Pacific Trade Deal Is a Big Deal, With U.S. or Not: QuickTake
(Bloomberg) -- The Trans-Pacific Partnership, though spurned by the biggest of its 12 intended members, never went away. Prospects for the trade pact looked bleak when President Donald Trump withdrew the U.S. last year. But leaders including Japan’s Shinzo Abe and Australia’s Malcolm Turnbull worked through a series of disputes to forge an agreement to keep the framework alive. The TPP (with a new tongue-twister of a name) will prove an economic and political force -- and a rival to a proposed new trade agreement including China -- with the U.S. or without. And now it looks like the U.S. might return to the fold.
1. What is the new TPP?
It’s much like the original agreement in 2015, expanding free-trade rules beyond agriculture and services, embracing the digital economy and adopting stronger protections for intellectual property. Unlike a traditional trade deal that merely covers the exchange of goods and services, there are broader requirements in areas such as labor issues, the environment and government procurement. The wording agreed to in Tokyo in January was essentially the same as before, but with some of the nitty-gritty suspended; for example, investors’ ability to sue governments will be cut back and copyright protection will not need to be extended as previously planned.
2. What’s it called and when will it start?
The old TPP is now the CPTPP, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Trade ministers from the 11 nations that stuck with TPP talks -- Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam -- signed the CPTPP agreement in Chile on March 8. At least six countries or 50 percent of the signatories must then ratify the agreement for it to come into force. Japan hopes this will happen in 2019.
3. What will the economic impact be?
The 11 members combined account for about 13 percent of global gross domestic product -- a little over half the U.S. share of 24.5 percent. But each can expect additional growth in national income of about 1 percent on average by 2030, according to an analysis by Professor Shujiro Urata of Waseda University in Tokyo.
4. Can other countries join the new deal?
Yes. It’s an open agreement with the flexibility to include others. Thailand, Indonesia, South Korea, the Philippines and Taiwan have all indicated interest in joining, as has the U.K.
5. Might the U.S. join it?
That’s hard to tell and is up to Trump. In January, he said he “would do TPP if we made a much better deal than we had," and on April 12, he told U.S. lawmakers he’s considering rejoining the pact. Australia’s Turnbull had already said that the new 11-nation deal is designed to “re-admit a member like the U.S. that chose to pull out.” And 25 senators from Trump’s own Republican Party sent Trump a letter asking him to “re-engage with the Trans-Pacific Partnership.” Whether the U.S. is in or out has implications for major nations inside and outside of the new deal, including Japan and China.
6. What role does Japan have in the new TPP?
As by far the largest economy in the group, Japan took the initiative to persuade others to keep the deal alive -- hosting most of the meetings, for instance. One of the main reasons was Abe’s hope of getting the U.S. back in. Japan is seeking to defend the rules-based economic order in the Asia-Pacific region to counter China’s growing sway, at a time when the U.S. appears to be paring back its influence.
7. Might China play a role in the new TPP?
China hasn’t shown serious interest in joining it and has been in talks for another trade agreement, the Regional Comprehensive Economic Partnership, or RCEP. If the 16-nation RCEP had come into being in a TPP-free world, China would have enhanced its regional dominance, giving President Xi Jinping a platform to further draw his Asian neighbors into his embrace. Instead, China must compete with Japan at the head of a rival trading group.
8. What’s the status of the RCEP?
Despite the fact that it is less far-reaching in scope than TPP (it’s more of a traditional trade pact), negotiators have struggled to make progress since the first round of talks in 2013. India and Southeast Asia’s Asean countries agreed in January to “intensify efforts in 2018 toward the swift conclusion” after missing previous deadlines. Philippine Trade Secretary Ramon Lopez said last year a signing could come in 2019.
The Reference Shelf
- The revived TPP shows free trade goes on without the U.S., Daniel Moss writes for Bloomberg View.
- A Bloomberg View editorial on the new TPP.
- An ex-U.S. president has a very different view to the current one.
- New Zealand outlines the differences between CPTPP and TPP.
- China is hoping for a "bumper year" for new trade deals.
©2018 Bloomberg L.P.