Pacific Money

The Trans-Pacific Partnership: Will it Happen?

Can the Trans-Pacific Partnership overcome challenges and make history?

In the future, economic and diplomatic historians could look back at the current negotiations underway between Australia, Brunei, Chile, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam as a pivotal point in history.  On the other hand, the negotiations could end up bogged down in national interests and “red lines”, leaving the Trans-Pacific Partnership (TPP) the legacy of being yet another failed attempt to expand freer trade between nations.

The TPP is the proposed inheriting organization of the original Trans-Pacific Strategic Economic Partnership Agreement (TPSEP) between founding members Chile, New Zealand, Singapore and later Brunei. Much as the European Economic Community (EEC) grew out of the European Coal and Steel Community (ECSC) and into the European Union (EU) and now the Eurozone (EZ), proponents of the TPP hope that if the negotiations are successful, then the organization can provide both an economic and strategic boost to likeminded nations, although nobody so far is suggesting political integration on the scale seen in Europe.  So far all members and negotiators for the TPP are also Asia-Pacific Economic Cooperation (APEC) members.

For President Obama, the TPP is clearly a strategic issue to both compliment and augment his administration’s “pivot” to Asia.  The pivot is controversial in China and elsewhere because it is a bit vague and has left many guessing as to its significance, purpose and process.  China perhaps correctly sees it as an attempt to form a containing alliance aimed at Beijing’s growing economic power and international assertiveness.  Whether the U.S. is trying to “hedge” against China’s equally ambiguous rise, or genuinely contain it, or whether the TPP is an attempt to put economics front and center of U.S. – Asia relations (rather than strategic issues) are questions that must be left for the future. For now, both the U.S., through former Secretary of State Clinton, and Singapore, through Prime Minister Lee, have openly invited China to join.

These invitations ring slightly disingenuous however, for in its present form, it would be near impossible for China to join the partnership without substantial negotiations and exemptions or domestic changes. The TPP covers many areas, including rules on government procurement, intellectual property and tariffs.

The TPP’s prospects did receive a boost in late December when Japan’s Agricultural Minister Yoshimasa Hayashi announced at a press conference that Japan will deepen discussions with the partnership.  The fact that it was the Agricultural Minister who made this statement is significant.  One key hurdle for Prime Minister Abe to overcome is Japan’s agricultural lobby, which has been opposed to the TPP due to fears that the sector will be hit too hard if protective tariffs are eliminated.   However, the U.S. plan to have the negotiations completed by the end of 2013 (more negotiations are scheduled for March) will probably not include Abe’s Japan. Many observers think that the TPP negotiations will be too controversial for the new Prime Minister to attempt before the July elections for the Upper House.