Though progress has been steady, competing interests and complex structural issues may slow down or stall negotiations. These barriers to negotiations include internal US divisions on central issues and substantive disagreements among key countries on questions related to intellectual property, investor–state relations, labour and environmental regulations, rules of origin, and creating a regional framework from existing FTAs.
From the outset of the P-4 agreement, the ultimate objective of the negotiations was to provide the building blocks for an area-wide Asia Pacific FTA. Carrying over from the P-4 decisions, it was envisaged that new members to the TPP would enter in successive tranches. But US membership and the desired November 2011 deadline complicated membership additions beyond the first tranche. The question remains whether it is possible to add new members without reopening decisions already made. Large Asian countries with important national interests — Korea, Japan and Indonesia — may not be willing to join the TPP if the major negotiating issues have already been decided without their interests represented.
A second issue still unresolved concerns the market-access architecture of the TPP: whether the negotiators should aim for common market-access rules among all members or whether existing bilateral market schedules should remain in place with additional common schedules to be added later. The US has strongly urged that existing FTA market access schedules be maintained, as bilateral agreements provide both defensive and offensive benefits to US trade. Other countries favour negotiating a common market-access schedule that would apply to all TPP members, arguing this approach would reduce or eliminate the complicating effect caused by differing and potentially conflicting obligations. In 2009, a hybrid approach was adopted under which countries will be allowed to make offers on a bilateral basis or to the TPP membership as a whole.
Major US agricultural groups, particularly in sensitive sectors such as sugar and dairy, are pushing the Obama administration to keep in place existing FTA market-access provisions; although there is division within the US agriculture ranks, as major agriculture-processing companies have pressed the administration to reopen sections of existing FTAs. At minimum, they argue the US should use agriculture restrictions as bargaining points to advance interests elsewhere. Some infighting has occurred between TPP negotiators as to how market access in agriculture may affect countries’ respective interest groups.
As the April 2011 Singapore talks concluded, there were still undefined baskets in which liberalisation commitments were vague or nonexistent. Whether dairy, sugar, grain or meat, agriculture negotiations are likely to be contentious right down to the conclusion of the talks.
The US has always pressed for protectionist Rules of Origin (RoOs) for its sensitive products. US negotiators are pushing for narrow, product-specific RoOs with high threshold levels for determining eligibility. By and large, other TPP countries support more liberal RoOs. They oppose product or country specific RoOs, pushing instead for region-wide rules. Rather than folding RoOs into general market access talks, a separate negotiation group is handling them, which increases the likelihood that opponents of true liberalisation can prevail.
Division among US interest groups has delayed the Obama administration’s final position on intellectual property (IP) and the TPP. All the major business associations have pressed both the Bush and Obama administrations to go beyond the terms of existing WTO-plus IP agreements in earlier FTAs. In several FTAs, the US has demanded language that attempts to limit FTA partners’ use of the Trade Related Aspects of Intellectual Property Rights (TRIPS) health exceptions.
Beyond internal US deliberations, IP is also a divisive issue for other national negotiators. In early 2011, New Zealand directly challenged key fundamental assumptions behind US arguments for a strong patent system, arguing overprotection could impede innovation. Then in the spring, the US offered even more detailed proposals regarding copyrights, the internet and geographic indicators.
The key sticking point on investment, both within the US and among TPP partners, is a section in the provisions related to investor–state dispute resolution. In April 2011, Australia raised important questions concerning investor–state dispute resolution procedures, announcing that in the future it would discontinue them in FTAs with developing countries.
Among US interest groups, labour unions, consumer groups, and anti-globalisation organisations are pitted against business associations in the industrial and service sectors. A top priority is to write rules that will reduce and ultimately eliminate foreign equity limitations. Australia and NZ have expressed reservations about some US investment demands.
In the US, labour and environmental issues may emerge as the thorniest and most difficult to resolve internally. To resolve the labour issue, signatories to US bilateral FTAs must adopt and enforce five basic international labour standards as set forth on the International Labour Organisation Declaration on Fundamental Principles and Rights at Work. For the TPP, labour unions, many NGOs, and the majority of House Democrats are urging the administration to go beyond a 2007 labour mandate. Republicans will resist such a provision.
With regard the environmental issue, US bilateral partners must pass and implement a group of multilateral environmental agreements on ozone depletion, endangered species, marine pollution, wetlands, whaling and Antarctic marine life. A number of FTAs already negotiated by TPP partners contain chapters on labour and the environment, but none match the highly legalistic and restrictive language of recent US FTAs.
The overarching goal of regulatory coherence is the harmonisation of measures that exert a major influence on international trade. Among the tentative proposals discussed are procedural rules for transparency, elimination of duplicative and overlapping regulations, and rules against anticompetitive practices.
Considering the substantive and political complexity of the issues in the TPP — and the lack of consensus to date — the November deadline for concluding negotiations is off the table. Negotiators will settle for statements of principles or framework agreements in key areas.
Claude Barfield is a Resident Scholar at the American Enterprise Institute.
A longer version of this article was published in the June 2011 edition of the American Institute for Public Policy Research.