Trade negotiators from a dozen countries are to gather for their 20th official meeting in Ottawa, Canada, starting tomorrow, but all signs are that talks on the Trans-Pacific Partnership (TPP) will not get very far, if anywhere at all.
The meeting is part of a final push for an agreement in time for US President Barack Obama’s visit to Asia for an APEC summit in November. Since this would require members to sign on without fast-track assurance by the US, it is likely that it would set the scene for another long delay.
After many years of trying to build a deep and wide-ranging free-trade agreement (FTA), it is time for the TPP’s would-be members to go back to tried and tested unilateral action. By multilateralizing the accords of their many FTAs, they would do away with having to administer multiple rules-of-origin while enhancing welfare by maximizing trade creation and eliminating trade diversion.
With two-thirds of TPP members’ imports already covered or about to be covered by trade agreements, expanding preferences to remaining countries should not encounter much resistance from trade-pact partners and would finally replace talk with action.
That such an end-run around the Trans-Pacific Partnership can even be floated attests to the doubts bedeviling the concept. There is widespread confusion about why the partnership is taking so long and what it may look like when finally concluded.
A useful starting point in explaining the delay is to look at the countries involved. In 2005, four small economies — New Zealand, Chile, Brunei and Singapore — began talking about a free-trade agreement. It began to grab headlines when the US embraced the Trans-Pacific Partnership in 2009 as part of its “pivot to Asia.” Four other nations joined the discussions — Australia, Peru, Vietnam and Malaysia — followed by Canada, Mexico and Japan.
These 12 countries are a highly diverse group by any measure. Unlike other plurilateral cooperation agreements, the Trans-Pacific Partnership is widely dispersed geographically. It is just as economically diverse.
Of course, the Trans-Pacific Partnership’s delays pale in comparison to another struggling proposed trade pact — the WTO’s Doha Round. However, although there are fewer countries in the Trans-Pacific Partnership compared with the WTO, diversity is not a linear function of the number of countries involved. Where a group includes countries as varied as Vietnam, Mexico, Peru and the US, there is not only a lack of commonality in negotiating positions; negotiators may not even subscribe to broadly similar principles.
Now add into this mix a highly ambitious agenda, to be tackled as a single undertaking. This can make common ground even harder to find.
Moreover, there is the sense of the Trans-Pacific Partnership being an unfair bargain. Never has there been a plurilateral negotiation with an agenda that appears so skewed in favor of one party. The carrot being dangled by the US is improved access to its huge market. However, as half the TPP members already have free-trade pacts in place with the US and the rest trying to conclude one, the incremental benefit is likely small.
Amid all this concern, the hoped-for motivation for genuine reform seems nowhere to be found. One hears of compromise and flexibility, terms unheard publicly during the initial negotiations. Japan made clear recently that it would not necessarily extend all members the same concessions made to the US in agricultural market access.
It appears the Trans-Pacific Partnership is degenerating into a series of bilateral deals, with a US-Japan agreement at its core. The challenge is to present a series of bilateral deals as if they were one comprehensive agreement; so, look out for a lot of “transition periods” and other loopholes.
How then do we move forward? If the Trans-Pacific Partnership is concluded anytime soon, even in a compromised form, any breakthroughs should be multilateralized, or extended to non-members in a non-discriminatory manner. If there is no end in sight, countries must take matters into their own hands. Unilaterally multilateralizing preferences is the only way to salvage something from the process.
Jayant Menon is lead economist in the Office for Regional Economic Integration at the Manila-based Asian Development Bank.
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