Pacific Money

With TPP in Limbo, Europe Has a Golden Opportunity

With TPP’s future uncertain in the U.S., the EU can take over global leadership on ambitious new trade deals.

With TPP in Limbo, Europe Has a Golden Opportunity
Credit: Flickr/Bob

The Trans-Pacific Partnership (TPP) is facing a difficult road ahead, with many commentators suggesting that its passage in the United States will be difficult. After long and demanding negotiations since the U.S. took the lead in 2009, the potential defeat of TPP is likely to have a profound impact on U.S. trade diplomacy with Asia-Pacific countries. Given the ongoing negotiations between the United States and EU on the Transatlantic Trade and Investment Partnership (TTIP) and disruption created by the unexpected Brexit vote in the U.K., a TPP failure would put pressure on a new U.S. president’s trade agenda and erase much of the trade legacy built by the Obama administration.

The 12 country mega-regional trade pact signed in February, which will cover some 40 percent of world commerce, has faced various waves of backlash throughout its negotiations, reaching a boiling point over the course of the U.S. presidential campaign. With both candidates opposing the agreement in its current form due to concerns over domestic job loss, the chances of its passage are now dimming. On the Congressional side, House Representatives and Senators are worried about how public support of TPP might impact their own reelections and that of their respective political parties. Of those lawmakers who initially supported the trade agreement, the majority are now reluctant to take a public position. Senate Majority Leader Mitch McConnell has now confirmed that the Senate will not vote on the TPP until the next presidency.

Trade negotiations, particularly ones of such magnitude, are rarely easy and take a great deal of compromise on all sides. This can certainly be seen currently in Europe in the talks over TTIP. During a political campaign, such trade-offs are a hard sell to the electorate who will not see immediate benefits at the time of the vote. With TPP especially, there have been many concessions – from agriculture and dairy tariffs, to automotive industry access, the international dispute settlement facility, and copyright and intellectual property provisions. Signatories of TPP will therefore find it a difficult to swallow such a defeat in the last hurdle.

TPP is in the process of ratification in many countries already, with Malaysia having already ratified the deal. Prime Minister Shinzo Abe in Japan is said to be determined to submit bills to the Diet by late September in order to set a course for ratification. For others, like Mexico and Peru, the agreement has begun its passage through government. Seeing the writing on the walls, however, the prime minister of Singapore told the U.S. Chamber of Commerce, one of the most influential business bodies, that ratification of the agreement is “a litmus test” of credibility.

For this reason, any backlash in the United States would not only be a trade retreat, but also a significant geopolitical failure. TPP was the Obama administration’s bid to shift the geopolitical axis to North America and away from China – consolidating the United States position in the region in particular. China is excluded from TPP, but will benefit from the Regional Comprehensive Economic Partnership, another mega-regional deal, which is being negotiated by the ASEAN states and Australia, China, India, Japan, South Korea, and New Zealand.

Enjoying this article? Click here to subscribe for full access. Just $5 a month.

By rejecting TPP, the United States is likely to lose its position in leading and designing future trade arrangements, leaving the EU as the natural successor. The EU has already launched trade negotiations with Japan, Malaysia, Indonesia, and others, as well as a range of agreements with other areas. In addition, TTIP has a much higher likelihood of passing through the U.S. Congress when agreed, which would further segment its position at the center of mega-regional trade deals. Brussels has also recently finalized an agreement with Canada through the EU-Canada Comprehensive Economic and Trade Agreement.

At a recent workshop for the Committee on International Trade of the European Parliament, it was noted that “the real response to TPP could be the EU-Japan and TTIP [agreements]. Another novelty is the inclusion of Taiwan and Hong Kong as potential partners for bilateral investment treaties … [and] for the first time, the Commission also mentions the idea of a bilateral free trade agreement with China.” There is therefore significant interest and movement in fostering international trade deals between the EU and Asia-Pacific.

One thing is certain though: international trade with the Asia-Pacific is essential for both the United States and the European Union, and whoever gains the best market access terms will bring a significant comparative advantage to its exporters.

Aline Doussin is a partner at Squire Patton Boggs, the global law and public policy firm, specializing in International Trade as well as EU Regulatory and Public Policy.