Race against the clock for the TPP

Race against the clock for the TPP

The TPP negotiations in Hawaii last week have failed to reach an agreement in what was seen as one of the final chances to push it through. While there remains hope for securing a deal, failure to do so will represent a huge loss for US foreign policy in the Asia-Pacific.

Following what should have been a final round of negotiations in Hawaii, the 12 nations who make up the Trans Pacific Partnership (TPP) have failed to reach an agreement.

Timing was always going to be an issue – the impending US elections which take place on the 6th of November 2016 were central to the urgency felt around achieving a TPP deal in Hawaii last week.

While that deadline is a year away, the Trade Promotion Authority (TPA) granted to Obama earlier this year stipulates that Congress requires a minimum of 90 days to ratify any agreement. New Zealand’s special agricultural trade minister Mike Peterson believes that there are now about two or three weeks where further negotiations can take place before hitting that deadline.

Trade ministers and industry leaders have since been pointing fingers at one another. Australian Trade Minister Andrew Robb blamed the US, Canada, Japan and Mexico for the hold up. Mexico’s Economy Secretary Ildefonso Guajardo and Canadian Dairy Farmer President Wally Smith blamed New Zealand for its tough stance on dairy. And New Zealand Trade Minister Tim Grosner blasted the US dairy industry.

The problems facing the negotiations are littered across different countries in three main areas:

  • Market access for agricultural products – particularly dairy and sugar;
  • Biologics data exclusivity – data protection for pharmaceutical drugs;
  • Rules of origin for manufacturing automobiles.

Some disputes included: Mexico and Canada who rejected a Japan-US agreement on rules of origins for automobiles; Australia and Canada who demanded higher quotas for sugar exported to the US; New Zealand who aggressively campaigned for better access for their dairy products; and the US who mandated a 12-year period for biologics data exclusivity while every other country stood at 5 years.

Ministers are now looking at possibly holding the next TPP Ministerial meeting around the 22-25 of August during the ASEAN Economic Ministers meeting.

TPP is important because it is not just about trade and market access. Other benefits include the potential to improve regional security and opportunities for regional development – much as the EU has acted as magnet for less developed economies to improve their business, regulatory and governance practices.

The TPP also represents a huge opportunity for the US. In the context of Obama’s pivot to Asia, the TPP is a key economic instrument and its failure would encourage China’s plan to sign the Regional Comprehensive Economic Partnership (RCEP) before the end of the year. While it is not a zero sum game between the RCEP and the TPP, it would add another US failure in the region contrasting to China’s successful launch of the Asian Infrastructure Investment Bank.

Politics, both domestic and foreign, is playing a huge role in these negotiations. While the US elections inch closer, other countries are taking their time. They are waiting for the US to make concessions as they understand how important achieving the deal is under the US’ wider foreign policy objectives in the region.

Should the deadline for presenting the TPP to the US Congress lapse, it is unsure whether future US Presidents will be as keen as the Obama administration to seek an agreement. Currently, Republicans generally stand for the TPP while Democrats range from being weary to outright against it.

Consequently, the US will most likely be ready to cede on areas it previously labelled ‘red lines’ during any future negotiation round. After all, it would be difficult to take Obama’s ‘pivot to Asia’ seriously without its key economic policy.

Despite the failed negotiations in Hawaii, there remain good prospects for the TPP to be agreed on time as impending deadlines will force red lines to shift. Considering ‘98%’ of the deal has been agreed, failure to reach an agreement would be significant loss for the Asia-Pacific region.

Categories: Economics, International

About Author

Nicolas Jenny

Nicolas Jenny specialises in European and Asian political risk analysis. He has lived extensively throughout the region and speaks English, French and Mandarin. He holds a double master's from Sciences Po Paris and Fudan University and a BSc in politics from the University of Bristol.