The 15th round of negotiations on the Trans-Pacific Partnership (TPP) free trade agreement (FTA) will take place on Dec. 3-12 in Auckland, New Zealand. These talks will include Canada and Mexico for the first time and have attracted comments from most trade-oriented industries. President Obama and other government leaders have targeted October 2013 for completion of negotiations.
The countries involved have expanded to 11 – the U.S., Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, 30 percent of global GDP. Talks began in March of 2010 in Melbourne, Australia and the most recent round was on September 6-15 in Leesburg, Virginia. The original plan was to have negotiations completed by the end of 2012, but that was impractical from the start and became more so with the addition of Canada and Mexico. The Asia-Pacific Economic Cooperation (APEC) leaders’ meeting in Indonesia in late 2013 would be a good opportunity to release the final agreement.
Thailand Prime Minister Shinawatraannounced last week that the country will seek to join the TPP negotiations. She met with President Obama in Thailand to discuss the TPP and would benefit from further integration into industrial supply chains in Asia. As an agricultural exporter it could also gain from increased access to importing countries. Japan has also expressed interest in joining the TPP at some point in the future, but it may have a new government after elections in December.
The addition of Canada and Mexico makes the talks even more important for U.S. agriculture. Last year the two countries were the number one and two export markets for U.S. agriculture. Australia, Chile and New Zealand will certainly be looking for more market access in Canada and Mexico, with Canada’s protected dairy and poultry markets major targets for change. Those were excluded from NAFTA and the U.S. has been trying to gain greater access. The U.S. dairy industry had wanted to be excluded from TPP because of concerns about increased dairy imports from New Zealand. With an opportunity to gain access in Canada, the industry is considering additional market access for New Zealand. Canada is in the final stages of negotiating a FTA with the EU and how it addresses access for dairy products from the EU may give some indication of their approach in the TPP talks. U.S. and New Zealand officials have had limited contact on dairy product access.
Australia continues to drive a hard bargain over greater access to the U.S. sugar market. Sugar was specifically excluded in the U.S.-Australia FTA. U.S. Trade Representative (USTR) Ron Kirk has taken the approach that products that have been addressed in an existing FTA will not be reopened in the TPP FTA. Australia has rejected that line of thinking in the negotiations and has been blocking other issues of importance to the U.S. to add pressure for changes on sugar.
Sanitary and phyto-sanitary (SPS) issues will be the real market access determiners in the talks. Commitments need to go beyond those made under the WTO, often referred to as ‘WTO-plus’. The USTR may propose new language making SPS disciplines fully enforceable, including those that go beyond WTO rules. If they would not be enforceable under TPP dispute settlement, they would not be settled at the WTO because they would be stricter than WTO requirements.
According to an October report in Inside U.S. Trade, Australia may propose export competition disciplines that could require significant changes in the USDA GSM-102 export credit guarantee program and food aid programs. The proposal is expected to be similar to a 2008 WTO Doha round draft text that would limit loan length to six months, about the same as can be secured in the private market. The longest GSM-102 guarantee is two years. There has already been pushback from U.S. groups involved with credit guarantees and ones directly supplying food aid. The USTR’s office is pursuing further consultations with U.S. groups.
As the TPP negotiations move toward completion, six members of the group are gearing up for talks for a Regional Comprehensive Economic Partnership (RCEP) by ASEAN, China, Japan, South Korea, India, New Zealand and Australia. The two groups overlap with Australia, New Zealand and four ASEAN countries (Brunei, Vietnam, Malaysia and Singapore) members of both groups. Some U.S. companies have raised concerns about the RECP having a lower level of standards on issues like intellectual property rights. New Zealand and Australian discount those concerns and see both agreements as consistent with APEC’s goal of wider regional cooperation. Negotiations are expected to begin in early 2013 and be completed by the end of 2015.
President Obama and ASEAN leaders also announced last week at the East Asia Summit in Cambodia a new U.S.-ASEAN Expanded Economic Engagement (E3) initiative. It will promote economic cooperation and the pursuit of high standards trade agreements.
Some businesses and trade officials are rightly concerned about the number of agreements now being negotiated in Asia, but that activity is the result of recognition that there are economic benefits from having cross border supply chains more closely aligned. If the U.S. can secure workable provisions for sanitary and phytosanitary issues and lower tariffs for agricultural products, the growth in incomes in Asia will be good for the demand for U.S. agricultural products.
Talk of completing the TPP within the next year has raised the issue of having Trade Promotion Authority (TPA) to allow for an up or down vote in Congress with no amendments. TPA expired on June 30, 2007 and President Bush did not ask for continuation because he did not appear to have the votes in a Congress controlled by Democrats. President Obama has not asked for the authority and the Administration is committed to asking for it at the ‘appropriate time’.
Critics of the TPP negotiations believe the President does not the authority to negotiate because the Congress has not given him negotiating objectives. Now is the time to resolve the issue before an agreement is reached. The movement toward freer trade should not be sidetracked by conflicts between Congress and the Obama Administration.
Ross Korves is an Economic Policy Analyst with Truth About Trade & Technology.