It's do or die for the TPP

East Asia Forum

Heading into the fifth year of intense negotiations (with 20-odd formal sessions and countless informal side meetings), the Trans-Pacific Partnership agreement will almost certainly succeed (or fail) over the next six months. 

President Obama has set the November APEC leaders’ meeting as his personal deadline for the broad outlines of a deal encompassing and overcoming the major challenges in this purported 21st-century trade pact. The 12 TPP member nations have previously blown past similar deadlines in 2012 and 2013, but this time the political calendar and negotiating weariness dictate that a continuing stalemate at year’s end will deal a crippling blow to a successful outcome.

With regard to the negotiating dynamic, failure to achieve major substantive breakthroughs by early 2015 will evoke the dreaded ‘Doha syndrome’ image.

The WTO’s multilateral Doha Round of trade negotiations has dragged on for 12 years. Currently, a desperate search for compromise on a small fraction of negotiating issues seems to have failed. Whatever the outcome of this tailend effort, the WTO experience will provide ammunition for TPP sceptics who will cite Doha as the rueful model for ‘biting off more than you can chew’ in trade negotiations -- with predictable results.

Turning to the political calendar and a shifting political balance of forces, as is often the case, the United States remains the central factor to any agreement on the TPP. First, though it is less an iron rule than sometimes portrayed, the 2016 presidential campaign will increasingly intrude upon all policy issues, and particularly upon the divisive trade agenda. This reality dictates a push for at least broad agreement on key TPP compromises by January or February.

Assuming solid advances in the TPP negotiating framework, what are the political pathways and political snares to US ratification of the agreement?

The Democratic Party remains deeply divided on trade policy in general and on the TPP specifically. President Obama, on the other hand, has elevated the TPP as a single goal for his second term. While there are signs of lame-duck erosion, having a Democratic president solidly behind a trade negotiation still will make, at least, a marginal difference.

The House of Representatives will be key. House Republicans can still deliver at least three-quarters of the Republican majority in favour of the TPP. The Tea Party’s 2011 votes on the Panama, Colombia and South Korea FTAs suggest that they will also support the TPP, despite any animosity toward President Obama.

As for the Senate, once again it is likely that the basics will prevail: a sizable majority of Republicans will combine with a minority of Democrats to produce a TPP majority.

Beyond these basics, the near-term political calendar is dicey. First, there is the problem of the Trade Promotion Authority, the authority granted by Congress to expedite an up-or-down vote on trade agreements within a certain time. Major political complications have stymied efforts to pass a bipartisan bill. Last week, Republicans on the Ways and Means Committee notified the administration that they would demand a vote on a TPA bill before TPP negotiations were completed.

Looking to the future, there are a number of possible scenarios that could play out. But most will depend on the outcome of the midterm election and who holds the majority in Congress. If Republicans win the senate, they may put off TPA until January and the new congress.

The role that the US Congress could play is premised on the assumption that the substantive negotiations produce an acceptable set of compromises by year’s end. What are the dynamics of such a result?

First, the TPP has been touted as a ‘twenty-first century agreement’, meaning that it will stake out new territory in liberalising ‘behind-border’ barriers to trade in service sectors, state-owned enterprises, health and safety measures, meaningful regulatory reform and convergence, intellectual property, and investment arbitration, among others. But alongside these new issues loom old fights on twentieth century issues relating to industrial and agricultural tariffs and subsidies in sectors such as textiles, clothing shoes, sugar, cotton, rice and grains.

Japan is demanding special treatment (that is, protection) for five ‘sacred’ items -- rice, wheat and barley, pork and beef, dairy and sugar -- and it is locked in a line-by-line battle with the United States to thwart liberalisation in these sectors.

Currently, it looks as if Japan will concede something in each sector (particularly pork, beef and dairy) but will not be forced to go to zero tariffs in all five areas. Both sides have promised key announcements in October at the latest.

An acceptable compromise on the old, 20th-century issues is tied directly to other negotiations on inside-the-border issues. For instance, Vietnam has told the US that it is not prepared to make concessions in investment without concessions on textiles and shoes. Australia’s trade minister openly stated that Australia’s opposition to an independent investor arbitration body and some US demands on intellectual property might ease if a better deal emerged on lamb and beef products. Other TPP countries have signalled openness to similar trade-offs.

It is going to take both luck and skill to bring off this high-wire act over the next six months. But much is riding on a successful outcome for the US: the TPP has become the single most important symbol of future US leadership in Asia. Failure will have not only economic but also debilitating diplomatic and security consequences.

Within the United States, two are imperatives: hands-on presidential leadership (admittedly not a normal Obama strength) and responsible initiatives from congressional Republicans, who have provided the bedrock majorities for FTAs for the past two decades.

This article was originally published at East Asia Forum. Reproduced with permission.