Written by Rahul Mishra and Asef Raiyan Hoque.
When the United States announced it’s intention to leave the Trans-Pacific Partnership negotiations, it seemed that without Washington, TPP would never see the light of the day. As part of former President Barack Obama’s Pivot to Asia, it was the US, after all, which steered the course of the TPP ever since it joined the group.
However, to much of the surprise of the world community, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) – or TPP-11 was back on track with the signing of the deal by eleven countries on March 8, 2018 in Santiago, Chile. The deal is expected to be ratified by 2019.
The TPP negotiations began in 2005, when an FTA was initiated between Brunei, Chile, New Zealand and Singapore. The agreement came to be known as the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP). Later, other eight members joined the negotiations and the agreement was signed in Auckland, New Zealand in February 2016. TPP covers almost 40 percent of the global economy and will provide members access to new markets with fewer barriers.
the negotiations amongst eleven economies of the TPP also signal the potential Japan has in terms of playing a leading role in the world. A point to ponder here is: would Japan have played such a proactive role if the US was still around?
During the APEC summit in November 2017 in Vietnam, the TPP was renamed to CPTPP. After the discussions during the APEC Summit, TPP-11 leaders announced that they had carved out the ‘core elements’ of TPP. The TPP-11 have assured that the deal is moving forward even without the US. The leaders believe the deal still has potential to benefit the remaining members. The Peterson Institute of International Economics has also predicted that the new TPP deal will result in real income gains of more than $158 billion, which is about 1 percent of the GDP of the member countries.
The signing of the TPP agreement clearly signals two important ongoing transitions in world politics in general, and the international economic system in particular.
First, the very fact that other member countries were able to sign the agreement without the US, indicates that the US is no longer indispensable to multilateral mega-regional agreements, the country which once championed the cause of international liberal economic order and made the “unipolar moment” a reality. Countries of the Asia-Pacific region, including US allies, are trying to manage without the US.
The comparative ease with which the Regional Comprehensive Economic Partnership (RCEP) negotiations are moving forward is a telling example of the power of collective forces of Asian economies- China, Japan, India, Korea, Australia, New Zealand, and ten ASEAN countries. This also signals the rising trends in US protectionism and isolationism, which has also been signalled by several other steps taken by the Donald Trump administration. Also, what is preferable to TPP-11 is that the US remains out, at least for time being, considering that renegotiating the deal would be difficult and will further delay the realisation of the TPP.
Second, the negotiations amongst eleven economies of the TPP also signal the potential Japan has in terms of playing a leading role in the world. A point to ponder here is: would Japan have played such a proactive role if the US was still around? Perhaps not! It was TPP minus the US that gave Japan a chance to lead the ten economies of TPP in arriving at a final solution. Apparently, of the eleven economies of TPP, Japan has been most proactive and the TPP started regaining momentum as Japan was seen leading the deal. Clearly, the US presence overshadows Japan’s role.
However, everything has not been smooth for TPP members. There are still some bottlenecks, which should be addressed before the deal is ratified. In that regard, four major outstanding issues are still being reconsidered.
the real challenge for the TPP-11 would be to find out of the box solutions to engage the two biggest economies- China and the US, in a way that they do not try to overshadow or undermine CPTPP, and TPP-11 leads the way forward in protecting the liberal international order.
Some countries such as Vietnam, Malaysia, Brunei, Peru, and Mexico are facing poor labour rights issues. For instance, Vietnam is going through the issue to work out a solution regarding labour regulations. Malaysia is also facing concerns regarding their state-owned enterprises, likely to be reviewed soon. Brunei continues to face issues over its coal industry. On the other hand, Australia and New Zealand face concerns regarding the risk of investor-state dispute settlement (ISDS) legal cases. But the new CPTPP has decided to revise the ISDS rules and the ISDS clauses are far less rigid now.
Setting a rather extraordinary example, Japan has agreed to lower tariffs in the agricultural sector, which was traditionally protected by the government. This has raised concerns for Japanese farmers. With the US out of the picture, some of the dairy and meat importing countries are poised to get access to Japan’s market. Along with Australia, New Zealand, Mexico and Chile will compete for their share in the Japanese market when the tariffs are lowered.
The pharmaceutical industry has also been at the centre of attention. After US exit from TPP, the members have agreed to revise the patent clause for the pharmaceutical industry. These include patent terms and biological data protection. The TPP-11 have decided that the best option regarding certain contentious clauses, is to suspend some of them for smoother negotiations.
Finally, with CPTPP, TPP-11 economies have shown their resolve to keep the flock together with Japan as the ‘new skipper’. However, the real challenge for the TPP-11 would be to find out of the box solutions to engage the two biggest economies- China and the US, in a way that they do not try to overshadow or undermine CPTPP, and TPP-11 leads the way forward in protecting the liberal international order.
Rahul Mishra is a Senior Lecturer at the Asia-Europe Institute, University of Malaya, Kuala Lumpur. He can be reached at firstname.lastname@example.org. Asef Raiyan Hoque is a Researcher at the Faculty of Business, Economics & Accountancy, University Malaysia Sabah. His email is email@example.com. Image credit: CC by Department for Foreign Affairs and Trade (DFAT).