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Is a “Non-U.S. TPP” possible?

Observers believe that the sooner the majority of commitments to the Trans-Pacific Partnership Agreement (TPP) is effective, the greater the benefits they bring to the signatories will be. Hopefully, for their own sake, the 11 TPP signatories will soon find the right path for now and for the future.

On February 4, 2016, when the then 12 members signed the agreement, all were confident in a bright future for the TPP beneficial to the signing economies on both sides of the Pacific. Nobody could at the time imagine that only one year later, that bright picture would turn bleak following U.S. President Donald Trump’s withdrawal from the trade pact on January 23, 2017.

The rest of the TPP signatories, including Vietnam, had to face a grim reality – whether they should proceed without the United States.

A fortnight ago, TPP chief negotiators from the remaining 11 member countries met in Hakone, a resort town southwest of Tokyo, Japan, to discuss the “non-US TPP”.

Observers also make a vivid illustration of the smoke from the famous hot spring outside of the conference room and the ambiguity in shaping the content of a “non-US TPP”. It is undisputable to revise a clause of more than half a page on the TPP’s validity for this agreement to begin without the economy accounting for 60% of the bloc’s total GDP. But negotiators were still not so sure about what they should do next with almost 1,200 pages of the agreement, not to mention the thousands of pages of the annexes concerning specific market opening commitments for each country. Redrawing that highly complicated “map” of intertwined benefits, tradeoffs and compensations of the 12 signatories is really a formidable task when a country – also the key player which accounts for more than half of the bloc’s economic strength – has decided to back down.

After the departure of the United States, Japan – now the TPP’s de facto leader – wants to keep intact all the TPP commitments. Some others desire to renegotiate the important content, including tariff concessions. The rest are still at a loss.

In fact, everyone has its own reasons. Retaining the TPP is the best way to preserve the benefits to be reaped by the high standards of this agreement. Otherwise, the TPP is just yet another version of bilateral agreements that have been signed among countries. Meanwhile, negotiations are also a way to fill the gaps of interests left by the United States.

Actually, there do be solutions to compromising these two wishes. That is keeping TPP intact for the future, when the United States returns, and also limiting the TPP at the present so that the signatories may take advantages of certain benefits.

TPP for the future

On the first member of the equation, the TPP content will be maintained as it was signed by countries in 2016. No modification to the details of the TPP is allowed. In other words, commitments reached during the six years of negotiation with the U.S. presence will be maintained (of course, except for the conditions on the TPP’s validity).

Keeping the TPP intact also allows TPP signatories to secure “high standards” that are the core of the TPP, which are also the foundation for the expectations of the benefits of member countries.

More importantly, keeping the TPP’s content intact will allow the agreement to immediately take effect as soon as the United States returns to it. The United States will not then be under pressure for new commitments. Nor will it have reasons for requesting changes to what is agreed to in 2016.

A U.S. return to the TPP? Are you kidding?

Indeed, this seem to be so unrealistic given the current context when President Trump has expressed his determination to pursue his “America first” strategy and protect domestic production by attacking the trade agreements he deems “unfair to the United States”.

But that is President Donald Trump of 2017 when his promises of reclaiming jobs for the Americans and the protection of U.S. production on this campaign trail is still fresh. His protective measures have just begun and have not made a significant impact, except for the grievances of this economic allies.

Nobody can be sure about whether his tough strategy will sustain during the rest of this presidency. Especially when U.S. competitors are regrouping to take advantage of the U.S. “timeout”. The conclusion of the negotiation of a free trade agreement between the EU and Japan just before the G20 summit in Germany is just an example. Other FTAs with Mercosur (South American Common Market), Australia and ASEAN are coming next.

If so, it is very likely that at some points, in the second half of his presidency for example, Trump may change his mind. Nothing is impossible to a pragmatist like Mr. Trump, once he realizes that the U.S. interest may be jeopardized by protectionism.

What’s more, the future of the TPP does not last for only two years or for a presidential term. Mr. Trump may oppose the TPP until the end of his presidency. But it is not quite certain that the next president will hold the same attitude. In the United States, it is a common practice for a trade agreement to be signed under a president and ratified in the next presidency or the one after the next. The three latest U.S. trade agreements with Colombia, Panama and South Korea were ratified after more than five years after they had been signed with the signing date and the validity date being under two different presidencies. A colossal trade agreement like the TPP may require a much longer time to be ratified.

TPP for the present

The second member of this equation is to limit the TPP commitments that can be enforced immediately by the 11 TPP members. That means the 11 members will sit together, not to renegotiate the commitments, but to classify commitments into two groups – the first involving those which can be implemented right away and be second concerning those to be complied with when the United States returns. Perhaps we can not forget that the TPP includes a number of commitments that were reached under U.S. pressure, particularly institutional or regulatory commitments, such as investment, intellectual property, labor and the environment. At that time, many signatories had to take a bitter blow in hope of receiving greater benefits from the U.S. market. Now that the United States has pulled out of the TPP, it is not surprising that some signatories are not comfortable if they still have to fulfill these commitments.

Furthermore, if these commitments are fulfilled right now, the signatories will have little room for bargaining with the United States in the future, either when the United States returns to the TPP, or when she negotiates for a new bilateral trade agreement with each country. Nobody has forgotten the principle of being “higher than the current situation” in the trade pacts.

Needless to say, at this moment, it is not easy at all for the 11 TPP members to agree on what should be implemented immediately and what can wait for the Americans. But at least it is still much simpler than negotiating totally new commitments. For example, in the immediate future, the 11 TPP countries may implement immediately tariff commitments or service market opening as they are reciprocal.

In any case, observers believe that the sooner the majority of commitments to the Trans-Pacific Partnership Agreement (TPP) is effective, the greater the benefits they bring to the signatories will be. Hopefully, for their own sake, the 11 TPP signatories will soon find the right path for now and for the future. 

Source: The Saigon Times

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