Trade

The role of Trans-Pacific Partnership in US trade policy

The role of Trans-Pacific Partnership in US trade policyThe Trans-Pacific Partnership (TPP) is akin to other free trade agreements (FTAs) that the United States (US) has negotiated over the past two decades that are aimed at opening markets and providing new opportunities for US goods, services, and firms.

The TPP is the first FTA to be negotiated by the Obama Administration. The three FTAs (with Colombia, the Republic of Korea, and Panama) that the Obama Administration implemented in 2012 were negotiated and signed by the prior administration.

The TPP will be the most significant FTA that the US has negotiated since the North American Free Trade Agreement (NAFTA) with Canada and Mexico, which entered into force in 1994. In the ensuing two decades, the US has completed negotiations for another 12 FTAs. Including an earlier FTA with Israel in 1985, the US now has implemented 14 FTAs that cover 20 countries.

The US has FTAs with all but four of its TPP partners. In addition to the 1994 NAFTA, the US implemented FTAs with Chile and Singapore in 2004, Australia in 2005, and Peru in 2009. The only TPP countries with which the US does not have an FTA are Brunei Darussalam, Malaysia, New Zealand, and Viet Nam (and Japan when it enters the negotiations).

Like other US FTAs, the TPP is intended to be comprehensive in addressing tariff and non-tariff barriers and ensuring a level playing field for US goods, services, and suppliers. However, the TPP is also intended to be a high-standard, 21st century agreement that will include issues that have not been addressed in prior US trade agreements. They include cross-cutting issues such as increasing regulatory coherence and disciplines on state-owned enterprises.

The US also envisions a broader role for the TPP—that of promoting economic integration in the Asia and Pacific region. This goal was recently reiterated by President Barack Obama’s National Security Adviser, Thomas Donilon: “We always envisioned the TPP as a growing platform for regional economic integration.”

The TPP had a relatively modest beginning as an instrument for economic integration, but it has continued to expand. It began as the Trans-Pacific Strategic Economic Partnership Agreement among Brunei Darussalam, Chile, New Zealand, and Singapore, which entered into force in 2006, with the exceptions of chapters on financial services and investment. In March of 2008, the US joined in three rounds of negotiations on those two chapters. In the fall of 2008, the US, followed by Australia, Peru and Viet Nam announced, their intentions to negotiate participation in the full agreement.

Negotiations on the TPP commenced in March 2010 in Melbourne, Australia with eight countries (Australia, Brunei Darussalam, Chile, New Zealand, Peru, Singapore, the US, and Viet Nam). Malaysia joined the third round of negotiations in October 2010. The TPP negotiations expanded further in the fifteenth round of negotiations in December 2012 with the addition of Canada and Mexico.

The annual trading relationship of the 11 TPP countries is $1.4 trillion. As Donilon observed: “The growing TPP is already a major step toward APEC’s vision of a region-wide free trade area of the Asia-Pacific.”

With the announcement on 15 March 2013 by Japan, the world’s third largest economy, that it was prepared to join the TPP negotiations, the TPP’s potential, as an instrument of economic integration, was significantly advanced. On 12 April 2013, the United States announced that it had completed its bilateral consultations with Japan regarding the TPP, and on 24 April 2013, the Obama Administration notified the US Congress of its intent to include Japan in the TPP negotiations. Following the 90-day U.S. notification period, and the completion of the domestic legal procedures of the other TPP partners, Japan will be able to join the remaining rounds of negotiations starting in July 2013 at the earliest.

The FTAs between the US and six of the TPP partners that have similar obligations will provide an important base for the development of the TPP, and will support and strengthen the aim of integration.

For the countries with which the US has an FTA, the focus in the TPP negotiations will be on expansion of the trade obligations beyond those in the respective FTAs, and will provide an opportunity to address areas and issues not covered in the FTA. For example, the TPP negotiations will provide an opportunity to modernize some of the NAFTA rules, since it is a first generation FTA.

Another US incentive in its drive to position the TPP as an instrument for economic integration is to counter other integration initiatives in Asia that would exclude the US.

The TPP is not the first US FTA with the aim of economic integration. US integration efforts began with NAFTA. That 1994 agreement was very successful in significantly integrating the North American economies. (The NAFTA had superseded an FTA with Canada that entered into force in 1989.) Today, US two-way goods trade with its NAFTA partners exceeds US goods trade with the European Union and Japan combined.

A second agreement that provided elements of economic integration was the Dominican Republic-Central America-United States FTA (DR-CAFTA), which opened markets with Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.

A third effort at economic integration was the attempt by the US, along with its NAFTA partners and most of the countries in Central and South America to negotiate the Free Trade Agreement of the Americas. However, intractable differences arose and that effort was abandoned.

For the US, the TPP builds on its existing trade regime, while at the same time providing a significant opportunity for advancing economic integration in the Asia and Pacific region.
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References:

Office of the United States Trade Representative, 2012 Trade Policy Agenda and 2011 Annual Report of the President of the United States on the Trade Agreements Program, http://www.ustr.gov/about-us/press-office/reports-and-publications/2012-0

Office of the United States Trade Representative, 2013 Trade Policy Agenda and 2012 Annual Report of the President of the United States on the Trade Agreements Program, http://www.ustr.gov/about-us/press-office/reports-and-publications/2013/2013-tpa-2012-ar

Office of the United States Trade Representative, Obama Administration Notifies Congress of Intent to Include Japan in Trans-Pacific Partnership Negotiations (Apr. 24, 2013), http://www.ustr.gov/about-us/press-office/press-releases/2013/april/congressional-notification-japan-tpp

Thomas Donilon, The United States and the Asia-Pacific in 2013, The Asia Society, New York (Mar. 11, 2013); http://asiasociety.org/new-york/events/thomas-donilon-national-security-advisor-president-barack-obama

About the Author

Jean Heilman Grier has more than 25 years of experience in international trade as a US trade negotiator, lawyer, and adviser, and has written extensively on international trade issues. Most recently, she was the Senior Procurement Negotiator with the Office of the United States Trade Representative. She is a principal in the consulting firm, Djaghe, LLC, and writes regularly on trade issues at: http://trade.djaghe.com.

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