The 11 remaining signatories to the Trans-Pacific Partnership have reached a broad agreement on a renegotiated version of the trade pact that does not include the U.S. The TPP 11, as they are called, have kept intact key provisions from the original 12-member deal, including those reducing or abolishing tariffs, though they have agreed to freeze a few others.
The 11 members call the new deal the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP. The original TPP was in danger of breaking down when U.S. President Donald Trump's protectionist-leaning administration withdrew the country from the deal. Now the TPP 11 are transforming that agreement into a new trade pact forged on their own initiative.
Trade ministers from the TPP 11 reached a broad agreement on the CPTPP when they met in the central Vietnamese city of Danang earlier this month. Leaders from the 11 members intended to confirm that agreement at a summit, but this had to be postponed after Canada expressed reservations. Eventually, however, the TPP 11 released a joint statement by the ministers saying they "have agreed on the core elements."
Japan deserves credit for playing the leadership role in the talks to salvage the TPP.
Without the U.S., the world's largest economy, the free trade zone formed by the CPTPP will be much smaller in scale and economic impact. Even so, the 11-nation deal has great significance.
First, the new pact is about much more than eliminating tariffs: It also sets extremely high-standard trade and investment rules.
Some of the rules in the original TPP deal, such as protection periods for pharmaceutical test data, had been included to satisfy U.S. demands. The 11 remaining members have agreed to put a number of these rules on hold until the U.S. returns to the pact, should that ever happen.
CORE IDEAS INTACT The new deal has retained key elements from the original TPP, however, including ensuring the free cross-border flow of data used in e-commerce. A pact that maintains such vital components of the original agreement will be a boon for companies pursuing global strategies.
Second, the revamped TPP may stimulate ongoing negotiations for other free trade agreements, such as the Regional Comprehensive Economic Partnership pact, by encouraging negotiators to aim for a higher degree of trade and investment liberalization.
Third, the new accord may be of particular benefit to Japan. If Washington presses for a bilateral free trade agreement, Tokyo can use the CPTPP pact as a bulwark against any unreasonable demands, arguing that it is in no position to make any concession beyond what it did in the multilateral deal.
It is hard to expect that the U.S. government will want to rejoin the TPP anytime soon. Even so, we hope Japan and the other 10 members will tenaciously try to persuade Washington to return.
The TPP 11 are expected to sign off on the final text of the deal as early as the first half of next year. Whether this will happen smoothly is uncertain, however, due in part to four unresolved issues, including Canada's call for a cultural exception provision and questions over how to treat Malaysia's state-owned enterprises. There is also no guarantee that ratification will make headway in individual countries, including New Zealand, where a change of government recently took place. At least six members must ratify the pact for it to go into effect. The hope is that the TPP 11 will make the utmost effort to bring the new accord into force as soon as possible.
Once that is accomplished, the challenge for the TPP 11 will be to open the door to other economies, such as South Korea, Taiwan, Thailand and the Philippines. The new TPP can be a significant stepping stone for building a broader high-quality free trade zone in the Asia-Pacific region.