23 Oct 2015
TPP Update: Implementation, Reactions and Related Issues
After more than five years of negotiations that produced a final Trans-Pacific Partnership deal in early October, supporters now face the task of implementing this broad-ranging free trade agreement. In the United States, there are already indications that securing congressional approval could be a tough job. In addition, timeframes within U.S. law and the TPP itself could delay full implementation for years.
Under the trade promotion authority law passed by Congress this summer, the first step in implementing a trade agreement is for the president to notify lawmakers of his intent to sign it. For TPP that could take place in a matter of weeks, once the parties have completed a thorough legal review of the text. TPP trade officials were expected to hold a series of meetings in Japan through the end of October to draft portions of the final agreement and complete the required legal scrub for chapters on market access, investment, services, textiles, intellectual property, trade remedies, and legal and institutional issues. Officials were also expected to work on two side letters to the agreement and perform technical work on the tariff schedules. However, it appears that additional meetings besides the ones taking place in Tokyo will be required in order to finalise the text.
Once a notification of the president’s intent to sign the agreement is submitted to Congress, the president must wait 90 days to sign the agreement; for TPP, that would put signing as early as late January. In the interim several other requirements are likely to be met, including publishing the text of the agreement (which must be done at least 60 days before it is signed) on the website of the Office of the U.S. Trade Representative and submitting reports and reviews on topics such as the agreement’s environmental and labour impacts.
After the agreement is signed there will be at least another 30 days before the president can submit legislation to implement it, which must occur on a date when both the House of Representatives and the Senate are in session. For TPP, this could be as early as late February. A number of supporting documents must be submitted with the draft bill, including an explanation of how it will change existing law and statements on how the agreement meets TPA objectives and serves the interests of U.S. commerce.
One additional consideration is a report on the anticipated economic impact of the TPP from the U.S. International Trade Commission, which will have 105 days from the date the agreement is signed to submit the report to Congress. If the USITC takes the full allotted time, Congress would not be able to begin consideration of the TPP legislation until about early May.
The House and Senate would then have up to 90 legislative (not calendar) days to either approve or reject that bill. This means a final congressional vote could come as early as March or as late as December 2016. The presidential and congressional elections next November could further affect the timing. Finally, assuming the implementing legislation is approved – which, given initial reactions from a wide range of lawmakers from both parties concerned about specific provisions that did or did not make it into the final agreement, is not assured – it would likely be another year or two (or perhaps longer) before TPP provisions start taking effect.
According to a fact sheet issued by the New Zealand government, there are three ways in which TPP can enter into force. The first option is that if within two years of the date of signature all countries that signed the agreement have notified the depositary that they have completed their applicable legal procedures, then the agreement will enter into force 60 days after notification by all countries. However, if all signatories have not notified their readiness within two years, then the second option is that the agreement will enter into force 26 months after signature if at least six of the signatories have notified the depositary that they are ready, provided that those six signatories account for at least 85 percent of the combined gross domestic product of the original signatories in 2013.
The third option will apply if the agreement has not entered into force under either the first or second options. In those circumstances, the deal will become effective 60 days after the date on which at least six of the original signatories have notified the depositary that they are ready. Again, these must be six signatories that together account for at least 85 percent of the combined GDP of the original signatories in 2013. The agreement also includes a mechanism that allows signatories that did not notify their readiness under option two or three to join the TPP when they are ready to do so.
Taking all of this into consideration, the earliest the TPP could be implemented is late-2017, although 2018 or even 2019 appears a more plausible possibility. While some tariffs would be eliminated upon implementation, others will only be phased out over time. Details on this process are expected to be made public in the coming weeks and could further affect lawmakers’ decisions on whether or not to support the agreement.
Responding to the announcement that the Obama administration had successfully concluded the TPP, many business groups have shown reluctance to throw their full support behind the deal and will not take a firm stance for or against it until they have had a chance to conduct a full review of the text. Among textile and apparel groups, the National Council of Textile Organizations, the American Apparel & Footwear Association and the National Retail Federation all took a cautious approach. Even the U.S. Chamber of Commerce, usually very supportive of the TPP process and U.S. trade agreements in general, did not express its opinion on the final agreement. A number of meat, poultry, agriculture, services and manufacturing groups have also reserved their position.
Most labour groups have come out in force against TPP, however, calling on Congress to reject it because its ratification would ostensibly place the interests of corporate profits over those of the public. United Food & Commercial Workers International Union President Marc Perrone said that “the only good thing about a TPP agreement being reached is that the American people will finally be able to read every line of this deal.” AFL-CIO President Richard Trumka contended the administration rushed the agreement. “We ask the administration to release the text immediately, and urge legislators to exercise great caution in evaluating the TPP,” said Trumka. He indicated that AFL-CIO “will evaluate the details carefully and work to defeat this corporate trade deal if it does not measure up.”
U.S. lawmakers have expressed a range of views about the agreement but most have elected to wait until the release of the text to take a stance for or against the deal. Senate Majority Leader Mitch McConnell (Republican-Kentucky) stated following the announcement that a deal had been reached that TPP “is potentially one of the most significant trade deals in history and could shape our engagement and commerce with these nations for decades.” However, he cautioned that “this deal demands intense scrutiny by Congress and the legislation we passed earlier this year provides us the opportunity to give this agreement that scrutiny.” He added that in the months ahead the Senate will review the agreement “to determine if it meets the high standards Congress and the American people have demanded.” Similarly, House Majority Leader John Boehner (Republican-Ohio) said that “more trade means more jobs, better pay, and more opportunities for our workers, farmers, and small businesses” but highlighted Congress’ role in ensuring the final deal “meets the highest standards before moving forward.”
Senate Finance Committee Chairman Orrin Hatch (Republican-Utah) was more sceptical, asserting that “while the details [of TPP] are still emerging, unfortunately I am afraid this deal appears to fall woefully short.” The senior senator from Utah added that in order to support the agreement he “must be convinced that the TPP is a balanced agreement that complies with the TPA law and that it has clear, implementable rules that our trading partners will follow.” He even suggested the possibility of amending the agreement if Congress finds that it does not meet the TPA negotiating standards. While the possibility of any such amendments is virtually nil, lawmakers could try to exert pressure on the Obama administration to negotiate additional side deals that address specific issues of concern.
Meanwhile, U.S. Trade Representative Mike Froman and European Union Trade Commissioner Cecilia Malmström met in September in Washington, D.C. to take stock of the on-going negotiations on a Transatlantic Trade and Investment Partnership. According to a European Commission press release, Froman and Malmström agreed on the need to accelerate discussions and achieve progress in all areas under negotiation. Malmström indicated that “in the technical talks preceding the next round, we will instruct our negotiators to exercise creativity and flexibility in order to achieve progress in all areas.” In addition, contacts between the negotiating teams will be intensified.
The tenth TTIP negotiating round that was held 13-17 July in Brussels covered a range of subjects, including market access for goods, rules of origin and services. All regulatory issues were discussed, including regulatory co-operation and coherence, technical barriers to trade, and sanitary and phytosanitary measures. The eleventh round was scheduled to take place 19-23 October in Miami, where the two sides were expected to exchange revised market access offers. Press sources indicate that the revised offers could include duty-free treatment for up to 96 or 97 percent of tariff lines as well as an increase in the share of products benefiting from such treatment immediately upon entry into force of the agreement. Negotiators were also expected to table offers on sustainable development and rules of origin and discuss matters related to government procurement.
Some observers believe that the conclusion of the TPP negotiations could speed up the TTIP discussions. EU Ambassador to the United States David O’Sullivan expressed hope in late September that once a TPP deal was finalised “the maximum attention [could] be focused on finalising the Atlantic deal next year, still within the life of this administration, which is our common objective.” Trade Commissioner Malmström has been trying to garner support for the TTIP process all throughout Europe, including from European lawmakers and business, labour, environmental, consumer and other associations, but she continues to face resistance from some groups despite the European Commission’s willingness to compromise on issues such as investor-state dispute settlement and its commitment to enhance the overall transparency of the negotiating process. Encouragingly, the EC recently reiterated its intention to prioritise the conclusion of major on-going projects such as TTIP, the Doha Round, a bi-lateral investment agreement with mainland China and a free trade agreement with Japan. Despite the lack of substantial progress at the negotiating table, the two sides have expressed interest and are perfectly capable of shifting the negotiations into a higher gear in hopes of reaching a deal by the end of next year.