Is the Trans Pacific Partnership (TPP) agreement still viable?

Is the Trans Pacific Partnership (TPP) agreement still viable, given the past failures in reaching a comprehensive Free Trade Agreement (FTA)? 

According to excerpts from Wikipedia.org, the Trans Pacific Strategic Economic Partnership Agreement (TPSEP or P4) was initiated in 2005 as a freeTPP trade agreement among Brunei, Chile, New Zealand, and Singapore. The objectives are to further liberalise the economies in the Asia-Pacific region. Since 2010, negotiations have been revived through the Trans-Pacific Partnership (TPP) agreement, which calls for the expanded version of the TPSEP. The new TPP agreement is a proposed free trade agreement under negotiation by (as of December 2012) Australia, Brunei, Chile, Canada, Malaysia, Mexico, Peru, New Zealand, Singapore, the United States and Vietnam. Japan has announced its intention to become a negotiating partner since the inauguration of Prime Minister, Shinzo Abe. South Korea currently has a free trade agreement (FTA) pact with the United States signed in 2012, and has been asked to join the TPP, but declined to do so at the moment. China is a potential entrant, but currently, there are no indications since the inauguration of President Xi Jinping in March 2013, that it intends to join in the TPP talks, which is scheduled to kickstart in Peru in May 2013.

There remains a bout of discontent among the public, advocacy groups, and elected officials due in part to the secrecy surrounding the negotiations, the expansive scope of the agreement, and a number of controversial clauses in drafts leaked to the public.

The TPP, as it stands, still needs some refinement, and further negotiations. Past FTA agreements, like the World Trade Organisation (WTO) talks in Doha, Qatar, have not resulted in any significant agreement among various trading partners due to disagreement among agricultural trade subsidies. If Japan were to participate in the TPP talks, there continue to be questions regarding its agricultural subsidies on rice, and most recently, the devaluation of the Japanese Yen, which sparked off accusations from many countries that Japan is engaging in currency ‘manipulation’. Could Japan finally liberalise its domestic markets, despite years of trade protectionism? It still remains a question if Prime Minister Abe could muster the support from his constituents, and government officials in his quest to revive the Japanese economy, which is still mired in deflationary woes.

Amid the negativity surrounding the questions over the successful outcome of the TPP talks, one could look at a positive angle, if the trading partners agree to a comprehensive and cohesive free trade agreement, which could open up new markets, such as Myanmar, and other Asia-Pacific countries to investors from across and outside the region. Consumers and businesses will be the main beneficiaries as a result of lower costs. This is a potential win-win situation for all. Government officials involved in the TPP talks are keen to see the successful conclusion of this pact and at this stage of negotiations, there is no turning back, and success will have to depend on each individual country’s determination to liberalise the domestic sectors within their countries.

The existing members of the current TPP negotiations are already members of the Asia-Pacific Economic Cooperation (APEC) group, and it is difficult to imagine that each APEC member could not come into agreement. However, most member countries are constrained in their abilities to reach a successful agreement due to domestic constraints. For example, in the United States, the majority of the free trade agreements are implemented as congressional-executive agreements, which means that unlike treaties, such agreements require the majority of the US House of Representatives, and the Senate to pass. Under the Trade Promotion Activity (TPA), established by the Trade Act of 1974, Fast track, Congress authorises the President to negotiate “free trade agreements, and it approved by both houses in a bill enacted into statutory law, other conditions including percentage of domestic content for most goods and services will still have to be met.

Given the current state of the Trans-Pacific Partnership (TPP) agreement talks, there are still many critical issues that need to be resolved. One of the most important tasks at hand for existing and incoming members to ensure that they are open to ideas, and are transparent in their public relations. The TPP talks are shrouded with quite a number of controversies, and distrust among the public advocacy groups, and anti-globalisation groups. It is vital that all members embrace the path of openness, and be able to come to terms with many of their different viewpoints on trade liberalisation. The successful outcome of the TPP talks will have to depend on how the existing APEC framework could fit into the TPP agreement, which could enhance greater participation in trade liberalisation, and a model of success for future resolution of the Doha round of trade negotiations.

About Hock Meng Tay - Chief Editor, Asia-Pacific Region

Hock Meng Tay, CAIA has written 181 post in this blog.

Chief Editor, Asia-Pacific Region Hock Meng Tay is a CAIA holder and is currently taking CFA qualification. He has over 10 years of experience working as research associate in several investment companies.He is an expert in financial analysis and has published research reports in his current role. He obtained his Masters of Business Administration in Integrated Management and Masters of Arts in Economics while serving his internship in Starsource Inc

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