TPP: The end of the beginning
BROOKINGS
Editors'
Note: Hammering out the political deal that has now brought
Trans-Pacific Partnership (TPP) negotiations to a successful conclusion
was a landmark achievement, but as Mireya Solis argues, there are still
battles to be fought. This post originally appeared in Nikkei Asian Review.
The Trans-Pacific Partnership (TPP) deal that the United States and 11 other Pacific Rim countries struck in Atlanta today was
five years in the making. More than once we heard that the end game had
come, only to see deadlines pass us by as the negotiations continued to
move at a frustratingly slow pace. The grueling work required to cinch
this mega trade deal should not come as a surprise, however, given the
sheer complexity of the negotiation agenda and the wide differences in
the makeup of the participating countries.
Hammering
out the essential political deal that has brought TPP negotiations to a
successful conclusion is a landmark achievement. But we should not lose
sight of the fact that more battles will need to be won before the TPP
morphs from an agreement in principle to an agreement in reality.
Success at the Atlanta ministerial, however, delivers immediate and
portentous benefits.
Countries in the Trans-Pacific Partnership agreement. Credit: Reuters.
U.S. leadership: A balance between strength and flexibility
Central
to American grand strategy has been updating the international economic
architecture to match the realities of 21st-century economy and
consolidating the critical role of the United States as a Pacific power
as envisioned by the Asian rebalance policy.
The TPP has long emerged as a litmus test of the American will and
resolve to rise to these challenges in a world of fluid geopolitics.
With success at the TPP negotiating table, the convening power of the
United States—as demonstrated by its ability to steward the most
ambitious blueprint for trade integration—has received an enormous
boost.
But equally
important is that in the final TPP deal, the United States has displayed
another key trait of international leadership: flexibility. Critics of
American trade strategy have frequently complained that the U.S. rigidly
pushes for its own free-trade agreement (FTA) template without
incorporating the preferences of its counterparts: that de facto, the
United States does not “negotiate” in trade negotiations. But the set of
final compromises that enabled the TPP deal to be struck at Atlanta
shows a different picture, one that in fact makes U.S. leadership more
attractive and the TPP project more compelling.
The TPP project is still a promise, not a reality.
In
endorsing the principle that TPP countries can opt out of
investor-state dispute settlement in their public regulation of tobacco
products, and in adopting a hybrid approach that will give up to eight
years of data protection for biologic drugs, the United States has shown
the strength to compromise without surrendering high standards. In
turn, these negotiated compromises cast a favorable light on the TPP as a
collective endeavor with a commonality of purpose among founding
members: to ensure that protection of foreign direct investment does not
hinder public health regulations; and to both promote innovation and
access to medicines.
Reviving trade policy
The
trade regime has not had a success of this magnitude for the past two
decades. Rather, the list of failures and missed opportunities is long,
and the prospects of the Doha Round are dim at best.
In
powerful ways, the TPP revives a stagnant trade regime. It shows that
mega trade agreements can offer a platform to devise updated rules on
trade and investment that cover sizable share of the world economy. And
it creates an incentive structure for concurrent trade agreements to aim
higher if they want to remain competitive.
A genuine re-launch of Abenomics
After
a bruising political battle to secure passage of the security
legislation, Prime Minister Shinzo Abe announced that the economy would
be his utmost priority. In so doing, he disclosed three fresh arrows: a
strong economy, raising the fertility rate, and boosting social security
to care for the elderly.
Abenomics
2.0, however, has fallen flat, as it lacks specifics on how to achieve
the target of 600 trillion yen GDP, and because subsidies for young
families and the expansion of nursing homes, while desirable and
politically popular, do not make for a strategy of economic
revitalization. Instead, the TPP deal boosts Abenomics 1.0 where its
true transformative power lies: structural reform.
An informed debate on TPP
After
legal scrubbing, the TPP text will be released. This will offer the
much-needed opportunity to debate the merits and demerits of the
agreement with facts, and not speculation. Full disclosure of the
agreement, close public scrutiny, and a spirited discussion on where the
agreement has lived up to expectations and where it has fallen short
will be essential in shoring up public support.
The
TPP project is still a promise, not a reality. Another set of
milestones will be required (twelve, to be exact). Each participating
country has its own domestic procedures for ratification, and some
definitely face an uphill battle: Malaysia is gripped by a major
political crisis as Prime Minister Najib Razak fights charges of
corruption; and it is anyone’s guess what the electoral results in a
couple of weeks will mean for Canada’s place in the TPP.
For the United States too, the quest for TPP ratification could not come at a more complicated time with
a full-blown presidential election race. In wrapping up the TPP
negotiations, the United States has demonstrated its leadership in
convening a significant and diverse group of countries and in stewarding
with success the negotiation of an ambitious blueprint for economic
governance. But this will mean little if TPP is voted down in Congress
or stays frozen in ratification limbo. Without the power to deliver a
TPP in force, past accomplishments will rightfully be brushed aside.