Japan seems to want the Trans Pacific Partnership to happen—U.S. or not—but with certain stipulations outlined in the original deal, pushing it forward could prove just as tricky as trying to get it signed.
The first hurdle to get over will be the provision that stipulates at least six of the agreement’s original signatories, which combined account for at least 85 percent of the collective GDP, have to agree to implement the TPP for the trade agreement to come into force.
With the U.S. accounting for upward of 60 percent of that GDP, reaching the 85 percent threshold would be impossible. The question now is whether that threshold might be amended or if that 85 percent will be based on the total GDP of the remaining 11 member countries.
Could the 85 percent requirement be eliminated altogether?
Removing the threshold stipulation from the TPP agreement doesn’t look likely.
As Baker McKenzie associate John Foote explained, “That provision could not be changed in TPP without reopening the negotiation of the agreement. The remaining parties to the TPP might be reluctant to do that, because any party would then be free to start demanding changes to any other part of the agreement (and they might be inclined to demand such changes now that the U.S. has withdrawn from the agreement).”
So as a practical matter, Foote said, it’s unlikely the 85 percent provision would be changed.
“I have seen press reports from Japan suggesting that the parties are considering adopting a separate instrument by which they would voluntarily agree to abide by and honor the substantive provisions of the TPP,” Foote said. “That strikes me as a more likely path to an agreement in the short term than re-opening negotiations to lower the 85 percent requirement.”
There may even be another way around that 85 percent, however.
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“Some have speculated that since the U.S. has withdrawn from the agreement, they are therefore no longer included in the GSP threshold. However, the provision clearly states ‘original signatories’ and the U.S. was an original signatory,” said Nicole Bivens Collinson, president of international trade and government relations for trade law firm Sandler, Travis and Rosenberg. Looking at it another way, the stipulation could mean that with the U.S. out it’s no longer an original signatory, and the 85 percent would only apply to the remaining nations.
If that’s the interpretation, Collinson explained, then Japan will be the key country needed to move forward. “Other combinations could reach 85 percent, but not without having Japan included. Given that Japan has already signaled its preparedness to move forward, there is a wide range of other countries that could agree to join to reach the 85 percent threshold assuming that stays set at 85 percent,” she said.
Will new countries sign up for TPP?
As Collinson explained, Japan, Malaysia, Singapore and New Zealand have all gone through the necessary processes to approve the TPP, and for Brunei, moving forward might only entail getting the Sultan’s approval, though that combination would still only represent 54 percent of the GDP.
“The provision for joining the TPP as written requires the agreement to be in effect and to follow a procedure. However, adding a new country prior to implementation may throw the carefully negotiated terms off track and result in an unraveling of commitments,” Collinson said. “I would not think it prudent for the countries to seek to add more partners prior to locking the commitments currently negotiated.”
For Foote, it remains to be seen how any potential separate agreements the 11 other TPP countries make will come into play.
“Regardless of which mechanism ends up being used, however, the question of whether any new country will join a given agreement is always a question of the political will,” Foote said.
What say does Trump have in what becomes of the broken TPP?
President Trump has been quite vocal about improving trade, and for him, the first step in doing that was detaching the U.S. from the TPP. But with U.S. hands technically out of the pot, the question remains how much influence, if any, the country will have on the TPP moving on without it.
“I think that the U.S. certainly could continue to have an influence on what becomes of the TPP if the president and his advisors want to do so,” Foote said, adding, however, that predicting America’s participation in the decision is too speculative.
Put simply, and on the contrary, Collinson said, “I don’t think Trump has any say in the TPP any longer and I am fairly confident that the TPP partners feel the same way.”
So what’s TPP’s most likely fate?
There is really no telling what could happen with the long-negotiated and now detached TPP as changes to trade have been somewhat unexpected and uncertain, but at the very least, it could inform future moves in trade.
“I think the TPP countries may want to move forward with the TPP absent the U.S. to have a structure in place to which other ASEAN and Asian partner countries can join,” Collinson explained. “The TPP goes far beyond the RCEP [Regional Comprehensive Economic Partnership] and establishes very stringent rules for trade operations, thus they may want to use that agreement as the template for developing and expanding fully comprehensive trade in the region.”
Either way, the world will have to wait it out.
“At this point, it’s still too early to tell whether there will be any continuing life to the TPP,” Foote said. “Clearly, some parties have indicated a willingness to do a deal even without the United States, but whether that eventual agreement will be substantively the same as TPP, or a new agreement altogether, driven by other parties and their own interests remains to be seen.”