Asia-Pacific Trade Deal May Get Second Lease on Life Without U.S.

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By Lucien O. Chauvin, Tom Azzopardi, Murray Griffin, Lien Hoang, and Emily Pickrell

A sweeping Asia-Pacific trade deal thought dead in January after U.S. President Donald Trump withdrew the U.S. from the Trans-Pacific Partnership appears ready to make a comeback.

Supporters and detractors of the TPP said the deal would not survive after the U.S. withdrawal, but that judgment was premature. New Zealand Trade Minister Todd McClay recently told Bloomberg BNA that momentum is building for the agreement, and the presidents of Peru and Chile July 8 issued a joint statement declaring their “willingness to actively participate in the dialogue for possible alternatives for the application of the TPP-11.”

Now representatives from the 11 remaining TPP countries, or TPP-11, will meet in Japan starting July 12 to determine what options exist to move the agreement forward without the U.S.

The meeting in Japan won’t be about decisions, but a chance for a broad discussion by technical representatives to examine issues and mechanisms for implementation to see what could be changed and how.

The TPP was signed in February 2016 by 12 countries, including the U.S., after nearly eight years of negotiations. Trump withdrew the U.S. shortly after taking office, one of his first official acts as president. The countries remaining in the agreement are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

Active Engagement

Japan and Australia, two of the three largest economies still in the TPP—Canada also being in the top three—are strongly behind efforts to keep the agreement alive. Japan called the meeting after Asia-Pacific Economic Cooperation (APEC) trade ministers met in May in Vietnam, and Australia’s government on July 6 said it was “actively engaging with TPP signatories on pathways for giving effect to the TPP.”

McClay told Bloomberg BNA that the plan is to keep any changes “to the bare minimum” necessary to activate the deal. One key point would be the activation mechanism. Under the original agreement, ratification was necessary by countries representing 85 percent of total gross domestic product of the original TPP for it to come into effect. This would have to be changed.

Peruvian Foreign Trade and Tourism Minister Eduardo Ferreyros said he doesn’t expect any breakthroughs at the meeting in Hakone, Japan, but said the TPP isn’t dead. “The original agreement signed in February [2016] has to change, but I think that progress made in many areas remains valid,” he told Bloomberg BNA.

No New Members

Peru hasn’t spelled out any specifics it will bring to the meeting, but Ferreyros was clear on what would not be on the table. He said the TPP-11 aren’t planning to open up the agreement to new members, or adding anything.

Ferreyros said the meeting probably would be the first of several before TPP trade ministers meet on the sidelines of November’s Asia-Pacific Economic Cooperation in Vietnam. Peru is sending Deputy Trade Minister Edgar Vásquez to Japan.

Neighboring Chile will be sending to the Japan meeting Felipe Lopeandia, who acted as chief negotiator during the TPP talks, as well as a legal representative from the economic relations office (DIRECON) at the Foreign Relations Ministry.

DIRECON Director Paulina Nazal told Bloomberg BNA that Chile wants to be sure that trade issues it had with the U.S. that were resolved in the TPP negotiation remained in place.

“Rather than renegotiate, as we are very happy with the agreement, we would like some of commitments in the deal to be made clearer,” Nazal said.

Other Agreements

Negotiations outside the TPP per se could also have an impact, including the planned renegotiation of the North American Free Trade Agreement (NAFTA) between Canada, Mexico, and the U.S.—Canada and Mexico are TPP-11 members—and the start of a bilateral free-trade agreement between Australia and Peru that began July 5.

Mexico’s potential participation in any TPP-type trade deal will also be weighed against the progress of the NAFTA negotiations, which is its first priority, according to Luz de la Mora, a former senior trade official and head of LMM Consulting in Mexico City. Mexico decided to participate in the original TPP largely to protect its special relationship with the U.S., De la Mora said. A TPP that doesn’t include Mexico’s primary trading partner will only be attractive if it doesn’t interfere with this relationship and if the terms reflect the absence of the U.S. Mexico will be further constrained by its upcoming presidential election next summer, and the resulting push for the current negotiators to finish trade talks before that deadline.

“If we open too many fronts, most likely we will not be able to close those negotiations, and we don’t know which party will be elected and what will the agenda be,” De la Mora said. “It is very difficult to sit down and negotiate with Mexico when they know they are at the end of an administration.”

Peru’s Ferreyros said the bilateral talks with Australia would be easier than previous negotiations because of the experience with the TPP. In broader terms, Peruvian authorities also believe that expanding that Pacific Alliance, which includes Chile, Colombia, Mexico, and Peru, to new countries will also benefit from the TPP.

Australia and New Zealand are scheduled to start talks with the Pacific Alliance as a bloc in September. This could later expand to Canada and Singapore and, potentially, Vietnam. All these countries, with the exception of Colombia, are TPP-11 nations and they are all also part of the 21-economy APEC.

RCEP’s Impact?

Also on the radar is the conclusion of the Regional Comprehensive Economic Partnership (RCEP), which also includes TPP overlap, as well as China and India. The RCEP, if it were to wrap up soon, could complicate the future of the TPP.

Nguyen Khac Giang, researcher at the Vietnam Institute for Economic and Policy Research, said other Pacific Rim negotiations, including the APEC-wide Free Trade Area of the Asia Pacific (FTAAP) may gain more attention in the short run, but that does not mean the TPP is finished.

“Vietnam will be tempted to focus more on RCEP or even FTAAP. Anyway, better more free trade than less, so I do hope the Japan-led TPP can work out to some extent,” he said.

To contact the reporters on this story: Lucien O. Chauvin in Lima, Peru, at correspondents@bna.com; Tom Azzopardi in Santiago at correspondents@bna.com; Murray Griffin in Melbourne, Australia, at correspondents@bna.com; Lien Hoang in Ho Chi Minh City at correspondents@bna.com; Emily Pickrell in Mexico City at correspondents@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

For More Information

The Chile-Peru declaration is available, in Spanish, at http://src.bna.com/qBU,

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