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Talking Trade blog

Moving the TPP ball forward in Washington

Published 16 February 2016

Washington DC:   With the formal signing of all 12 members on February 4, 2016, in New Zealand, the Trans-Pacific Partnership (TPP) has crossed another milestone.  What is up next?

Officially, the member states remain focused on finishing up domestic procedures needed to trigger the entry into force for the whole deal.  In practice, most eyes are focused on Washington.

While domestic approval is not automatic everywhere else, most of the TPP member countries do not face the same set of hurdles as the United States. 

Malaysia, for example, just managed to clear two contentious days of parliamentary debate on the TPP at the end January.  While the government did not, strictly speaking, need MPs to grant approval for the deal, the government had promised a debate before signing the final texts.  In the end, MPs did not block the agreement. 

The country still has to change 26 different pieces of legislation to bring the country into alignment with new TPP requirements.

In most parliamentary systems, getting legislative approval is easier (assuming the government that negotiated the deal is the same government that is asking members of parliament to approve the final agreement). 

Most other TPP members are rapidly moving towards granting approval and making necessary domestic legislative changes to bring the agreement into force.  This likely includes Japan, which appears to want to finish approvals for the TPP ahead of this summer’s elections in the Diet.

The United States, by contrast, has a special problem.  The agreement was launched under a Republican administration, but negotiated under a Democrat.  Traditionally, however, Democrats have been less than enthusiastic about trade.  Hence the President has to get the opposition to do the heavy lifting to get the agreement through the legislature. 

To this mix, add a crazy electoral cycle, as an earlier blog post noted, where even the normally reliable pro-trade Republican party has been stepping out against trade.  Even a former USTR (trade minister), now a Republican Senator from Ohio, Rob Portman, just said he would vote against the TPP.  (Surprisingly, his photo at USTR seems undamaged so far…)

There are three issues of particular concern in DC.  First, the patent length for data protections for biologic drug continues to raise a ruckus. 

Think about that for a moment.  In an agreement that runs to 1200 pages with thousands of pages of specific schedules, the fight is literally over one number—should it be 12 or 8 or 5?  More amazing, this is a fight that has been highlighted for years.  It’s been in our blogs for more than a year with the clear warning that 12 years is simply a non-starter for the other parties. 

Astonishing, no? 

Anyway, issue number two is the onshoring of financial services data.  Until this week, I was not aware that it was the United States that caused this problem in the first place.  I thought there was another (unnamed) TPP member that was pushing for this policy.  No. US Treasury has some obscure rule about data flows for financial services that it wants to maintain for future policy space. 

Again, think about this for a moment—the TPP deal is potentially going to be derailed in Congress over a policy position that US Treasury has taken. 

Third, the “tobacco carve out” is a problem.  Tobacco is not carved out of the deal.  Tobacco is included.  What is carved out is the ability of tobacco firms to sue for expropriation (seizure of assets by government) under the investor-state dispute settlement mechanism. 

In doing the rounds this week in Washington, the consensus among many veteran trade watchers is that much of the fuss can be handled without “renegotiation.”  It appears to have finally sunk in that asking the other TPP member companies to reopen the deal for 3 things will put the US at risk of accepting 33 unpalatable changes in the agreement in return. 

Hence, people are furiously working behind closed doors to figure out some sort of domestic level solutions.  For example, in tobacco, maybe a commitment to not exclude tobacco (or any other sector) from ISDS in any future negotiation?

The general level of animosity in the town is clearly not helping.  Each side is accusing the other of “insufficient” attention.  The few objective observers in DC have said that there have been a lot of meetings between the White House and various members of Congress.  Whether these have been sincere or sufficient or include adequate listening or whatever is clearly a subjective call. 

Executive branch staff members are also fanning out across the country and holding meetings everywhere.  One staff member joked that if there were three people in a Starbucks somewhere who wanted to discuss TPP, he would be there on the next airplane.   The various business organizations are actively and intensively working the ground in some districts. 

The timing of the US vote is going to be interesting.  The idea seems to be to work out the “fixes” to the specific problems and objections of members that can be addressed.  Then the package will be ready to go with all the necessary implementing legislation while everyone furiously counts votes.  The minute the votes are thought to be ready, the whole thing will be put forward.

The earliest date this might happen is probably May.  The ITC has to report on the expected benefits of the agreement with a target date of May 18.  This could be sooner, although if I were the ITC, I would not try to rush what is going to be a highly contested report.

Most people are expecting the vote in the lame duck session.  However, this is risky, as noted earlier.  Timing is tight.  Depending on who wins, it is not automatic that getting it done then is easier.

One other point of note for TPP watchers from this week—even if all 11 TPP parties managed to complete their own “domestic procedures” by summer and the US somehow miraculously got the Congressional votes in June, the deal does NOT happen 60 days later.  This is because the American domestic procedures also include another element—certification. 

The United States has to certify that all parties have sufficiently carried out the necessary legislative steps to implement the deal on day one.  In practice, this means USTR has to notify Congress that, for example, Malaysia did pass the 26 pieces of legislation to comply with TPP rules.  Only when this certification is finished can the United States declare that it has sufficiently completed its own procedures to trigger entry into force.

This process could be speedy, but likely not just 60 days.  Hence, if all 12 parties appeared to ratify in mid-2016, the agreement would likely enter into force around January 2017. 

Of course, lots of things—like the death of a Supreme Court Justice, perhaps—could easily throw the entire process into complete disarray and either speed up or derail the trade agenda entirely.

© The Hinrich Foundation. See our website Terms and conditions for our copyright and reprint policy. All statements of fact and the views, conclusions and recommendations expressed in this publication are the sole responsibility of the author(s).

Dr. 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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