14.10.2015 Author: Vladimir Terehov

Negotiations on TPP are over: What’s Next?

453453453So, on Monday, October 5, at the meeting in Atlanta, USA, the ministers of 12 member countries of the Trans-Pacific Partnership (TPP) finally rounded off a many-year negotiation process where they were working on resolving the last disputes in their initial stance on a number of important issues. Among the issues of concern, were the terms of the gradual lifting of customs barriers to accommodate the free flow of a number of goods and services between the markets of the member countries.

In the course of several years and dozens of meetings at ministerial and expert levels, representatives of each country have been striving to get preferences for their countries. That is, to extend the period when the country’s customs import duties would be still effective to the maximum, while having other TPP partners lift barriers for their own exported goods. Actually, each TPP member has a roster of the “overly sensitive” domains of national economy, which could be harmed should foreign suppliers of goods and services gain duty-free access to them; at the same time, each TPP member has a roster of the economic zones of its partners, which it would wish to gain access to as soon as possible.

For example, opening the domestic agriculture market (where they trade rice, pork, beef and dairy products) would be extremely painful for Japan. But this is what the US, Australia, New Zealand and the majority of other TPP members were targeting since export of agricultural produce to Japan is among their immediate interests.

Likewise, Japanese industrial companies strive to gain a duty-free access to the US car market, which would all too clearly have negative consequences for the American carmakers.

Similar “contradicting interests” exist (to one extent or another) in all pair combinations formed by the 12 member countries and the application of the laws of elementary combinatorics demonstrates that the number of potentially problematic situations could have been really huge (prior to harmonization and finalization of the documents). It is not surprising then that it took over five years to prepare documents accounting for the interests of all parties.

The completion of the negotiations in Atlanta does not imply though that the establishment of the TPP has become a reality. In his speech at the final press conference, Michael B. Froman, the US Trade Representative, called the harmonization of positions of all participants at the ministerial level, “an important, but merely an initial step” on the path to the effectuation of the TPP. Later, the signed documents will have to be ratified in the parliaments of all member countries. And this final stage could prove to be the most challenging since nobody can guarantee today that the documents will be passed in the US Congress, Japanese Diet or Parliament of Canada, i.e., in the legislatures of the three leading TPP members.

The usually optimistically disposed The New York Times predicts that Barack Obama will have a “tough struggle” in the Congress debating the approval of the TPP since the opposition to this proposal will have a bipartisan character.

Explaining his insistence on the implementation of the TPP, the US President has said that, “When over 95% of our potential customers live outside our borders, we can’t let countries like China to write the rules of the global economy. We should write those rules, opening new markets to American products while setting high standards for protecting workers [in the US] and preserving our environment.”

Commenting on this statement, The New York Times‘ reviewer (with reference to an unidentified representative of the Administration) suggests that the anti-Chinese context that initially signified the TPP project will play the role of the core argument when the document is submitted to the US Congress by the President for consideration.

The management of the largest American carmaker Ford Motor Company expressed a highly expected negative reaction to the news that came from Atlanta. But ordinary US workers have also received this news apprehensively. In particular, a number of trade unions expressed readiness to hold protests.

Such sentiment in an important segment of the American society cannot but affect the current domestic policy making processes, with the most important of them being the 2016 presidential election.

For example, Bernie Sanders, Hillary Clinton’s major rival in the quest to represent the Democratic party in the final part of the election campaign, responded to the completion of the ministerial level of the preparatory process of formalization of TPP thusly: “The Wall Street and large corporations have just won a big victory, which will lead to the destruction of trade. Now it is up to us to not let the TPP be legalized.”

The PM of Japan Shinzo Abe has also found himself in a sensitive situation since he has to push the deal through an admittedly difficult TPP approval procedure in the Japanese National Diet, which adopted harshly criticized defense laws right before the “curtain fell” on the previous Diet session. And the PM will have to carry out this mission in a zero tolerance atmosphere. Today Japan is energetically discussing the possibility of an immediate convening of the Diet, though the representatives are probably still “short of breath” after the recent battles (in the literal sense of the word), which accompanied debates over the approval of the defense laws.

But, since the topic of Japan’s participation in the TPP is as unpopular in society (especially, among the farmers who more than once drove their tractors to the suburbs of Tokyo) as the just passed defense laws, PM Abe will, most probably, try not to “tickle the dragon’s tail, ” until society has got over its previous “tickler.”

Most likely the debates to approve the documents adopted in Atlanta will be rescheduled for April of the next year and will be sent to the Diet after the approval of the core documents (like the 2016 fiscal year budget) in the course of the upcoming session of the Diet.

The decision taken by Shinzo Abe not to “push” the legislative act on TPP through the parliament immediately was quite a reasonable step as it gives some hope that the upheaval in society provoked by the discussion of the defense laws will somewhat subside. This is extremely important for the ruling party in view of the upcoming regular midterm election to the Upper Chamber of the Diet in summer 2016.

There are several undertones, which stand out to those who listened to the statement made by the Japanese prime minister on the completion of the negotiation process concerning the establishment of the TPP. Namely, in his speech he advocated the concept of state support for Japanese farmers and the accession of China to the TPP, “which would be a plus for stability in Asia.

However, the possibility of the last statement can be entirely ruled out without prior consultation with his “big brother” who sometimes (depending on the US-China relations) makes similar statements.

In Canada, the third most significant member of the TPP, the domestic policy situation is not ideal either as far as ratification of the agreement reached in Atlanta is concerned. Today they are already forecasting an emergence of additional problems in the car making industry and agricultural sector, for which the state plans to allocate over 4 bn. dollars in support.

In conclusion it should be noted that unlike the representative of the US, who was radiating optimism at the public debriefing of the negotiating process in Atlanta, calling it “a historical event,” the ministers of other countries looked somewhat lost at the final press conference. And this is yet another indication that the climax in the situation of the creation of the TPP has not been reached yet.

Vladimir Terekhov, expert on the Asia-Pacific region, specially for the online magazine “New Eastern Outlook”.

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