Menu
Account
TPP Survives After Canadians ‘Screwed Everybody’
Trade ministers and delegates from the remaining members of the Trans Pacific Partnership (TPP) attend the TPP ministerial meeting on the sidelines of the Asia-Pacific Economic Cooperation (APEC) leaders summit in Danang, Vietnam (Nov. 9, 2017).
Image Credit: AP Photo/Na Son Nguyen, Pool

TPP Survives After Canadians ‘Screwed Everybody’

 
 

Canada may have “screwed everybody” by walking out on the Trans-Pacific Partnership (TPP) signing ceremony, but the Asia-Pacific trade deal is far from dead. After a weekend of dramatic negotiations in Vietnam, the 11-nation pact has a new name that only diplomats could love: the “Comprehensive and Progressive Agreement for Trans-Pacific Partnership,” or CPTPP.

The name change reportedly was aimed at Canadian Prime Minister Justin Trudeau, who shocked the leaders of the TPP’s 10 other Pacific countries by pulling a last minute “no show” for Friday’s key meeting in Da Nang.

After a lengthy delay, Japanese Prime Minister Shinzo Abe reportedly told the leaders of fellow pact members Australia, Brunei Darussalam, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam that Trudeau would not be attending the ceremony.

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

An official summed up the room’s attitude by telling Australia’s ABC News that “the Canadians screwed everybody.”

Just a day earlier, Canadian Trade Minister Francois-Philippe Champagne had reportedly raised no objections with the pact.

Trudeau’s sudden change of heart was attributed to various reasons, including upcoming elections in Quebec, concerns over automotive imports and cultural issues, and Canada’s desire to appear a tough negotiator amid new talks with the United States over the North American Free Trade Agreement (NAFTA).

“I wasn’t going to be rushed into a deal that was not yet in the best interest of Canadians. That is what I’ve been saying at least for a week, and I’ve been saying it around TPP12 for years now and that position continues to hold,” Trudeau said.

The liberal leader’s statement came despite the Business Council of Canada declaring that the “TPP11 could be more beneficial to Canada than the original agreement,” since it offered preferential access to Japan, the world’s third-largest economy, along with other TPP markets, with the United States frozen out.

The original agreement contained 12 members including the United States, which withdrew from the pact in January despite criticism that doing so was a “senseless act of wanton destruction” for U.S. interests.

The suggestion that the previous pact was neither progressive nor comprehensive might upset its original backers, who sought to create the world’s biggest free trade zone, accounting for 40 percent of global trade. It was seen having the potential to boost world income by as much as $295 billion a year over a decade, serving as a pathway toward a greater free trade area for the Asia-Pacific, including potentially China.

In comparison, the “TPP11” accounts for around 14 percent of global GDP and 15 percent of world trade volumes.

However, since U.S. President Donald Trump’s decision to quit, other TPP members, particularly Australia and Japan, have worked hard to revive talks and prevent the “hard fought gains” negotiated over a number of years from being wasted.

TPP talks continued in March, May, and August, until the latest negotiations on the sidelines of the APEC summit.

According to Japan’s Nikkei newspaper, Trudeau and Abe met for talks Friday that extended from the planned 20 minutes to nearly an hour, as the Canadian leader raised objections to the pact. However, after the leaders’ meeting collapsed due to Trudeau’s absence, negotiators met again Friday evening and successfully rescued the deal.

High Standards

In an official statement released Saturday, the TPP ministers said they had “agreed on the core elements” of the new CPTPP, “with the exception of a limited set of provisions which will be suspended,” including those areas still needing consensus.

“Ministers agree that the CPTPP maintains the high standards, overall balance, and integrity of the TPP while ensuring the commercial and other interests of all participants,” it said.

“Ministers reaffirm that the CPTPP demonstrates their firm commitment to open markets, to combat protectionism, and to advance regional economic integration,” it added.

The latter statement contrasted with Trump’s announced preference for bilateral deals.

“I will make bilateral trade agreements with any Indo-Pacific nation that wants to be our partner and that will abide by the principles of free and reciprocal trade,” he said at Friday’s APEC CEO Summit. “What we will no longer do is enter into large agreements that tie our hands, surrender our sovereignty, and make meaningful enforcements practically impossible.”

Commenting on the CPTPP, Japanese Economy Minister Toshimitsu Motegi told reporters that it maintained the high standards of the original pact.

“The initial agreement spans 8,000 pages, and the fact that we were able to limit the suspension list to 20 means that we were able to keep the high standards set by the initial TPP agreement,” he said Saturday.

“I think this will be a strong message for not only Asia, but also other regions in the world.”

Vietnamese Industry and Trade Minister Tran Tuan Anh agreed, saying: “The new agreement maintains a high standard and secures the interests of all member countries. The deal will promote trade and economic co-operation throughout the region.”

Australian Trade Minister Steven Ciobo said the CPTPP would deliver significant benefits to the world’s 12th largest economy.

“This has always, like any international negotiation, involves [sic] a bit of give and a bit of take, but importantly we have done great work on a very important deal, a deal here that, if successfully concluded, would for example, in Australia’s interests, give us new market access to Mexico, to Canada, countries with whom we don’t have a free trade agreement, as well as give Australian exporters access to markets worth some $12 trillion. I mean, that’s really significant,” he told ABC News.

“Substantial” Gains

Capital Economics has described the gains of the new pact as “quite substantial.”

“Malaysia, Singapore, and Brunei export significantly more to the remaining members than they do the U.S. Even for Vietnam, for whom the U.S. is a much bigger market, exports to the remaining countries are still the equivalent of around 15 percent of GDP,” it said in a November 10 report.

The London-based consultancy said the eventual growth boost would depend on “the extent to which the remaining countries stick by their commitments to eliminate non-tariff barriers. Unsurprisingly, without the carrot of access to the U.S. market, countries have been reluctant to agree to the same level of market access.”

However, it said the new pact still represented a superior deal to the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement that comprises ASEAN, Australia, China, India, Japan, New Zealand, and South Korea but excludes the United States.

“But whereas the TPP was focused on reducing tariff and non-tariff barriers, the RCEP is focused primarily on tariff barriers alone, and most countries in Asia already enjoy low tariff access to the Chinese market,” Capital Economics said.

Even India’s inclusion in RCEP represents only a marginal difference, given that India is a “tiny” trade partner for most Asia-Pacific nations. “Even a big increase in exports to India would make a negligible impact on overall growth prospects,” it said.

“The upshot is that the RCEP is likely to bring few economic benefits to the region, and is more about China increasing its influence over the rest of Asia at the expense of the U.S.”

The Nikkei’s Shotaro Tani suggests the CPTPP could help revive multilateral trade talks, while aiding Asia’s smaller nations in negotiations with China and the United States.

“Japan and the Southeast Asian nations were also wary of trade negotiations in Asia becoming a tool in the regional power struggle between the U.S. and China. The new TPP agreement, which does not involve either China or the U.S, gives them a stronger hand in future trade negotiations with the two economic giants,” he argued.

Another knock-on effect could be for other negotiations such as RCEP using the CPTPP as a benchmark in setting rules, according to a Japanese official.

Both Japan and Australia have called for the RCEP to take a more progressive stance in areas like environmental protection, similar to the original TPP.

Nevertheless, the CPTPP still requires domestic ratification by each member nation. While Japan has already done so, other members, particularly Canada, could require longer to officially validate the pact. With Trump pushing for bilateral talks with other Asia-Pacific nations, the pressure is on for an agreement described by Australia’s Ciobo as 90 percent complete.

Getting to the final 10 percent is the challenge for negotiators, while Washington and Beijing continue pursuing their rival approaches. Yet while there is still plenty of time for more hiccups, Asia’s trade ministers have kept the flame of free trade burning a while longer.

Newsletter
Sign up for our weekly newsletter
The Diplomat Brief