Don’t Let the Trans-Pacific Partnership Fade

What a difference a year makes. At the 2011 APEC summit meeting hosted by the United States in Honolulu, the Trans-Pacific Partnership Initiative (TPP) garnered everyone’s attention. President Obama made a strong case for the TPP to become the focal point in a high-standard economic integration process aiming for an ambitious slashing of tariffs and a new batch of trade and investment rules. The appeal of this vision seemed evident when Japan announced on the eve of that summit its interest in exploring the possibility of membership in this expanding club, and Mexico and Canada followed suit with proactive campaigns to join in. Fast forward to Vladivostok 2012, and the TPP appeared to be sidelined, no longer commanding the attention it had just a year before.

Why did the TPP fade from the limelight at the latest APEC meeting, and how does this bode for its future prospects? A number of factors bear consideration in answering these questions:

Host country effect: To be sure, the country hosting the annual APEC meeting plays a key role in setting the agenda and signaling the priority that specific issues will receive at the meeting. The fact that the 2012 host country, Russia, is not participating in the TPP negotiations was, therefore, an important factor. For President Putin, the priority was to signal Russia’s turn to the East, and coming on the heels of its admission to the WTO, to gain further standing in economic diplomacy. In terms of actual deliverables, the 2012 gathering did not bring about the conclusion of the TPP negotiations as originally planned, but rather a list of 54 environmentally beneficial goods for which APEC economies pledge to reduce tariff barriers to 5% or less by 2015.

American elections. The electoral calendar in the United States did not help keep the spotlight on TPP as APEC leaders gathered. President Obama, who had so eloquently made the case for TPP in Honolulu, could not attend the 2012 summit meeting as it overlapped with the Democratic Party’s nominating convention. But the electoral process in the United States is important to the TPP process in another way: on the eve of contested elections where employment figures are deemed sensitive indicators for the candidates’ prospects, it is not politically feasible to put on the table substantial trade initiatives that could generate a domestic backlash.

Coveted club: If countries are perceived to be lining up to join a coveted club that promises to generate important political and economic gains to its members, the saliency of the TPP increases. This effect was clearly in play last year, but fizzled in 2012 for two reasons. 1) Mexico and Canada’s entry into the TPP had already been approved months before the 2012 APEC meeting, and 2) Japan, a country that could transform the economic significance of the TPP given the size of its economy, was unable to formally petition for membership. Having spent all his political capital in a fight to increase the consumption tax , and confronted with a party election in a few weeks and possibly a general election this fall, Prime Minister Noda could not risk alienating more members of his party who oppose Japan’s participation. Japan, therefore, sidelined the TPP issue at Vladivostok.

The dynamics among leaders at the 2012 APEC summit clearly were not favorable to a TPP spotlight. The meeting featured a host in Russia with a different set of priorities, an absent advocate in the United States, and an undecided major prospective member in Japan. But in fact the muted importance of the TPP at the APEC meeting also reflects the real negotiation hurdles that involved parties have confronted over 30 months of talks.

Negotiation hurdles. The hallmark issues of the TPP that could render it a 21st century agreement―discipline on state-owned enterprises, regulatory convergence, and protection of intellectual property, among others―have generated substantial disagreements among negotiating parties. Furthermore, it is important to keep in mind that the cleavages among TPP members do not follow a North-South divide. Some developed nations have objected to U.S. proposals on investor-state dispute settlement, intellectual property, and disciplines on SOEs. But the bread and butter issues of market access for goods such as dairy, sugar, and textiles have also created negotiation logjams.

At the most fundamental level, therefore, the TPP waned in significance at the APEC gathering because the negotiating parties are still far apart on core areas. There is little desire now to identify a new deadline for concluding negotiations given that the fall 2012 goal was unmet. TPP negotiators may in fact welcome the opportunity to negotiate without artificial deadlines hanging over their heads. While this may make for a more sensible negotiation process, the risk is of course that absent a looming deadline, negotiations may drag on endlessly. Moreover, leader summits do offer a key opportunity for high level political intervention to bridge disagreements at the negotiating table. In this sense Vladivostok might have been a lost opportunity.