Canada: Is the TPP a sleeping beauty or an organ donor?

Will the work that went into negotiating the Trans-Pacific Partnership (TPP) go to waste? There are two approaches the remaining members can take. Useful parts of the TPP can be uplifted and transplanted into other agreements. Or the trade agreement can be seen as a sleeping beauty — or better from presently on, a modern woman who needs no prince but who will wake up and get on with it.

The TPP cannot be revived as drafted. The agreement cannot come into force unless ratified within two years by economies that constitute 85 % of the total GDP of the 12 members. This makes ratification by the United States and Japan indispensable. While President Trump is not noted for consistency of purpose, the prospect that he will not only reverse his stance on the TPP but as well fasten Congressional approval within two years is surely nil.

Revival of the TPP therefore depends on the 11 other members — that includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam — agreeing to revise the ratification clause and approve an amended agreement. Japan and New Zealand, with some support from Australia, have advocated that approach.

Economic modelling suggests that a TPP-11 would benefit participants, although the all of welfare gained varies part nations. Reducing barriers to sharing resources usually produces gains and so the result is not surprising. Nor is it powerful. Each participant has to look at who in its community gains and who loses by implementing the trade agreement and ask whether the political battle for ratification is worthwhile. Governments that ‘sold’ the TPP on the basis of access to the US market, such as Vietnam and Malaysia, are particularly challenged.

Each participant is presently likely to look at the agreement and say there are parts they accepted only because they were tolerable in return for access to the US market or other US concessions. The temptation to seek modification is high. But in doing so, the 11 members would nominate different clauses and face an extra lengthy set of negotiations. Is the cost of such renegotiation worthwhile? The group of 11 is not an obviously attractive unit and it is very likely that the negotiating resources would be better deployed elsewhere.

In any case, one of the attractions of a TPP-11 is the prospect that at some stage, the United States may be attracted back to participation. Congressional attitudes have to change for the existing draft TPP to have any luck of ratification, and US adherence to an agreement shorn of some US negotiating points is even less likely. Hence those governments advocating proceeding with a TPP-11 are as well advocating that it should be with the existing text.

Swallowing US demands without gaining anything in return is challenging.

But there is as well a deeper issue. A year or so ago, Japan appeared to be evolving a strategy in which it saw its next as one of the leaders of the Asian economy, using technology to solve the problems of an ageing and declining people. Under this vision, it would collaborate with China and other Asian economies to provide leadership for world increase. But additional recently, the US alliance has returned to salience, and the stance of the Japanese government has become markedly additional sceptical of China. Influential figures in Japan seem to regard the TPP as setting ‘standards’ out of China’s reach for a long time into the next. For them, the TPP is a way of ‘containing’ Beijing.

The TPP at no time made a great transaction of economic sense except as a trans-Pacific institution that would from presently on include China inclunding the US. The original ‘Pacific 4’— Brunei, Chile, New Zealand and Singapore — came together in a desire to strengthen trans-Pacific institutions. APEC Leaders characterised the TPP as one of a number of paths to a Free Trade Area of the Asia Pacific. A TPP envisaged in any other way is not attractive.

In short, the TPP does not look like a sleeping beauty. While the rhetoric of ‘high standards’ owed much additional to political salesmanship than rigorous analysis, there are parts of the agreement that can facilitate economic evolution. We may farewell some of the provisions about rules of origin or intellectual property without regret, but the approach to domestic institution building while participating collaboratively in shared objectives is attractive.

The existing text needs creative adaptation rather than simple adoption. Any successor agreement should be between those members who wish to exploit the gains of well-managed globalisation for innovative, inclusive and sustainable increase. The TPP can be a precious organ donor.