Still a Long Way to Go for the TPP

After more than five years of skipped deadlines, trade ministers from the Twelve participating Asia-Pacific countries that fulfilled in Atlanta finally came to the conclusion the negotiations surrounding the Trans-Pacific Relationship (TPP) on 5 October 2015. So is the TPP settled? The short response to the question is not yet. The public fanfare accompanying the announcement led many to believe the arrangement would soon come into force. Yet there is still a lot more work to do before this occurs.

While the TPP agreement announcement arrived, the full-negotiated text is not out.  Expect it to come sometime in November 2015. This delay looks like it’s because officials are still focusing on the wording of the agreement. This is in itself unusual given the announcement and all the fanfare. A number of US Democrats fear ‘aspect agreements and special secret deals’ that water down the arrangement are still being struck, while one trade minister was forced to concede that ‘a few problems have yet to be settled … and we are nevertheless negotiating via email’.

Worse still, what’s finally publicly released is ‘not expected to be the final legally scrubbed text’ either, although it is anticipated to closely resemble the final edition to be presented for ratification. It appears the TPP is a ‘living document’ which will continue to evolve.

Following its release, the next step for the TPP is ratification through the respective legislatures. This is expected to happen within about two years. For the US, legislators will have a the least 90 days to study the arrangement before Congress votes ‘yes’ or even ‘no’. While the Trade Promotion Expert (TPA), the fast track negotiating authority granted to the US President, may have helped in successfully concluding negotiations, how it affects congressional passage is less clear. If a majority of legislators discovers the final agreement compromised, an excessive amount of they could vote ‘no’, as they can no more change its details. House Republicans will need to support it in numbers if it is to pass, however may find it difficult if there are too many critical compromises.

Other countries may also face challenges in getting the actual agreement passed by their legislatures. When the TPP is ratified only after a country ‘cherry picks’ the agreement for its desirable components, and avoids dealing with the greater sensitive areas of reform, the entire process could be compromised.

What if a person or more countries fail to ratify the TPP? The TPP will still survive if at least six unique signatories — accounting for 85 percent of the region’s 2013 GDP — complete ratification, ideally but not necessarily within 2 yrs. The GDP threshold guarantees the agreement cannot enter into force without both the US and Japan.

The final action, following successful ratification, is implementing the agreement. This is arguably the most crucial step in the process in terms of its impact on the ground. History is littered with examples of industry and other agreements that have experienced little or no impact because of the way in which they have been implemented. While the controversial investor–state dispute resolution mechanism may increase the likelihood of compliance, it cannot guarantee comprehensive implementation.

Even with no negotiated text, we can currently judge some crucial aspects based on information either officially or unofficially released. With time drained in the lead-up to the September 2015 Atlanta meeting, there was increased speak of compromise and flexibility to interrupt deadlocks and reach agreement.

More than a year ago, I warned that the TPP was ‘degenerating into a series of bilateral offers, with a US–Japan agreement at its core’ and to accommodate the differences, we should ‘look out for lots of transition periods and other loopholes’. It is now clear that the special pursuits of middle-income countries — Vietnam and Malaysia in particular, but also Peru and Mexico — have been accommodated to secure agreement.

The leaked text purported to be the final intellectual property chapter implies that transition periods for pharmaceuticals can extend up to 18 years (as it does with regard to Vietnam). Data exclusivity on biologics also appears to have been limited to five years, a lot less than the actual 12 years the US pharmaceutical lobby pushed for. Various transition periods also apply to copyright and trademark procedures. In addition, some countries even have the option to maintain current domestic rules when implementing TPP responsibilities.

There are several other examples of special interests being added to the actual TPP, including exemptions for changing government procurement policies as well as state-owned enterprises (SOEs). Immediately following conclusion of negotiations, Malaysia’s Trade Minister reiterated that ‘flexibility approved to Malaysia included longer transition periods and differential treatment for the country’s sensitive areas … such as government procurement, SOEs and Bumiputera issues’. There’s also indications that Malaysia, Vietnam, Peru and Brunei might be granted a minimum five-year grace period to reform its SOE policies. However, the integrity of reform outcomes tends to deteriorate as delays in execution increase.

These compromises suggest that the outcome of the TPP is likely to be lower than exactly what most estimates suggest, since the main benefits would be based on real reforms in these delicate areas. Still, in the long run the actual TPP will be judged by its ability to attract other nations — for example China — under its umbrella. First, it has to come into force. Unfortunately, the likelihood of this happening is only marginally higher than prior to Atlanta.

The TPP is not a done deal yet is republished with authorization from East Asia Forum