Pacific Money

Crunch Time for the TPP

Recent Features

Pacific Money

Crunch Time for the TPP

Participants have expressed optimism, but it is clear that much hard work remains before a deal can be done.

With seven separate meetings scheduled on various topics between October 28th and November 24th, Trans Pacific Partnership (TPP) negotiators are acting on a new-found sense of urgency as their self-imposed end-of-year deadline approaches. Though negotiations have largely resolved the low-hanging fruit in the 12-country free trade agreement, contentious issues like market access, the role of state-owned enterprises, and intellectual property are being discussed by the parties as they rush to complete the agreement by the next full meeting in Singapore this December.

In spite of the fact that there were no major breakthroughs at the latest round of talks in early October, negotiators generally maintained an optimistic tone when discussing prospects for the TPP’s conclusion by year’s end. In a statement made on the sidelines of the APEC conference in Bali, the leaders of the TPP countries highlighted “significant progress” across sectors and committed to resolving all outstanding issues by the end of the year. However, one anonymous administration official cautioned that "None of us are here to agree to a bad agreement simply to meet a deadline. The collective view is that it is ambitious but doable."

Ambitious may be an understatement given the scope of challenges remaining. In response to the impending deadline, intercessional meetings have been organized between several key countries to address outstanding sticking points. Meetings last week focused on rules of origin, while the negotiations in this and the coming weeks will concentrate on the role of state-owned enterprises and government procurement.

All three of these topics are of great concern to countries like Malaysia and Vietnam, which have voiced increasing skepticism in later rounds of negotiations. The stricter rules of origin proposed under the TPP, which would require signatories to abide by a yarn-forward rule (whereby everything from the yarn stage forward must be produced by countries that are a part of the TPP), pose a particular problem for Vietnam given that it sources 75 percent of the raw materials used in its domestic textile production from other countries, especially China. Additionally, Vietnam has expressed concern over the agreement’s approach to state-owned enterprises (comprising an estimated 40 percent of the country’s GDP), a concern shared by Malaysia, which has voiced opposition on the grounds that it would unfairly hinder government procurement policies currently giving preferential treatment to Malaysian-owned companies.

Separate from the aforementioned negotiations, the United States and Japan have been conducting bilateral talks on the sidelines as the two largest economies in the prospective trade agreement attempt to find a middle ground on a variety of issues. Following their most recent meeting, the Office of the United States Trade Representative released a readout saying that negotiations “yielded some progress, although important work remains – particularly in the area of motor vehicles.” Meanwhile, opposition to the TPP in some sectors remains stubborn in Japan, with a recent Japan Times editorial cautioning the administration of Prime Minister Shinzo Abe to “fulfill its duty to the public by disclosing as much information as possible to increase the transparency of the talks” before citing statistics detailing public skepticism of the agreement’s treatment of tariffs on agricultural goods, intellectual property, and food safety.

In addition, the Office of the United States Trade Representative has unilaterally begun selling various facets of the agreement to key stakeholders domestically. Five of the seven intercessional meetings happening in this month-long period will be held in the United States, with the other two hosted in Santiago and Mexico City respectively. Though the agreement features participants from both sides of the Pacific and has been cited as a hallmark of the Obama administration’s pivot to Asia, the fact that not one of these meetings is actually being held in Asia indicates that much of the hard work remaining is on the domestic front.

All eyes will be watching as TPP ministers come together on the sidelines of a WTO meeting in Bali beginning December 3rd and again in Singapore on December 7th for the next official round of negotiations. However, the success or failure of the seven meetings happening during this month-long period will serve as an effective bellwether, ensuring that prospects for the TPP’s conclusion by year’s end will be decided well before then.

John VerWey is a Program Assistant at the American Enterprise Institute.