After more than five years of talks, representatives from 12 Pacific Rim countries finalized a deal on the Trans-Pacific Partnership (TPP), the deepest and most important multilateral trade deal in years. The trade pact aims to liberalize commerce and investment between the countries, which account for nearly 40 percent of the world’s economy. If the TPP realizes its ambition to “define the rules of the road,” it could prove to significantly reshape various industries globally.
Representatives settled the remaining tough issues over late-night discussions last weekend, in the final round of closed negotiations in Atlanta. One of the issues negotiated requires cars and trucks to contain 45 percent TPP member-origin content to benefit from tariff cuts under the deal. However, the agreement takes a more complex approach for auto parts and components, with required TPP member-origin content ranging from 35 to 45 percent. Meanwhile, the U.S. secured a 25-year tariff phase-out for Japanese autos and a 30-year phase-out for trucks. However, hard as it is to dismantle tariffs and increase access to foreign markets, one of the treaty’s most touted features is the minimum standards it establishes for the protection of intellectual property, workers, and the environment. The complete text of the TPP will be available for public release after the technical work, including legal review, translation, drafting, and verification as expressed by the joint statement from the trade representatives.
Some of the negotiators’ leaders will be particularly pleased to see the deal completed against the backdrop of presidential campaigns in their countries. President Barack Obama views the TPP as a capstone both for his economic agenda of expanding exports and for his foreign policy “pivot” towards Asia. For Shinzo Abe, Japan’s prime minister, the TPP promises to not only help Japan’s economic revitalization, but also form a “coalition of the willing” to set the next generation of trade rules before China fully dominates the arena.
Nevertheless, the conclusion of the TPP is merely “an important first step,” as U.S. trade representative Michael B. Froman remarked, for the deal still needs to be approved by lawmakers in the 12 participating countries. And many lawmakers are likely to resist the changes included in the new agreement. For example, the TPP is expected to shake up Japan’s agricultural sector due to its agricultural liberalization provisions. Moreover, both Canadian auto manufacturers and dairy farmers may protest the jobs and revenue lost from diminished state protection. The TPP’s fate in the U.S. Congress is also highly uncertain given the threats it poses to manufacturing jobs, safe food, and affordable medicines and the narrow margin by which the Trade Promotion Authority passed.