Agreement in Principle Reached on TPP but Entry into Force Far From Certain
Senior Feature Writer/Editorial Writer
Trade ministers from Japan, the United States and the 10 other countries in the Trans-Pacific Partnership Agreement (TPP) negotiations gathered again in Atlanta, Georgia in the United States from the end of September into early October 2015, this time achieving an agreement in principle. Having focused on the difficulty of plurilateral negotiations in my previous article back in September, I'm embarrassed to find my prediction going wide of the mark. At the same time, I'm not quite ready to shave my head in penance yet given the substantial degree of uncertainty remaining until the agreement's actual entry into force, as well as my conviction that, from a longer historical perspective, Japan really does need to make haste in improving its relations with Asia.
In my previous article, one of the reasons I suggested for the negotiations stalling was the way in which the Obama administration has been hamstrung, and that basic structure has not changed. If anything, the situation appears to have worsened, with the Republicans controlling both houses of Congress even as the labor unions supporting the incumbent Democrats have ratcheted their criticism of the TPP up a further notch.
Republican Orrin Hatch, who chairs the Senate Finance Committee where the TPP is being debated, immediately expressed dissatisfaction with the agreement in principle as falling "woefully short" of meeting the "high-standard objectives laid out in bipartisan Trade Promotion Authority." Donald Trump, the leading Republican candidate for the US presidential elections next year, poured scorn on the result, observing that "The incompetence of our current administration is beyond comprehension. TPP is a terrible deal." Even leading Democrat presidential hopeful Hillary Clinton, formerly US Secretary of State, has announced that she is "not in favor" of the deal, setting herself in the anti-TPP camp.
The US is already in full presidential election mode, and candidates do tend to pander to voters by taking extreme positions. However, even taking that into consideration, the US has a certain history, including remaining outside the League of Nations when it was launched after the First World War, and refusing to ratify the Kyoto Protocol, the international agreement linked to the United Nations Framework Convention on Climate Change. The TPP really has just been wrapped in the thin capsule of an 'agreement in principle' and thrown into the sea of uncertainty that is the US Congress. Deliberations on the TPP could even potentially be shelved until after the presidential elections-two years from now. If the US drags its feet over ratification, the risk will grow of new governments emerging elsewhere in the meantime which might pull their countries out of the TPP. When general elections took place in Canada on October 19, immediately after the agreement in principle was reached, the pro-TPP Harper administration lost power, a development which is likely to impact heavily on Canada's ratification.
The other issue which I previously raised was negotiating technicalities, which in fact evinced such a surprising degree of improvement that I should at least consider shaving my eyebrows. President Obama demonstrated leadership in ringing Australian Prime Minister Malcolm Turnbull and other leaders in the midst of negotiations to win them over to agreement in principle. US Trade Representative Michael Froman, who has incurred the distrust of other ministers at the negotiating table, was hardly likely to undergo a complete change of character, but apparently the Australian trade and investment minister Andrew Robb and Japanese TPP minister Akira Amari helped to keep the discussions on course at the Atlanta table. As a result, the TPP negotiations managed to avoid coming adrift.
At the same time, looking at the actual content of the agreement in principle, the wording on all the most sensitive issues is quite ambiguous, leaving it open to the interpretation that best suits the particular party. The local content requirement for automobiles which had been a major sticking point amongst Canada, Mexico, Japan and the US was resolved by setting the requirement at between 45 and 55 percent according to the component. The data protection period for new pharmaceuticals has been set at eight years, but this could also be interpreted as the five years sought by Australia. There even appear to be exceptions, such as Malaysia and Peru being permitted to leave their domestic laws as they stand for the meantime.
Fudging sticking points and treating harmony as the greatest virtue has virtually been a tradition in Japan, but we could well see the same issues rearing their heads again when the final agreement is drawn up and all the details are revealed, or even subsequently when the negotiating parties are ratifying the agreement. The US pharmaceuticals industry in particular was extremely disappointed not to get the 12-year data protection period that it was pushing for.
The priority on reaching agreement has made the TPP in one sense more realistic but as a result has also required considerable compromise. Its high level of ambition, included tariff elimination without exceptions and stringent local content requirements, has been watered down, and the shine has already worn off the TPP as the 'model 21st-century trade and investment agreement' originally touted. Korea, Thailand and other countries have started talking about possibly joining the TPP, but whether the agreement will have a sufficiently explosive effect to draw China in as well will have to wait on the TPP's entry into force.
Under the agreement in principle, at least six countries must ratify the TPP in order for it to enter into force, and the total GDP of those six must account for at least 85 percent of the GDP within the trans-Pacific region. This means that the agreement will not enter into force unless ratified by both the US (which accounts for around 60 percent of the trans-Pacific GDP) and Japan (around 17 percent). The Abe administration apparently plans to rush through Diet deliberations on the TPP and the related legislation, but what is needed at this stage is complete disclosure and impact assessments made on the basis of that information.
Even if Japan leads the way in ratifying the TPP and committing to action, we will still have to wait for US ratification. If the US were to ratify the agreement first, Japan would hold the power of life or death, as it were, over the TPP. It would not be too late even then to enter into deep discussion.
It would be best if Japan were to watch and wait on the ratification process in the US, using the time to conduct a detailed TPP impact assessment and engage in free trade agreement negotiations with China and Korea. My belief that Japan needs to prioritize its relationship with Asia and position as the ultimate goal a return to the WTO and its central principles of non-discrimination and most-favored-nation treatment remains unchanged.
(This article was written on 23 October 2015. The views expressed are those of the author and have no relation whatsoever to the institution with which the author is affiliated.)
(original article : Japanese)