The failure of the 12 negotiating countries of the Trans-Pacific Partnership (TPP) to meaningfully conclude an agreement in the last week of July at Maui, Hawaii, has led analysts across the world to declare the deal dead. For sure, the possibility of the deal going through and getting ratified by 2016 seems remote.
A close look at what happened at the TPP meeting in Hawaii brings out the close similarity it has to what has been happening with the Doha Development Agenda of the World Trade Organization (WTO) for many years now. And like the WTO's Doha Round, TPP is also not dead, but provides several pointers to negotiators of other mega trade agreements such as the Regional Comprehensive Economic Partnership, which involves 16 countries.
What went wrong with the TPP is that while all negotiating countries agreed that there is a need for an ambitious agreement, when it came to specifics many backed out. This is because, other than the original four members of TPP - Brunei, Chile, New Zealand and Singapore - the remaining members who joined later have strong domestic constituencies that seek protection. From dairy in Canada to rice and cars in Japan, the list is long.
Second, it is believed that smaller and less developed countries like Vietnam have a problem in taking on onerous responsibilities in areas such as labour rights that is expected to be part of the agreement. The US, on the other hand, wants to protect its big pharma interests, which may not find support among all countries at the table.
The similarity between the TPP and the WTO negotiations may begin to grow when member countries of the TPP begin to hint, as some analysts predict, that smaller groups within the larger grouping should start working towards agreements that suit the minority with the hope of getting the majority to join later. Some analysts have predicted that the four founding partners along with Australia may reach an agreement and hope the others follow suit.
The same is happening at the WTO in Geneva. From the Information Technology Agreement signed in July to the current discussions around the Trade Facilitation agreement, smaller groups are looking to cajole the larger and wary countries into an agreement.
The pointers from the TPP are important for negotiators of other major trade agreements. While political will can get countries together to begin negotiations for a trade agreement, for the agreement to conclude countries have to balance their protective interests with aggressive market-access-seeking intent. Second, the era of a heavyweight country pushing the negotiations towards a conclusion may not be relevant in the current economic environment around the globe. The TPP is seen as a very US-centric agreement, which seems to be making some other players slightly wary. This perception needs to change if other countries that are not part of the group look to join at a later stage.
Third, harmonisation across standards, customs procedures and tariffs cannot be achieved easily. The easiest form of trade liberalisation is in the form of tariff reduction; eliminating or substantially reducing different standards or harmonising customs procedures across countries is difficult even when the intent of all parties to reach an agreement remains strong. The TPP is expected to have a strong level of harmonisation across countries in the areas of standards and customs procedures.
Fourth, investment and intellectual property remain difficult chapters to negotiate if something substantial has to be achieved as specific sector interests will differ among the negotiating parties. Finally, countries have to agree that while trade agreements may make economic sense they do not always find favour in countries that are going to the polls. Therefore, the time period of negotiations have to be decided with care.
The mood in many countries is not in favour of a strong TPP but a lot has already been achieved for it to go waste. The same can be said about the forthcoming ministerial meeting of the WTO. The road to a successful meeting in Kenya in December is difficult, but after making some good progress on issues such as trade facilitation, it may not be a good idea for countries to let it fail.
The author is principal adviser, APJ-SLG Law Offices
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
