When U.S. President signed an executive order to fulfil his campaign promise to withdraw from the Trans-Pacific Partnership (TPP) trade agreement, sane analysts thought the deal was dead. Japan’s Prime Minister Shinzo Abe frankly admitted that a TPP without the United States would be “meaningless.” But Australia’s PM Malcolm Turnbull vowed to push forward, even inviting China to join the pact. (China politely refused.)
But today, against the odds, the 11 remaining members of the TPP announced an agreement to form the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) — apparently it was Canadian Prime Minister Justin Trudeau who insisted that it be “progressive.” The agreement promises a much more flowery preamble (still not released) and a much watered-down agreement on just about everything else.
The CPTPP, signed exactly a year and a day after Trump tanked the original TPP, will strip out most of the provisions that made the TPP something more than an old-fashioned trade agreement. The original TPP was a next-generation economic governance agreement. The CPTPP increases quotas for imported cheese.
The 11 rump TPP partners were only able to come to a symbolic agreement on the CPTPP by eliminating a raft of TPP provisions (20 in all), including those on:
* investor-state dispute settlement (ISDS)
* digital intellectual property protection
* copyright extensions and harmonization
* patent extensions and harmonization
* liberalization of the pharmaceutical sector
* liberalization of postal services
* opening of telecoms markets
* government procurement
What’s left? Apparently, not much, though it’s hard to tell for sure until the countries involved release a copy of the agreement. For the record, that’s Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore, Vietnam, and New Zealand. The agreement will apparently abolish “all tariffs on seafood, wine, sheep meat, cotton wool, and manufactured goods” among these 11 countries. Yes, cotton wool. That’s cotton balls to you and me.
Ironically, the rump agreement puts the TPP right back where it started as a minor regional agreement among second-tier Pacific economies. The big win for the CPTPP is that Japan has now joined. Japan conceded some agricultural market access to please Australia, Canada, and New Zealand. It gets the (eventual) elimination of already-low manufacturing tariffs in return.
The simple fact is that the TPP was only so ambitious because the United States offered improved access to its vast market in exchange for massive changes in the way international trade and investment were governed across the region. The TPP was, in effect, a template for ultimately tying China into a Pacific system of economic governance on terms friendly to American corporations and investors. China was not a party to the TPP, but it might have joined someday, and if it did, it would have joined on American terms.
The CPTPP is, by contrast, a grand gesture that allows regional leaders like Malcolm Turnbull and Justin Trudeau to proclaim their commitment to a liberal world order, multilateral governance, and free trade while giving up very little in return. Market opening and investment liberalization have been taken off the table. Japanese consumers will no doubt enjoy their improved access to Australian cheese. But don’t expect the global economy to wake up to a new global (or even Pacific) order on Thursday. The CPTPP is a political statement, not an economic pact.