TPP Replacement Takes Effect, Producers in Non-Member U.S. Already Apprehensive

MSC Astrid container ship. Photo by Bernard Spragg.

With fights over walls boiling in Washington, history was made this weekend as some barriers across the world began to come down.

As of 12 a.m. Australian Eastern Daylight Time on Sunday (8 a.m. EST on Saturday), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, also known as the TPP-11, became official. The United States, once the driving force behind the deal, was uninvolved.

The CPTPP is the successor of the now-defunct Trans-Pacific Partnership. Signed in February 2016, the TPP was never ratified by Congress and therefore did not take effect. And in a final blow to the deal, President Trump carried out one of his chief campaign promises soon after taking office and issued an executive order withdrawing the United States from the pact in January 2017.

But the rest of the world moved on, and shortly afterwards, the remaining 11 signatories agreed to revive the deal. The resulting agreement entered into force 60 days after the sixth nation (Australia) ratified it.

Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam are all officially party to the agreement, which was originally designed to economically snub China until it met certain standards. Those countries who have currently ratified the deal include Mexico, Japan, Singapore, New Zealand, Canada, Australia, and Vietnam.

Notably, the agreement was formally signed in March 2018, on the same day President Trump imposed tariffs on aluminum and steel imported from everywhere except Canada and Mexico.

Despite the CPTPP’s origins, though, it differs from the TPP in a number of ways – perhaps, most significantly, in terms of scale:

The TPP would have established by far the world’s largest free trade zone, covering roughly 800 million people and about 40 percent of the world’s economic output. The remaining members of the CPTPP, by contrast, represent a combined population of nearly 500 million people and more than 13 percent of global trade.

That still makes for the third-largest trade bloc in the world, behind only the North American Free Trade Agreement and the European Union, according to data cited by Japan’s Nikkei.

NPR

The new agreement also suspends 22 provisions the United States sought to include in the original TPP. These involve many free market protections and include the following, among others:

  • Rules allowing for investor-state dispute settlement (ISDS), which enables companies to sue foreign governments over onerous regulations
  • Advanced regulations protecting intellectual property, under which participating countries were required to recognize a copyright’s existence for its author’s lifetime plus 70 years, as is the case in the United States
  • Reviews of express shipping thresholds, which would keep foreign shipping monopolies in check
  • Provisions that restricted the powers of government agencies in negotiating prices with pharmaceutical companies
  • A number of investment agreements and authorizations pertaining to oil and other raw materials

More details about these suspended provisions can be found here and here.

For countries participating in the CPTPP, tariffs will be phased out over a 15 year period. This means that products shipped between member nations will receive a greater market share, while American products such as Welch’s grape juice and Tyson’s pork, for example, will face import restrictions in these countries.

Particularly vocal in their concerns, according to SBS News, have been American wheat and beef producers, who are worried about what some consider an “imminent collapse” in overseas markets:

“Japan is generally a market where we seek to maintain our strong 53 per cent market share, but today we face an imminent collapse,” US Wheat Associates President Vince Peterson told a public hearing held by the US Trade Representative earlier this month.

“Frankly, this is because of provisions negotiated by (former US president Barack Obama’s administration) for our benefit under the Trans-Pacific Partnership.

“Our competitors in Australia and Canada will now benefit from those provisions, as US farmers watch helplessly.”

The National Cattleman’s Beef Association voiced similar apprehension, forecasting that exports to Japan (the top market for US beef) will be undercut by its Australian competitors, who will see Japan’s 38.5% beef tariff reduced by 27.5% in the first year under the agreement.

Some members of the CPTPP, such as Australia and Japan, have left open the possibility for the United States to enter the trade deal, should it agree to terms.

“They’re trying to say, ‘We’re moving forward and we hope you come to your senses at some point and join us, too’,” Phil Levy told CNN. Levy is a senior fellow at the Chicago Council on Global Affairs and served as a senior economist for trade under President George W. Bush.

President Trump expressed openness to rejoining the TPP in January 2018 and again in April if the deal were “substantially better.” In February, Treasury Secretary Steven Mnuchin reportedly echoed those sentiments in a summit meeting sponsored by the US Chamber of Commerce. However, there has yet to be much, if any, progress towards doing so.  Meanwhile, the United States has pressed on with its trade war with China and historical American allies, in Europe and elsewhere.

China, for its part, is reportedly weighing whether to join the CPTPP itself, according to a source close to the government. Such a move, though not yet publicly under consideration, would allow China to curb much of the economic impact of America’s tariffs and greatly boost its standing in the global community.

What might be the most remarkable aspect of this whole agreement, though, is the fact that its members struck the accord without the input of the United States, traditionally considered the world’s foremost proponent of free trade. After all, this is not the final massive trade deal for Japan as the new year approaches: the EU-Japan Economic Partnership Agreement, under which tariffs on 94% of Japanese goods and 99% of EU products are to be abolished, is set to take effect beginning February 1, 2019.

Deborah Elms, executive director of the Asian Trade Center in Singapore, summed up this trend quite succinctly:

“It shows how upside-down our world has become that the U.S. – which drove the [TPP] initiative from the early days, stood to benefit from it significantly, and will be harmed by being out of it – has pulled out and gone in the completely opposite direction. The U.S. has ceded its leadership on trade to Asia.”

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About TheStig 48 Articles
Likes going in circles but never getting anywhere. So basically politics.