The Trans-Pacific Partnership

Negotiating Background and Controversies

Simon  Lacey  |  January    2014  
 Overview
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1.  Background – How did we get here?

2.  The TPP in the grand scheme of things
3.  How is the TPP Different?
4.  What are some of the controversies surrounding the TPP
5.  Likely scenarios going forward
6.  Broader implications for the global trading system

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 Background – How did we get here?

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§  The TPP’s historical pedigree lies in an earlier set of negotiations between Chile, New
Zealand and Singapore, known as the Pacific Three Closer Economic Partnership (P3
CEP), which took place across four rounds of talks between 2002 and 2005, before Brunei
Darassalam joined the talks, transforming them into the Trans-Pacific Economic
Partnership Agreement (TPSEP or P4)
§  Very few people outside of the original four contracting parties took much notice of the P4
until the United States announced it would begin negotiations to join the agreement, which
it did on 22 September 2008.
§  Negotiations towards the conclusion of what we now understand as the Trans-Pacific
Partnership have officially been going on since the first round of talks in Melbourne, which
took place in March 2010.
§  18 rounds of formal meetings, plus other meetings of chief negotiators and ministers, the
last of which took place from 7 – 9 December 2013 in Singapore (simultaneously to the
WTO Ministerial on Bali).

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 The TPP in the grand scheme of things

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 The TPP in the grand scheme of things

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 The TPP in the grand scheme of things

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The TPP is perhaps best understood as a continuation of an ongoing process of concluding

FTAs, led by the United States under its doctrine of "competitive liberalization”

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 The TPP in the grand scheme of things

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And is one of many FTAs under consideration by the US

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 The TPP in the grand scheme of things

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As early as the 1996 WTO Ministerial Declaration in Singapore, a number of the issues on the TPP agenda
(and in other US-FTAs) were mentioned, and the possibility of their being the subject of multilateral trade
disciplines was raised:
§  Core labour standards;
§  Trade and environment;
§  Trade and investment
§  Trade and competition policy
§  Other areas also now in the TPP were included in the Doha mandate but have progressed only very
slowly or not at all during the course of the Doha Round:
§  The relationship between trade rules and the obligations set forth in various MEAs (multilateral environmental
agreements);
§  Government procurement (transparency);
§  Subsidies
§  Liberalization of trade in services
§  Market access (agriculture and non-agriculture)

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 The TPP in the grand scheme of things

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Competitive Liberalization
2005 USTR Trade Policy Agenda and 2004 Annual Report:
Four years ago, the Bush Administration initiated a new strategy: to pursue reinforcing trade
initiatives globally, regionally, and bilaterally…By pursuing multiple free trade initiatives, the
United States has created a ‘competition for liberalization’, launching new global trade
negotiations, providing leverage to spur new negotiations and solve problems, and
establishing models of success in areas such as intellectual property, e-commerce,
environment and labor, and anti-corruption

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 The TPP in the grand scheme of things

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Pivot to Asia
§  Two costly wars in the Middle East / South Asia that were
winding down
§  Global Financial Crisis which challenged the long-term
viability of the US economic model and the international
liberal order it has championed since WWII
§  The perception of US decline and China’s rise with a
competing economic model of state-led capitalism
§  Obama administration devised the pivot to Asia in the
form of:
-  Strengthening existing alliances with Japan, Korea, Australia,
Philippines, Thailand.
-  Engaging with emerging powers in the region, most notably
though the Strategic and Economic Dialogue with China,
elevating engagement with India, and normalizing relations
with Myanmar, appointing an Ambassador to ASEAN
-  Commercial diplomacy, such as hosting APEC, ratifying US-
KORUS FTA, and launching the TPP negotiations

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 How is the TPP Different?

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§  The TPP is the most ambitious FTA to date in terms of the sheer volume of global
GDP and international trade flows it seeks to cover.
§  The TPP is being touted as a “high-standard agreement” meaning “a landmark,
21st-century trade agreement, setting a new standard for global trade and
incorporating next-generation issues”
§  The TPP negotiations are taking place across twenty-nine chapters and as part of
a single undertaking.
§  So-called "key elements" including the notion of comprehensive market access,
a fully regional agreement, cross-cutting issues (regulatory coherence,
competiveness and business facilitation, small and medium sized enterprises, and
development), new trade challenges (particularly rules on state owned
enterprises); as well as, finally, the notion of a living agreement.

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 How is the TPP Different?

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The approximately 25 negotiating groups that have reportedly been formed are focusing on achieving
different legal texts and negotiating outcomes on, inter alia, the following areas:
-  Competition,
-  Cooperation and capacity building,
-  cross-border services,
-  Customs,
-  E-commerce,
-  Environment,
-  Financial services,
-  Government procurement,
-  Intellectual property, investment, labor,
-  Legal issues,
-  Market access for goods,
-  Rules of origin,
-  Sanitary and phytosanitary standards (SPS),
-  Technical barriers to trade (TBT),
-  Telecommunications,
-  Temporary entry,
-  Textiles and apparel, and t
-  Trade remedies.

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 How is the TPP Different?

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§  In terms of international treaty commitments in areas that have thus far eluded multilateral trade
rules, the TPP seems to harbor the prospect of a new textual template that will set the tone in
both the Transatlantic Trade and Investment Partnership currently getting started between the EU
and the US, as well as - further down the road - future trade and investment agreements.
§  These “new” areas include the following:
-  Regulatory coherence,
-  State-owned enterprises,
-  Government procurement,
-  Competition,
-  Investment,
-  E-commerce,
-  Environment and
-  Labour.

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 How is the TPP Different?

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In areas that have long been part or were recently brought within the purview of
multilateral trade rules, the TPP seems to promise more far-reaching
commitments with regard to contracting parties' policy space and regulatory
autonomy, particularly in policy areas such as:
§  Export taxes and restrictions,
§  Subsidies,
§  Sanitary and phytosanitary measures,
§  Technical barriers to trade,
§  Trade in services,
§  Intellectual property rights.

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 What are some of the controversies
surrounding the TPP?
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§  Probably the biggest controversy surrounding the

TPP is the unprecedented secrecy it is being
negotiated under.
§  In bilateral FTA negotiations, there’s usually a great
deal of secrecy surrounding negotiating texts.
§  But in the WTO, the negotiating texts are circulated
to all 159 Members, so that they inevitably make it
into the public domain sooner rather than later.
§  In the TPP, which in terms of its scale covers about
40% of global GDP, the secrecy that these talks
have been conducted under has been criticized by
all elements of the political spectrum.

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 What are some of the controversies
surrounding the TPP?
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Other areas that have drawn criticism from various sources include the following:
§  Intellectual property where proposals put forward by the US seem to favor established
players that long ago managed to capture USTR such as Big Pharma, and Big
Hollywood.
§  State-owned enterprises and government procurement where some elements of civil
society feel that proposed rules would curtail the ability of public entities to provide
essential services in areas like medical care, education.
§  Investor-state dispute settlement in the investment chapter
§  Carve outs with regard to certain areas (investment, IP) on health policy grounds
§  The lack of binding rules on currency manipulation

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 Likely scenarios going forward

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§  The December 2013 deadline for completing the negotiations has been
missed, what now?
§  US President first needs to obtain Fast Track Negotiating Authority which
could be complicated by up-coming congressional mid-term elections
§  Applications from additional countries (e.g. South Korea) to join could slow
progress even more
§  US presidential legacy shopping likely to kick in seriously after the
Congressional Mid-Terms which could see a more focused drive by the
Obama Administration

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 Broader implications for the global
trading system
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§  Is this just a China-containment strategy or is there more to this than that?
§  The implications of a new set of treaty templates (TPP and TTIP) that would
then be capable of being multilateralized at the WTO
§  Relationship between RCEP and TPP (competing or complementary visions
of a new trade architecture for the region)
§  Can other big economies in the Asia-Pac region afford to stay out of the TPP?

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 Findings and Conclusions

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§  The TPP talks are likely to be concluded this year or the next, certainly in time
for President Obama to ratify the agreement before the end of his term in
2016
§  The agreement that ultimately results will establish rules that sooner or later
all countries, developing and developed will have to follow in one form or
another
§  Countries like Thailand, Indonesia, the Philippines will have to join the TPP at
some point, and are probably not doing themselves any favours by waiting too
long.
§  China will also have to join the TPP at some point, after which there would be
little point to not multilateralizing many of the Agreement’s rules at the WTO
(especially if the EU is conducting much of its trade according to similar
rules).
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