Friday, March 1, 2013

All Aboard for the Trans Pacific Partnership

Meeting in Singapore seeks to push the trade door wider across the Pacific Ocean

Starting Monday, trade representatives of 11 Pacific Rim countries will meet in Singapore over nine days for another round of negotiations over the Trans-Pacific Partnership, the landmark agreement designed to create a major Asian trading block equivalent to the 25-nation European Union, the world's biggest such free trade zone. 

The projected agreement, which has been called "the biggest trade deal you've never heard of," is a core part of the Obama Administration's so-called Asia Pivot. The Congressional Research Service in Washington says that if concluded, "it may serve to shape the economic architecture of the Asia-Pacific region by harmonizing existing agreements with U.S. FTA partners, attracting new participants, and establishing regional rules on new policy issues facing the global economy--possibly providing impetus to future multilateral liberalization under the WTO."

More than 20 negotiating groups involving hundreds of stakeholders have met over 15 previous sessions to develop the texts of the agreement and define specific market access commitments. The document itself now comprises 29 chapters and continues to grow. Stakeholders have been registering for the Singapore conclave to continue to advance the talks.

It a relatively torturous process, moving ahead slowly as other trade negotiations - particularly the Doha Round of agricultural and other trade liberalizations, remains stalled after 12 years. Many nations have in effect ignored the World Trade Organization, which more and more has become a talking-shop, while they negotiate what has been called a confusing "noodle bowl" (spaghetti bowl in Europe) of individual agreements. The US, the chief proponent and architect of the WTO, itself is now contemplating its own bilateral agreement with the European Union after opposing the idea for two decades.

The TPP, as it is known, seeks to develop a comprehensive agreement across a huge geographical and socio-democratic area. It faces a long list of questions, not least in the US Congress, where five years of national economic recession and stagnation have pretty much put paid to any enthusiasm for free trade, especially among the core labor groups that make up the backbone of Democratic Party political support. Nonetheless, the Obama administration has remained largely committed to expanding global trade in the face of protectionist pressures.

The projected trading pact, as it is known, would eliminate tariffs and other barriers to goods and services trade and investment, facilitate the development of production and supply chains among members, promote trade between member nations and foster economic integration and jobs within the region. Over the past several months, the US and eight other eight TPP countries - Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam - have worked with Canada and Mexico to hammer out negotiations.

The big question is whether Japan will bring the world's third-largest economy into the US-led agreement. On Feb 22, during meetings in Washington, DC attended by Japanese Prime Minister Shinzo Abe, the US and Japan issued a careful statement leaving open the entry of Japan into the talks while allowing the country to protect its rice sector while the US could maintain duties on Japanese cars. That illustrates the problems the US faces with Japan.

Tokyo is believed unlikely to join, however, and the US Congress is likely to stand in the way of any concessions.

"Whether to pursue TPP candidacy is a decision that Japan has to make; certainly the United States and other TPP partners have been consulting with Japan on their willingness to strike a comprehensive, high-standard agreement. Also, the United States has been consulting on bilateral issues of concern." A trade representative spokeswoman said in an email interview.

Critics in the US, chief among them former Reagan Administration trade councilor Clyde Prestowitz, say bringing Japan into the TPP would increase the US trade deficit by reducing tariffs in key industries such as autos without gaining reciprocal reduction of non-tariff barriers in Japan that effectively keep many Japanese markets closed.

While the US Congress appears unlikely to go along with any agreement that doesn't pry open Japan's farm and car markets, Japan regards as both of those markets as sacrosanct. Abe has vowed to take dramatic steps to revive Japan's economy with an expansive monetary policy, government spending and structural reform. There is little sign, however, that Abe, a Japanese nationalist, will take any steps that would break down more of the walls of Japan's mercantilist economy. His strategy so far has centered on such moves as devaluing the yen to improve Japan's trade position, not open the country's markets. Abe curried the favor of farmers and other groups during his political campaign by promising not to agree to eliminate tariffs. While tariffs have been eliminated on Japanese car imports, US carmakers and labor unions argue that the country maintains non-tariff restrictions that are just as effective.

Also, although the current TPP members have pledged to negotiate an agreement that eliminates tariffs in as many areas as possible, many of the potential parties to the agreement in Asia have hidden behind their own tariff and non-tariff walls to build formidable export-led economies. while keeping the hot breath of competition away from their own favored companies. The decision to allow Japan into negotiations would have to be made by all the current TPP members. The agreement is being negotiated as a single undertaking that covers all key trade and trade-related areas, according to the US Trade Representative's Office in Washington. In addition to updating traditional approaches to issues covered by previous free trade agreements, the TPP includes new and emerging trade issues and cross-cutting issues.

All of the nine countries also have agreed to adopt high standards in order to ensure that the benefits and obligations of the agreement are fully shared. They also have agreed on the need to appropriately address sensitivities and the unique challenges faced by developing country members, including through trade capacity building, technical assistance, and staging of commitments as appropriate.

A set of new, cross-cutting commitments is intended to reduce costs, enable the development of a more seamless trade flows and trade networks between TPP members, encourage the participation of small- and medium-sized enterprises in international trade, and promote economic growth and higher living standards.

The negotiating teams have proposed new commitments on cross-cutting issues in traditional chapters and also have made substantial progress toward agreement on separate, stand-alone commitments to address these issues. Asia Sentinel

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