japan gave up too much in the agricultural negotiations.  Presumably, if the talks are reopened in any way, McConnell’s friends in the Kentucky Farm Bureau will find that Japan will reduce, and certainly will not expand, all existing benefits coming to American farmers when talks resume in 2017.

Kentucky’s 76,000 farmers in the Farm Bureau exported $2.3 billion in 2013.  Under the TPP, Japan promised to drop tariffs in several product categories of direct interest to many Farm Bureau exporters, including tariff reductions in soybean oils and meal (Kentucky’s largest export crops), elimination of tariffs for tobacco and tobacco products, and elimination of poultry tariffs, with new quota access for wheat.  If the TPP is to be reconsidered next year, Japan might rethink some of these pledges.

Changes might not stop there.  Canadians could opt to take back some promises on dairy.  New Zealand might very well rethink pledges on pharmaceutical products.  Malaysia could choose to schedule additional restrictions on services and government procurement, closing these markets off to TPP member firms. 

In short, if the US wants to reopen or even to think about signing additional side letters or new market access instruments to address specific areas of concern to address American concerns in Congress in 2017, it should be prepared to undertake similar requests from all 11 other TPP parties.  For every American request, there is likely to be at least one reciprocal demand from another TPP member for a new change, modification, exception or reduction in coverage.

A future US administration might also try to put new issues on the TPP negotiating table as well next year—perhaps new rules on currency or add in new provisions to address climate change. 

It is highly unlikely that the current TPP member countries would agree to the inclusion of such provisions.  But even if TPP countries were amenable, it is not at all clear how the addition of these topics would improve the prospects of passage of the final agreement through Congress. 

At this moment, it is not obvious that recalcitrant members of Congress, including McConnell, are rejecting the agreement because it does not have enforceable currency provisions—or would somehow be more willing to accept a final deal if it had such rules included.  For every Congressional member vote that might be gained, another might very well be lost.

Hence McConnell’s statement that the TPP will still be around in 2017 to be worked on and changed in the next administration is disingenuous.  It may still be around, but the prospects for passage through Congress will likely be much worse. 

No.  The TPP really must be voted on now.  By this Congress—with all the warts or flaws that it contains.  It can still be massaged, changed and worked on in the future. 

As an agreement that is meant to exist into the future—to be added to by new countries currently still lining up to join—it is not a once-and-forever deal.  But if it is left for a new administration in 2017 to get it done in Congress, it might be a once-upon-a-time agreement.

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Dr. Deborah Elms is Head of Trade Policy at the Hinrich Foundation in Singapore.  Prior to joining the Foundation, she was the Executive Director and Founder of the Asian Trade Centre (ATC). She was also President of the Asia Business Trade Association (ABTA) and the Board Director of the Asian Trade Centre Foundation (ATCF).

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