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What Happens Next for TPP?

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The Trans-Pacific Partnership (TPP) was signed in New Zealand Feb. 3, and though trade ministers may have been breathing sighs of relief, the hard work is really only just beginning.

Trade negotiations are no doubt challenging, and the more countries involved, the harder the process. Depending on how you measure it, the TPP negotiations took between five to eight years. The United States and the other member countries made a huge political and diplomatic bet that they could come to an agreement and get that agreement through their domestic political systems. But can they?

Even before TPP was signed, influential members of the U.S. Congress expressed either outright opposition to the agreement or serious doubts about its viability.

The Obama Administration has to convince skeptical members and senators that TPP will benefit the nation by opening markets and creating jobs. And this is no easy task.

A skeptical Congress, combined with a full-throated and highly competitive presidential campaign where all but two of the candidates in both the Republican and Democratic races have either expressed opposition to the agreement or vowed to renegotiate it, does not bode well for TPP.

The other TPP countries are watching the political winds in the U.S. to determine how best to move TPP in their domestic political systems. A few trade ministers have expressed confidence that their countries would pass TPP this year, but each TPP country has a different system that will need to be navigated.

It appears that any action on TPP will take place in the third or fourth quarter of 2016 in most of the countries, and that is certainly what the current timeframe looks like in the United States. Vietnam said after signing the agreement that ratification for them could take as long as two years. Many TPP countries want to wait and see what happens in the U.S. before testing the political waters at home, because without the U.S., TPP won’t work. Signature and ratification are only the first few steps in the process.

TPP countries will have to amend domestic laws, regulations and policies to come into compliance with the agreement, and this could take months or years (recalling the years it took to implement the United States-Peru Trade Promotion Agreement). It is only after completing the domestic ratification procedures that a country can say it is ready to bring TPP into force. For TPP to be fully implemented, at least six countries covering 85 percent of overall GDP have to be ready to put it into place. This can be complicated.

Companies looking to start making decisions based on TPP need to understand the complexities of the domestic ratification procedures and that some adjustments may need to be made to appease key members of Congress.

Senator Orrin Hatch (R-Utah), chairman of the Senate Finance Committee, signaled that he has some “fixes” for TPP. Those “fixes” could jumpstart a new negotiation between the Hill and the Administration, and then between the TPP countries. It is entirely possible that this scenario will repeat itself in other TPP countries.

The Obama Administration continues to push back against any attempts by Congress to modify TPP but at the end of the day Congress is the key to TPP.

If Congress delays consideration of the agreement or rejects it outright, the dreams of TPP could turn into a nightmare. The Obama Administration must negotiate with Congress to secure passage of TPP just as every other Administration has done before it. President Obama must get personally involved in securing support for the agreement—surrogates will not be an adequate replacement when it comes to something as important as TPP. The concerns and objections of important and pro-trade senators such as chairman Hatch and Senator Rob Portman (R-Ohio) must be taken seriously.

TPP countries will begin the ratification process in 2016 but it is unlikely that most countries will be able to complete ratification until 2017. That means TPP won’t likely be implemented until late 2018 or 2019, and even then it may not include more than six of the 12 countries.

There may be more hurdles and political instability ahead in some of the TPP countries and that could affect the implementation timelines. So as we all look forward to TPP we must remain aware and engaged with the real challenges that lie ahead and work toward addressing them. TPP is an important agreement and it is in the interest of the United States to ratify it and implement it, but it must be done the right way.

By Mara M. Burr, executive vice president, World Strategies LLC 

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