In April, three U.S. dairy organizations sent a letter to Congress urging lawmakers to back the Trans-Pacific Partnership, or TPP — the free trade accord signed two months earlier by 12 countries that together represent around 40 percent of the global economy and a third of world trade. The dairy organizations said the agreement would create tens of thousands of jobs in their industry alone and could help to “support the continued growth of a robust U.S. dairy industry.”
In other words, they were saying the TPP is great for milk and cheese. But there are others who say it’s as foul as spoiled milk and cheese. The agreement, which is said to be the most comprehensive (and longest) trade deal ever put together, took more than five years to negotiate. But its signing on Feb. 4 did not mean that it is now in force on either side of the Pacific.
The signing ceremony in Auckland, New Zealand, simply signaled that the negotiation phase was over, New Zealand Trade Minister Todd McClay said. Now comes the hard bit as all 12 countries that signed the agreement — Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam — “begin their respective domestic ratification processes,” McClay explained. They have two years to do that “before the agreement enters into force,” he added.
If the way he said that makes you think that the TPP will come into force even if it is not ratified by all 12 signatories, you would be right. All 12 ratifying within two years would be the easiest way for the TPP to come into effect — it would do so two months after the last country OKs the deal. But the more plausible scenario is that all 12 will not ratify, which you might think means the deal is dead in the water. It doesn’t. If at least half the signatories ratify, and if the combined economies of those six or more countries are worth at least 85 percent of the cumulative GDP of all 12 TPP signatories, the TPP will take effect.
Based on a World Bank tally of GDPs of countries around the world (the information was updated in April 2016 but is from 2014), the combined GDP of all 12 TPP signatories is $28 trillion. More than $17.4 trillion of that, or 62 percent, is generated by the United States. Eighty-five percent of the cumulative GDP is $23.8 trillion, so clearly the United States has to ratify the TPP for the deal to have a chance to take effect.
The path of least resistance for TPP, other than all 12 countries ratifying, would be for the United States, Japan ($4.6 trillion GDP), Canada ($1.8 trillion) and any three other countries to ratify. If, however, the United States does not ratify the deal, all the other 11 countries would have to do so in order to fulfill the 85 percent requirement. If the second-biggest economy in the TPP, Japan, and the biggest, the U.S., do not ratify the deal, the TPP is sunk.
Salvaging a Historic Accord
President Barack Obama hopes that last scenario doesn’t happen. In an opinion piece published in the Washington Post in May, Obama said the TPP would strengthen the U.S. economy and national security; give “private firms … a fair shot at competing against state-owned enterprises”; keep the internet free and open; and “level the playing field by setting the highest enforceable standards and by removing barriers to selling our goods overseas — including the elimination of more than 18,000 taxes that other countries put on products made in America.” This includes products ranging from beef to financial services to automobiles.
“Simply put, once the TPP is in place, American businesses will export more of what they make. And that means supporting more higher-paying jobs,” Obama concluded.
Other supporters, especially those in the business community, have echoed the president’s position that the TPP would give the United States an important economic foothold in the fastest-growing region in the world, where China is pursuing its own trade agreements with Asian neighbors. Politically, the deal could serve as a counterweight to China’s growing clout in the region as part of the president’s strategic pivot of resources to Asia (Beijing is not a party to the pact, although it could feasibly join it down the line).
Obama also points out that the TPP is the “highest-standard trade agreement in history.” He says it contains strong, enforceable labor rules that allow the formation of unions and collective bargaining, as well as provisions that address child labor, strengthen intellectual property protections and curb illegal fishing and wildlife trafficking.
In addition, the TPP could remove tariff and red tape barriers that prevent many small and midsize American businesses from branching out into Asia, where governments have been historically protective of their domestic markets.
TPP advocates in other nations also cite the potential economic boost there. In an opinion piece published in the Japan Times in November last year, Yuriko Koike, former defense minister and national security adviser to Prime Minister Shinzo Abe, said the TPP is “vital to achieve economic liberalization — the third arrow of ‘Abenomics,’ the government’s program to revitalize the country’s ailing economy.”
For example, the deal will make the price of sukiyaki and beef noodle soup fall dramatically, when lower tariffs on beef kick in, Koike said. Import duty on beef will fall from its current rate of 38.5 percent to 27.5 percent during the first year that the TPP is in effect, and eventually to 9 percent in the agreement’s 16th year — a long time to wait for cheap sukiyaki, but probably worth it if you like that kind of thing.
“The legislation to enact the TPP will simply push aside the lobbies and vested interests that have been so effective in slowing down or diverting piecemeal reforms,” she said.
But opponents of the TPP accuse vested interests and lobbies of back-door maneuvering to create a sweeping, byzantine trade pact that will line the pockets of big business while stealing jobs from blue-collar workers and eroding critical environmental and consumer protections.
There is widespread opposition to the deal not only in the United States, but also in Japan, Australia, Mexico and elsewhere.
Canada’s new international trade minister, Chrystia Freeland, said that although she would travel to New Zealand to sign the deal, it was not certain to be ratified by Canada’s Parliament.
“Only a majority vote in our Parliament can allow the agreement to take force,” Freeland said in an open letter posted on the Global Affairs Canada website just days before the TPP was signed. “Signing is simply a technical step in the process.”
Indeed, there are a lot of Canadians, Japanese and Americans — including everyone still in the running for the presidency and both Democrats and Republicans on Capitol Hill — who are adamantly against the deal. Presidential hopeful Hillary Clinton had glowingly positive things to say about the TPP when she was secretary of state but changed her tune during a debate in February with her rival for the Democratic Party nomination, Bernie Sanders, according to Pulitzer Prize-winning website PolitiFact.com.
In 2012, Clinton said the TPP “sets the gold standard in trade agreements to open free, transparent, fair trade, the kind of environment that has the rule of law and a level playing field.” In the February debate, she said she opposed the accord because it “failed to provide the basic safety net support that American workers need in order to be able to compete and win in the global economy.”
Sanders has a document posted on his Senate website that starts with the sentence: “The Trans-Pacific Partnership is a disastrous trade agreement.” The Vermont senator says that under the TPP, U.S. jobs will be lost, the price of pharmaceutical medicines will go up, Wall Street will become richer and ordinary people will get poorer in a “global race to the bottom.”
Republican nominee Donald Trump said at a debate in November that the TPP was a “horrible deal” that was “designed for China to come in, as they always do, through the back door and totally take advantage of everyone.” Apparently, he was unaware that China is not one of the 12 countries that signed the TPP.
Crossing Finish Line
Even if all the pushback to the deal is overcome, ratification in the United States will take time, Kelsey Snell wrote in the Washington Post. First, there’s a 90-day waiting period after the White House formally notified Congress of intent to sign the agreement. That happened on Nov. 5 last year. During the first 30 days of the waiting period, lawmakers reviewed the documents and were able to consult with the administration. In the next 60 days, there was a public access period during which interest groups could comment on the deal. That 60-day period ended right around the time that the deal was signed.
After that, the U.S. International Trade Commission began a full economic review of the deal. It had 105 days to complete the review. According to our calculations, that deadline came up in mid-May.
When the “implementing bill is introduced in the House and the Senate, Congress has a maximum of 90 days to approve or disapprove the trade deal but can move much more quickly,” Snell wrote.
If our counting is correct, that would mean that the TPP could be signed, sealed and delivered — by the United States, at least — by the end of the summer, if everything goes smoothly and there are no obstacles. But, of course, this is Washington, which, even if the U.S. were not in the middle of a marathon presidential campaign, is particularly partisan and divided.
Even traditionally business-friendly Republicans on the Hill — who teamed up with Obama to grant him fast-track authority last year to help push the deal through Congress — have been decidedly lukewarm about handing Obama such a major legislative victory.
Senate Majority Leader Mitch McConnell (R-Ky.), who has previously spoken positively about the TPP, said he has “some problems” with the deal. In an interview with Agri-Pulse, an agriculture-focused newsletter, McConnell said the TPP was unlikely to succeed if it were brought before Congress this year. The Kentucky Republican said he felt the deal “did not treat tobacco fairly and I think the substance of the agreement also did not treat the pharmaceutical industry fairly,” although he did not go into detail on either point, and there are many who would disagree with him. (Health advocates have warned that the TPP, which extends intellectual property rights on drug patents, among other things, could result in price hikes for drugs and smother innovation in the pharmaceutical business. The TPP also does not provide the tobacco industry with the same legal protections as other agricultural sector industries are given.)
But McConnell said the biggest obstacle facing the TPP “is the political environment to pass a trade bill.” In nearly 30 years in the Senate, he said he has never seen such a hostile atmosphere.
“It looks bleak for this year,” he said.
“But the good news is, the TPP doesn’t just go away…. If it’s not dealt with this year, it’s still there to be dealt with next year,” he added, hinting that the United States would not walk away from the deal — but was also in no rush to sign it and give President Obama “bragging rights.”
It’s possible, of course, that Congress could quietly take up the TPP during the lame-duck session — or simply wait until a new president takes office. Even then, though, the next occupant of the White House may be in no rush to embrace the deal.
About the Author
Karin Zeitvogel (@Zeitvogel) is a contributing writer for The Washington Diplomat.