The Trans-Pacific Partnership is back, even after being spurned by the biggest of its 12 intended members. When President Donald Trump withdrew the U.S. a year ago, the prospects for the trade pact looked bleak. Instead, leaders from Japan’s Shinzo Abe to Canada’s Justin Trudeau worked through a series of disputes to forge an agreement to keep the framework alive. And while the hope is that the U.S. will return to the fold, the TPP -- with a new, tongue-twister of a name -- will prove an economic and political force in its own right. And one that doesn’t include China.
1. What is the new TPP?
It’s much like the original agreement in 2015, expanding free-trade rules beyond agriculture and services, embracing the digital economy and adopting stronger protections for intellectual property. The wording agreed in Tokyo this week is essentially the same, but with some elements (for example, dispute settlement) suspended. The bottom line: Unlike a traditional trade deal covering the exchange of goods and services, it also locks in other requirements, from labor issues and the environment to government procurement.
2. What’s it called and when will it start?
Trade ministers from the 11 remaining nations -- Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam -- intend to sign up in Chile on March 8. At least six countries must then ratify the agreement for it to come into force. Japan hopes this will happen in 2019. The new name? The Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP.
3. What will the economic impact be?
The 11 members combined account for about 13 percent of global gross domestic product -- a little over half the U.S. share of 24.5 percent. But each can expect additional growth in national income of about 1 percent on average by 2030, according to an analysis by Professor Shujiro Urata of Waseda University in Tokyo.
4. What does it mean for Japan?
As by far the largest economy in the group, Japan made much of the running in negotiations, showing it can tread its own path on trade even while relying on the U.S. in terms of national security. It’s seeking to defend the rules-based economic order in the Asia-Pacific region to counter China’s growing sway, at a time when the U.S. appears to be paring back its influence. China hasn’t shown serious interest in joining the CPTPP and has been in talks for another trade agreement called the Regional Comprehensive Economic Partnership, or RCEP.
5. What does the new TPP mean for China?
A lost opportunity. If the 16-nation RCEP had come into being in a TPP-free world, China would have enhanced its regional dominance, giving President Xi Jinping a platform to further draw his Asian neighbors into his embrace. Now, China must compete with Japan at the head of a rival trading group.
6. Does it affect talks on RCEP?
It may suck out some of the momentum, according to Stephen Nagy, a Tokyo-based fellow with the Asia Pacific Foundation of Canada. Countries like New Zealand may insist on a higher-quality deal and it may be harder to get India to agree to dismantle its import tariffs and allow entry of duty-free Chinese goods. China is busy negotiating more than a dozen trade agreements and is focused on Xi’s pet project, a web of projects from Asia to Europe called the Belt and Road Initiative.
7. Can other countries join the CPTPP?
Yes. It’s an open agreement with the flexibility to include others. Thailand, Indonesia, the Philippines and Taiwan have all indicated interest in joining, as has the U.K. South Korea is a party to RCEP negotiations, but has also talked about joining TPP.
8. What does the CPTPP mean for Nafta?
The North American Free Trade Agreement is another of Trump’s punching bags -- the new TPP is unlikely to change that. Under the CPTPP, Canadian automakers will include more Chinese auto parts in Canadian-made vehicles destined for the U.S. That runs counter to Trump’s plan to raise the Nafta share of a typical car built in the U.S., Mexico or Canada to 85 percent, from 62.5 percent currently -- including 50 percent in the U.S.
Source: Bloomberg
Key words: a TPP, without, U.S., a big deal
