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Tough road ahead for 'TPP 11' even with New Zealand on board

New prime minister's shift eases path, but issues remain on about 50 provisions

Exiting the TPP 11 would leave New Zealand out of the broader movement toward free trade, a dairy industry body warns.

TOKYO -- Though a Trans-Pacific Partnership without the U.S. appears more likely now that New Zealand's new leader has softened her stance, the chances of reaching a broad agreement in November rest on negotiators resolving which of dozens of parts of the trade pact should still apply.

"We have only a very short time left," Atsuyuki Oike, Japan's acting chief negotiator, told peers from the other 10 remaining TPP nations Monday afternoon. The group has gathered outside Tokyo to settle questions on how the multinational deal would take effect after the U.S., its largest participant, announced its withdrawal in January. Members have requested that about 50 provisions be suspended in response to that move.

Leaders and TPP ministers from the 11 countries aim to reach a broad agreement when they meet in Vietnam starting Nov. 8 on the sidelines of the Asia-Pacific Economic Cooperation summit. Producing a workable text by that time will require all involved to "show some flexibility," as Oike urged his fellow negotiators to do.

All on board

Prospects for the "TPP 11" have brightened. New Zealand, one of the four original TPP nations, seemed on the brink of abandoning the effort after a September election that led Jacinda Ardern to become prime minister. Ardern, who took office Thursday, called during her campaign for the trade deal to be renegotiated, arguing that the country needs to restrict sales of existing property to foreigners as a means to curb surging real estate prices. The existing agreement prohibits such rules.

But Ardern shifted Monday, saying Wellington is "no longer in this binary position of choosing" either the TPP or restrictions on property purchases. New Zealand's dairy industry, which would enjoy greater access to global markets under the trade pact, leaned heavily on the new government to proceed with the deal. Ardern has met periodically with officials including Trade Minister David Parker since taking office, and she apparently has accepted some accommodation to domestic producers.

New Zealand's farm-driven economy needs to increase agricultural exports. The country has fallen far behind neighboring Australia in efforts to tap the Japanese market, due largely to an economic partnership agreement between Canberra and Tokyo. Exiting the TPP 11 would leave New Zealand out of the broader movement toward free trade, warned Malcolm Bailey, chairman of the Dairy Companies Association of New Zealand, or DCANZ.

Devil's in the details

But New Zealand's softening solves just one of the many problems negotiators must address. Countries still need to determine which portions of the original TPP agreement will be suspended in response to the U.S. withdrawal, and they have around 50 sections left to consider, including contentious points such as eliminating textile tariffs and rules for settling disputes between states and investors.

Vietnam, which has been wary of proceeding without the U.S., has released a list of provisions it seeks to freeze. These include a ban on restricting international trade in e-commerce data. The prohibition conflicts with a bill under debate in Vietnam that would require personal information and other e-commerce data to be stored on servers physically located in the country.

Japan is a leading proponent of the ban, meant to ensure the free flow of data across borders. Tokyo's negotiators seem set against any changes: The rule "is central to the TPP's mission," an official at the Ministry of Economy, Trade and Industry said.

The TPP allows for exceptions on national security and other grounds, and a source close to the negotiations speculated that a carve-out could be made for Vietnam's domestic legislation. But this and many other matters must be settled soon for a broad agreement to be reached next month. One source involved in negotiations said the goal is to resolve more than half of the remaining issues at the working level before taking the rest to ministerial-level talks.


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