Is the US Ready to Rejoin the TPP?
By Dafydd Williams, Senior Director, Advisory Services
In a possible about turn, President Trump has recently indicated an interest in reopening Trans-Pacific Partnership negotiations, as long as the US can get a favorable deal.
If the US decides to rejoin the TPP, what might be the consequences?
First of all, it will need to get used to a few more letters. The organization is now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), often called TPP-11. Including the US would make it TPP-12.
The original agreement was negotiated during the Obama administration, but it had met opposition in Congress, and had not been signed at the time Trump took office. Trump campaigned on an opposition to multilateral trade pacts, arguing that bilateral agreements offer the possibility of more favorable terms to US businesses and workers. Trump pulled out of the pact in early 2017. The 11 remaining countries renegotiated, finally signing the pact in early March of 2018.
The 11 signatories are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Other countries — including South Korea, Indonesia, Thailand, Taiwan and the Philippines — have indicated an interest in joining.
How Does CPTPP Differ From TPP?
For one thing, the new agreement’s name includes the word “progressive,” which almost seems intended to prevent the return of the US under the current protectionist-minded administration. In addition, a total of 22 provisions were “suspended” (not removed) from the original before the agreement was signed.
One of the main issues US negotiators focused on during TPP talks was intellectual property. The US is a world leader in producing and holding IP. The other TPP nations were reluctant to include the US’s proposed trademark and patent protections in the initial pact, since (relatively speaking) they are users of IP rather than owners and developers of it. Many criticized the US’s proposed IP rights on the grounds that they would have prevented millions of poor people in developing countries from obtaining cheap generic drugs. When the US pulled out of the TPP, the remaining countries suspended the proposed IP provisions.
Other suspended provisions included those relating to investor-state dispute settlement (ISDS), environmental protections and reforms for state-owned enterprises.
The Tricky Issues of Intellectual Property and ISDS
IP and ISDS provisions were some of the most contentious, within the US as well as among the other signatories.
The US pushed for stringent requirements in technological protection measures, rights management, safe harbors for ISPs, extended copyright periods and (as mentioned) extended patent periods for innovative pharmaceuticals, particularly biologics.
Investor-state dispute settlements allow foreign investors to challenge host-state regulations outside of that country’s courts, in front of a binding arbitration panel put together for that specific dispute.
The ISDS provision had the unusual distinction of being opposed by both candidate Donald Trump and left-leaning Sen. Elizabeth Warren. (Warren was vocal in her opposition to TPP in the run-up to Congress’ 2016 fast-track TPP vote.) Essentially, both Trump and Warren see the ISDS system as undermining regulatory sovereignty.
It’s important to remember that any agreement the US entered into would still need to pass Congress, where it would face additional opposition, even without the ISDS provision.
The Role of the US
Clearly, the US would have been the most significant TPP signatory, and its absence from the agreement handicaps the remaining members.
The agreement currently covers about 14 percent of world GDP. With the US, it would have covered 40 percent. The current members state that they don’t need the US for the agreement to be worthwhile, but the negotiations would likely not have started in the first place without US participation.
The TPP-11 might be unhappy having to deal with the readmission of the US, but, in practical terms, they have little choice but to take it seriously. The advantages of incorporating the world’s largest economy are just too great to ignore.
The question is really whether the Trump administration is genuinely committed to seeking readmission, and willing to work to overcome Congressional opposition in order to accomplish it.
The Larger Trade Context in 2018
As the provisions about IP and ISDS show, multilateral agreements such as TPP are as much about governance as they are about trade itself. That’s why they take so long to negotiate. In a world where a change of political leadership in one of the participants can result in the torpedoing of an ongoing complex negotiation, there is an understandable reluctance to embark on such deals. Bilateral agreements are hard enough.
After five years of difficult negotiations, the other 11 signatories watched the US walk away from the deal. They then spent another year modifying the agreement, even enduring a Canadian walkout of an original signing in late 2017.
Getting the partnership back in under the original terms might be achievable — it’s pretty clear those 22 provisions were suspended rather than removed with exactly this hope. But Trump has already indicated that the US will ask for additional concessions, to get a better deal than the previous administration had. This would require some longer negotiations, which some of the 11 might balk at, and which the US might no longer have the patience for.