The global trading system is in a state of fluidity with the proliferation of preferential trade agreements (PTAs) and difficulties in concluding the Doha Round which have impeded the WTO from being able to renew its rules for commerce in the twenty-first century. In an attempt to forge new rules to promote trade and commerce where the WTO has so far been unable, countries in the Asia Pacific region are negotiating an ambitious plurilateral agreement called the Trans-Pacific Partnership (TPP).
The Trans-Pacific Partnership: A Quest for a Twenty-first Century Trade Agreement is a 20 chapter collection of analyses from specialists on various aspects of the TPP, including politics, economics, and international trade law. The book covers almost all aspects of importance to the TPP and is the most comprehensive and authoritative book on TPP to date.
The book was published after the Honolulu APEC meeting in November 2011 where the TPP was originally targeted for conclusion after a year and a half of negotiations. Negotiations are still underway as of Bali's hosting of APEC in October 2013. The risk with a book such as this is that it becomes outdated quickly. Yet, despite some of the details having changed, the main issues and analyses in this book are as relevant today as when it was written.
Unlike many other edited volumes, this one is comprehensive and well designed, with few if any gaps in coverage – an impressive achievement given the 29 TPP chapters supposedly under negotiation but also given the vastly differing aspects of the agreement from services trade, traditional market access issues, development issues, the TPP's relationship to APEC, and importantly how the TPP fits into, relates to, and potentially pushes the multilateral trading system. With an agreement of potential significance to Asia-Pacific and global trade, there are important geopolitical implications as well, which are touched upon throughout the volume. Yet the book sensibly focuses on the trade and economic issues, with the US rebalance towards Asia very much part of the context.
As is often said in respect of PTAs, the TPP can be an important building block towards multilateral trade or it could be a stumbling block. Very few PTAs have turned out to be building blocks towards furthering the multilateral system. They have also failed to be major stumbling blocks as they have largely not impacted trade positively or negatively in a significant way given the low utilization rates and the limited liberalization in services or investment.Footnote 1 The TPP has the potential to be a game-changer in that it could significantly affect trade and investment flows, either positively or in a diversionary way.
Trade in the twenty-first century is characterized by supply chains that require not only free trade at the border but confidence in the investment and regulatory environments. The book assesses different aspects of the TPP against those realities. The authors take stock of the negotiation parameters from the early stages of the TPP process and then benchmark those frameworks against both common practice in PTAs and ideals that would make a true high-quality agreement for trade, investment, and commerce in the region. Areas that appear to be falling short of an ideal outcome – and there are many across the range of elements in the TPP – are highlighted with recommendations for preferred outcomes. Useful and practical suggestions are made in areas where difficult issues might lead to the exclusion of some countries, such as in investor-state dispute settlement provisions, or a watered down agreement, such as rules of origin or traditional goods market access.
The volume is split into three parts. It first looks at the origins of the TPP, including its ‘P4’ (Trans-Pacific Strategic Economic Partnership Agreement, between Brunei Darussalam, Chile, Singapore, and New Zealand) origins and at the context of the development of US PTAs. It then examines specific elements of the TPP such as goods trade, rules of origin, intellectual property rights, and regulatory coherence. Finally, the third main part relates the TPP to the broader regional and global context of trade and commerce reform.
While the original P4 agreement is widely believed to be an open, liberal agreement which was the template for the TPP, Gao in Chapter 4 assesses that assumption and demonstrates that the politically easier route, which the negotiating members seem to have taken, is essentially to start from scratch rather than transplant the P4 framework over to the TPP negotiation. Some of the most promising features of the P4, such as easy and open accession, will be major challenges for the TPP. Indeed, Gao casts doubt on whether the TPP can be a truly ‘living’ agreement and address new issues in trade and cross border business as they arise as well as add new members, as the rhetoric of its proponents would suggest.
Many aspects of the TPP are, as the editors describe in the introduction, a double edged sword which makes future integration simultaneously more and less difficult. As the book recognizes, the key goal is a high-quality agreement that is not watered down. The TPP has succeeded in expanding membership from nine negotiating members at the time the book was written to 12 with the addition of Canada, Mexico, and Japan, but Canada and Mexico each had some difficulty in joining despite already being part of NAFTA. Expanding membership will be much more difficult once the agreement is completed.
The book has as an underlying sub-text which worries about the extent to which some measures or provisions in the TPP can be beneficial to non-members. One of many examples is in bringing regulatory coherence to sanitary and photosanitary rules. The challenge is to do so in a way that increases transparency and embraces rules while also being non-discriminatory toward non-TPP firms. Yet those rules need to be consistent with other rules and norms being developed globally through the WTO or other regional groupings.
Of importance to the region and the TPP is not only eventual inclusion of non-member countries but also inclusion of new players within those member countries. As the book points out, most small and medium enterprises (SMEs) do not utilize the provisions in PTAs because the compliance costs for rules of origin are high and thus trade frequently happens outside the framework of the PTA. The challenge for the TPP is to finalize an agreement that will allow new SMEs to join regional supply chains, and not simply result in a few large multinational enterprises with lobbying power gaining privileged positions in foreign markets.
Opening up markets with ‘no exception’, as the TPP promises, is a high bar to reach, as the chapter on market access in goods describes. While the extent of liberalization will not be known until the agreement is finalized, and one could reasonably predict market access being held off the negotiating table from the beginning of negotiations in sensitive sectors, the end-game test is how many of these sectors are liberalized. Past experience would suggest that comprehensive liberalization including sensitive sectors is not the most likely outcome; getting stuck on ‘traditional’ border barriers may also turn out to be an Achilles heel for the twenty-first century agreement. Worse, from almost the beginning, negotiators opted for a second-best approach to rules of origin within the TPP. The chapter details the different approaches taken by different countries in PTAs and shows the TPP heading towards a less than high-quality agreement by not having a sufficiently liberal regime.
Market access gains in services are recognized as potentially modest in the TPP. The exceptions, as Harbinson points out, are Malaysia and Vietnam. Japan could be added to the list as a major success for TPP (and for Japan) if it offers liberalization of its services sector.
The chapters on regulatory coherence, labour standards, and environmental standards take stock of negotiation proposals, likely outcomes, and best practice or best-case scenarios. In most cases, the TPP is ambitious and unlikely to conclude with the best-case outcome but would still be beneficial to members. The chapter on intellectual property rights warns of protections that are too strong, which would stifle innovation and competition. That is an area where the TPP should be less ambitious and proceed with caution.
Two pathways towards a Free Trade Area of the Asia Pacific (FTAAP) are discussed in detail in Chapter 15. The Asian track of ASEAN plus China, Japan, and Korea (ASEAN+3), plus perhaps Australia, India, and New Zealand (ASEAN+6) or the TPP represent potential ways forward. With the ASEAN plus process launching a Regional Comprehensive Economic Partnership (RCEP) agreement among the ASEAN+6 grouping since the book has been published, the chapter is somewhat farsighted. That chapter and others assess the TPP alongside other regional and global arrangements. Among these is the chapter by Low on the GATT/WTO.
The proliferation of PTAs and the development of regional trade agreements have occurred in the absence of clear or robust WTO rules regarding how they should be governed. The TPP and other regional agreements are a bottom-up approach to consolidating the many overlapping PTAs, but Low considers that approach in the context of an alternative top-down approach through the WTO, in an analysis of how to multilateralize regionalism. He argues that a top-down approach would be issues based (not restricted to geography) and go a long way towards making progress without discrimination (through preserving the pre-eminence of the WTO's MFN Article 1).
Trans-Pacific Partnership: A Quest for a Twenty-first Century Trade Agreement is a mix of new ideas for regional and global trade and provides a synthesis of trade issues being negotiated within the TPP. It brings recent developments to bear on the analysis of critical issues. Finally, it provides the reader a benchmark by which to assess the TPP as it unfolds as well as a framework for how think about where the TPP sits, or should sit, in the global trading system.
