The Trans-Pacific Partnership No end in sight

Feb 25th 2014, The Economist

THE trade agreement the 12 members of the Trans-Pacific Partnership (TPP) hope to reach is to be “ambitious”, “comprehensive”, “high-standard” and “21st-century”. I know this, because every one of the 12 trade ministers who spoke at a press conference at the end of four days of talks in Singapore on February 25th, used at least one, and usually all four, of the terms. The talks had made great progress, they all also agreed. But “significant gaps” remain, no date or place has been chosen for their next meeting, and it was hard to avoid the conclusion that any agreement is months or years away.

Yet they had set what seemed a serious target of finalising the agreement last year. There are two main reasons the finishing line is now receding into the distance: the political obstacles in all of the 12 remain unsurmounted; and the 12 seem to be having trouble bridging those pesky gaps.

The TPP groups five countries from the eastern side of the Pacific (America, Canada, Chile, Mexico and Peru) and seven from its western fringes (Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam). Together these contribute 40% of the world’s GDP and account for one-third of its trade. By any definition, the TPP is a big deal.

The “21st-century” aspects of TPP are “behind-the-border” issues, such as intellectual-property protection, environmental and labour standards, the privileges of state-owned enterprises and government-procurement practices. All are problematic. But at the TPP’s core is the traditional free-trade aim of “comprehensive duty-free access”. And some of the biggest difficulties remain in the area of market access.

Perhaps inevitably, it is within and between the two biggest economies in TPP, America and Japan, that those difficulties seem most acute. America wants better access for its car industry to the Japanese market. Japan wants “sacred” agricultural products—such as rice, wheat and sugar—exempted from the free-trade regime.

Chatter that Japan was proving so intransigent on these basic issues that the other 11 countries were contemplating going ahead without it was implicitly dismissed by the US Trade Representative, Michael Froman. “Our focus is on achieving an agreement among all 12 of us,” he said, before, almost inevitably, continuing, “and that agreement needs to be that ambitious, comprehensive, high-standard agreement.”

Japan’s prime minister, Shinzo Abe, has billed the TPP as an important part of his “third arrow” of structural reforms to the Japanese economy (arrows one and two being monetary and fiscal). Much as, in China in the 1990s,  Zhu Rongji, a former prime minister, used the prospect of accession to the WTO to force change on vested interests, so Mr Abe seems to have hoped to enlist outside pressure to promote domestic reform. So far, however, he seems far less successful in this than was Mr Zhu.

It does not help him that opposition to TPP seems to be growing in America as well. The most obvious manifestation of this is that Barack Obama seems to have little immediate hope of winning “fast-track” authority (known now as “Trade-Promotion Authority” or TPA) to negotiate trade agreements that Congress cannot challenge clause by clause.

Malaysia’s trade minister, Mustapa Mohamed, said there had been no discussion at all in Singapore about the link between TPA and TPP. But it must have been on everybody’s mind. Mr Froman stalwartly pointed out that every country has its domestic processes and that the administration was “building support on Capitol Hill”.

Not fast enough, however, for many of the TPP participants, who face political difficulties of their own, such as Malaysia’s worry that TPP might outlaw its affirmative-action policies in government-procurement in favour of “Bumiputras” (ie, mainly ethnic Malays, as opposed to Chinese and Indians), and undermine support for the ruling coalition. 

Australia’s trade and investment minister, Andrew Robb, said that what made him most hopeful, as negotiators strive to find some middle ground, was the esprit de corps that had grown between them.

The overall impression, however, is that this is the camaraderie of a beleaguered troop fighting a noble battle against insuperable odds.

            

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