Reaching a Trans Pacific Partnership Agreement: Perspectives from Asia
The U.S. Congress’s approval of “fast-track” trade authority last week lent new momentum to the negotiations for the Trans Pacific Partnership (TPP), a 12-country trade deal representing some 40 percent of world GDP. Former Jack Wadsworth Fellow Shom Sen asked a range of trade specialists from TPP countries in Asia for their perspectives on the major points that remain to be worked out in the negotiations and the countries’ national processes for ratifying a proposed agreement. All the views expressed below are those of the authors.
Graeme Thomson, Principal, Graeme Thomson and Associates; Former Senior Official, Department of Foreign Affairs and Trade, Australia
Australia, with low protection levels across all sectors, wants a world-leading, high-quality, comprehensive settlement liberalizing trade in goods and services among all participating partners. Australia is keen to be a leader in writing liberal rules for trade and investment for the twenty-first century in this mega-bloc. If highly protected sectors such as agriculture (tariff rate quotas and tariffs) are not addressed or are only marginally addressed, this will be the major stumbling block for Australia.
TPP outcomes must therefore go beyond existing provisions and exemptions in current FTAs and EPAs. For Australia this means, inter alia, new and additional liberalizing commitments on beef, sugar, dairy and certain fruits by North American TPP partners with, in addition, grains for Japan. Commensurate liberalization is required from all new partners.
Another key Australian objective will be substantial sectoral coverage across all modes of supply in trade in services.
All liberalization needs to be implemented within reasonable time frames – hopefully no more than 10 years if the agreement is to be of high quality.
Australia is strongly supportive of inclusion of WTO-Plus issues though there will be sensitivity in some quarters on issues such as investor-state dispute settlement (ISDS), foreign investment thresholds/liberalization, and intellectual property (IP) protection extension obligations particularly affecting health and pharmaceutical costs and labor and environment provisions. However, it seems that the agreement provisions in these areas have been drafted in ways that will assuage key concerns for Australia. Some WTO-Plus provisions will be warmly welcomed if indications during the negotiating process prove correct, e.g., limitations on global roaming charges for mobile telephony. Depending on the extent of liberalization and trade facilitation achieved, enhanced economic integration in the Pacific will be welcomed.
There will be concern that China is not at this time integrated into the TPP agreement. There will also be concern expressed over the transparency of the TPP negotiating process.
As the present Australian Government does not command a majority in the Senate, ratification could be a challenging exercise requiring support from the opposition Labour Party. There is considerable common ground between the major Australian political parties on trade issues but minor parties will oppose many TPP outcomes. Where difficulties with the Labour Party might arise (e.g. on ISDS, foreign investment, and IP issues), successful ratification will depend on how contained the agreement provisions have been drafted and how attractive the overall liberalizing provisions on goods and services are for Australia.
Dr. Shankaran Nambiar, Senior Research Fellow, Malaysian Institute of Economic Research
The next few months are critical because they presage Malaysia’s decision to sign the TPP agreement. There are various reasons why Malaysia would want to be a member, and a founding member at that, of the TPP. Prominent among these would be the benefits that would accrue by gaining market access to Canada, the U.S., and Mexico since Malaysia does not have any other trade agreement with these countries. No less important would be its interest to actively engage with the U.S. in its rebalancing bid. If Malaysia cannot meet the requirements of the TPP agreement, then it cannot meet those of the European Union, a bloc that Malaysia has an interest in exploring.
While the government has strong reasons for wanting to be a part of the TPP, there are equally compelling forces that pull it in a different direction. There are strong lobbies that are not in favor of the TPP. These groups are unhappy with a number of issues, including those relating to intellectual property rights, investor-state dispute settlement processes (ISDS), government procurement, labor, and environmental issues.
A fundamental concern is the Bumiputera agenda, which underpins a large area of the national policy space. The Malaysian government will seek to convince the other members that due recognition must be given for it to pursue the preferential treatment of the Bumiputera and Bumiputera participation in business. This is an issue that permeates other chapters such as government procurement and state-owned enterprises (referred to as government-linked companies in Malaysia). The government cannot afford to relinquish too much of a margin on government procurement (which is a useful instrument to support Bumiputera participation in business) neither can it dissolve GLCs in the interests of competition.
While Prime Minister Najib Razak may see the TPP as a window of opportunity to align himself more closely with the U.S. (economically and politically) and to undertake institutional reform, he cannot completely ignore dissenting views from within his own party.
Stephen Jacobi, Executive Director, NZ International Business Forum
New Zealand has a special interest in the Trans Pacific Partnership (TPP). Not only does the TPP reflect the country’s long-abiding interest in open markets and economic reform, New Zealand can claim a share of TPP’s parentage. A founder member along with Singapore, Chile and Brunei of the original “P4” agreement, New Zealand was also at the forefront of even earlier efforts to link up the more liberal minded trading nations in the Asia Pacific region. In the mid to late 90s the United States was part of those emerging discussions. How long it has taken to get to where we are today!
As well as being eternal trade optimists, New Zealanders are also mindful of the need to integrate more closely in the Asia Pacific region. Our high-quality FTAs with China, ASEAN, Taiwan, and Korea are the result of a well thought-through and well executed internationalization strategy. The United States and Japan are missing pieces. Our economy is small and distant from world markets. Trade — exports and imports — is our lifeblood: it’s what makes possible the successful, smart and developed economy that we enjoy. Yet we are an oddity amongst other developed economies because our largest export earners are natural resource based products — dairy, meat, horticulture, wood, seafood. So clearly the most important issue for us is ensuring that these products benefit from the comprehensive removal of trade barriers in TPP.
New Zealand’s economy is also changing: services, ICT, the creative sector, and the “weightless economy” are all important and growing sectors. So we need also to ensure TPP promotes the market-based innovation and commercial expansion necessary to fuel these sectors’ continuing development. We know too that business models are changing so we share with others the need to optimize supply chains and to ensure we can participate effectively in regional value chains and networks.
When it comes to ratifying the completed agreement — and when we finally get to see the treaty text — we like others will be looking to ensure that our key interests are addressed and any risks minimized. We subscribe fully to the founding vision of TPP as an “ambitious, high-quality and comprehensive” agreement. Not all sectors require the same treatment, but none should be left out. That means especially agriculture. We will want to pay careful attention to the detail of the rules. If there is provision for investor-state dispute settlement, we will want to see the detail of safeguards around the right to regulate, especially on environment and public health. If intellectual property provisions go beyond what is currently the international norm, we will want to see that innovation is not penalized. If there are requirements about medicines purchasing policies, we will want to see that these apply equally to all economies (including the United States) and that citizens continue to have affordable access to the medicines they need.
New Zealand is already an open economy. We have high standards of regulation and a sound judicial system. We are not expecting the adjustment from TPP to pose significant challenges. We pursue agreements like TPP to provide the best possible environment for trade and investment and sound rules for the operation of markets which also reflect our country’s values and interests. If TPP can deliver on its founding vision, we hope to be a proud parent of a new economic instrument which will deliver value for citizens and businesses alike.
Daniel Kalderimis, Partner, Chapman Tripp
From New Zealand’s perspective, there are four particularly difficult issues for concluding the TPP agreement: the extent of market access concessions, the scope of intellectual property rights protection, restraints or disciplines on government procurement (especially of pharmaceuticals, which are presently bulk-purchased in New Zealand through a state agency) and the reach of investor-state dispute settlement (ISDS).
Of these issues, the first is usually regarded as the most important. New Zealand is a trading nation, with little remaining tariff protection, large FDI inflows and small FDI outflows. Accordingly, the basic political calculus is that market access for our primary production goods (dairy, meat, fish, forestry) is traded for enhanced protections in other areas. As New Zealand’s outbound FDI is low, its direct benefit from, say, enhanced investor protection is modest. Its guiding strategy for negotiating these ancillary chapters is accordingly to reduce domestic (including fiscal) risk, rather than secure particular rights. Its real gain is the increased market access — especially for goods — achieved through the overall deal.
So perhaps the biggest question for New Zealand is whether the trade-off will stack up. Will there be sufficient market access improvements to offset the concessions made in other areas? Of these issues, perhaps the most vexed in New Zealand at present is binding ISDS. One might argue that this ought not to be especially controversial, given that New Zealand already has binding ISDS agreements as part of its FTAs with China (2008), ASEAN (2010), Malaysia (2010) and Korea (2015). However, there is something about the nature and composition of the TPP parties which has galvanized opposition to ISDS. Close scrutiny will accordingly be applied to the recently-leaked TPP investment text. This may come sooner rather than later, as select committee hearings are presently taking place in Wellington with respect to ratification of the Korea FTA. This will no doubt provide an opportunity for some public positioning and lobbying regarding the TPP agreement.
In the end, though, the main issue for the domestic ratification process will be whether one can point to sufficient market-access gains to justify the potential interference with domestic autonomy in other areas, including IP, procurement and investment. For New Zealand, the proof will certainly be in the (milk) pudding.
Amb. Barry Desker, Distinguished Fellow, S. Rajaratnam School of International Studies
Singapore regards the TPP as a “state of the art” agreement on intellectual property, services and government procurement. I support the TPP as it is a multilateral agreement which avoids the trade-distorting aspects of single country FTAs. Unlike the U.S., the process of ratification is less contentious in countries following the Westminster model such as Singapore and Malaysia. Ratification is a decision of the Cabinet and would not require parliamentary approval.
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