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Talking Trade blog

Trans-Pacific Partnership (TPP): Predictions for the last round


Published 29 July 2015

A professor of mine once suggested that I never write anything about ongoing events until after I had tenure. This way, I would never find myself in the embarrassing (and potentially career-ending) position of being completely proven wrong by unfolding events.

I am going to ignore this excellent piece of advice and make a series of predictions about the Trans-Pacific Partnership (TPP), while the 12 trade ministers are currently meeting in Hawaii.   

We, of course, have no idea what will happen in these negotiations, but here are my predictions:

Officials will conclude the negotiations on Saturday.  The round is supposed to end on Friday, but these sort of down-to-the-wire negotiations rarely end on schedule. 

The World Trade Organization (WTO) found this out to its peril in Seattle in 1999.  Given the protests outside the convention center, delegates were unable to get to the meeting venues until a full day had passed.  This compressed the negotiations into an even shorter time period.

A convention of dentists was scheduled to arrive immediately after the WTO ministerial finished.  It was not possible to reschedule the dentists or move the trade meetings anywhere else.  This meant that trade delegates did not have enough time to reach agreement on their agenda and the negotiations ended in collapse.  It took two years before the WTO was able to try again in Doha, Qatar, to launch a new round of trade talks in 2001.

Negotiations will conclude.  This is a controversial prediction, but if I’m going to go out on a limb, I should go all the way.  Talks will end because, after more than 5 years, officials have cleared the path to conclusion.  The remaining issues are sensitive and politically (and potentially economically) hard to resolve, but everyone has been focused on outcomes for some time now.  The last bit requires a leap of faith and a willingness to commit. 

At this point, most of these compromises are not time consuming to resolve either.  They require a decision.  For example, how many tons (exactly) is Japan willing to grant in new market access for polished rice?  The text on issues like this is otherwise done and officials are just waiting for the final numbers to be inserted by political leaders.

The agreement will finish with all 12 parties—but entry into force may not include all 12.  As we head into the finish line, two countries (especially) are facing domestic political challenges that make closure particularly difficult:  Canada and Malaysia. 

Canada has been pursuing a high risk, hardball tactic of refusing to discuss dairy concessions of any kind.  As we get to the end, the government has to decide if it is willing to pull out of an agreement that should dramatically increase market opportunities for Canadian companies on behalf of roughly 13,000 dairy farmers.  These farmers—mind you—will not be facing the complete elimination of a system of protection that has been in place for decades, but likely a much more modest opening over very long time horizons.  I would like to think that cooler heads will prevail and Canada will be a partner in the closure announcement and enter the agreement with the rest.

Malaysia faces more difficult challenges.  The Prime Minister just fired key cabinet officials yesterday as part of a plan to contain a growing domestic scandal.  Some of the provisions in the TPP (such as opening central government procurement markets more transparently and allowing some state owned enterprises to be subject to market forces) may be difficult.  Hence, it is possible that Malaysia will be present for the photos this weekend, but may delay entry into force for the agreement.  (The economic consequences for Malaysia of delay will be important, but that is the subject of another blog in the future.)

More time would not have fixed all problems.  There is an argument making the rounds that officials should take “as long as it takes” to reach the perfect agreement.  This is false.  With 12 diverse countries negotiating in the TPP, timing will never be ideal for sorting out the myriad issues under discussion.  And, looking ahead at the political calendar in participating countries, more time is likely to lead to more problems maintaining momentum in negotiations rather than fewer hassles. 

The agreement will not be perfect.  This prediction is a painful admission for someone who helped write a book (literally) on what a high-quality, 21st century agreement ought to contain.  For example, I wish officials had the guts (or suicidal tendencies) to drop all tariffs on all goods to 0 as they originally seemed to promise. 

This will not happen in the TPP.  Nearly all goods will drop to 0.  The coverage will be far, far better than any other free trade agreement.  But the final result will not be perfect.  Instead of 100%, the deal is likely to land at something like 97-98% of what perfection might have required.  But even in tariffs, the last few percent are dropping (even if not quite to zero). 

Much of the 21st century rhetoric of regulatory coherence, for instance, has also been dropped from the final agreement.  Turns out, it is very hard to get regulators to cohere.  Regulators are protectors—of the public, of health, of the environment, and of various types of policies.  They are not overly keen on matching other people’s views of their appropriate roles. 

And, as I have highlighted in the past, without the right institutional arrangements, implementation and expansion will be especially challenging.  If a “virtual” Secretariat remains in the final document and is not replaced with an actual physical group of people in one place dedicated to the long-run management of the agreement, problems will ensue. 

Lots of businesses will breathe a sigh of relief.  After more than a decade of stumbling in global trade negotiations, businesses have been reluctant to believe that big, important trade agreements can still be concluded.  This has kept many firms from paying as much attention to the TPP as they should, since the benefits can be substantial.  But with the closure of the agreement, TPP businesses ought to be working out the best opportunities for themselves.  For firms in formerly protected sectors, especially, the benefits of the agreement could be substantial. 

Some people will not be happy.  We met an NGO at one of the TPP negotiating rounds who was bitterly complaining about TPP outcomes.  I asked, “Is there anything in this agreement that would make you happy?”  Without a moment of hesitation, the answer came back, “No.” 

I think this is likely to be true for many groups.  Some will never be satisfied.  Others are going to be unhappy that this agreement does not deliver sufficiently on issues like the environment or labor.  But I would argue that this is somewhat unfair—a regional trade agreement is not the best place for managing climate change, for example.  Hence anyone with expectations that the TPP will somehow fix climate change is bound to be disappointed.

We will be glad the deal is done.  After 6 years of following these talks, we are delighted to be moving to discussing content of the agreement with reference to actual commitments and texts and to getting on with the business of implementation.  The TPP contains substantial benefits and we are looking forward to the future of trade in Asia.

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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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