Today in Chile 11 of the original 12 countries that had signed the Trans-Pacific Partnership (TPP) multilateral trade agreement on February 4, 2016 are signing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP-11 for short, i.e., the TPP minus the U.S.). Upon taking office President Trump promptly withdrew the United States from the agreement saying that it was “a bad deal”. In fact it modernized and raised the level toward U.S. standards in the areas of e-commerce, intellectual property protection, and dispute resolution. Though the agreement provided significant benefits to the U.S. and despite the U.S. withdrawal, the remaining participants (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam) preserved the basic provisions of the original agreement while freezing 22 provisions of particular interest to the United State to facilitate its rejoining at a latter time should it return to its senses. China and other Pacific Rim countries are also welcome to join if and when they meet the agreement’s high standards. This will not be easy for China should it chose to return to its earlier efforts to integrate into the rules of the world trading system.
The U.S. Congressional Research Service summarized the key provisions of the TPP as follows:
“The TPP would provide several principal trade liberalization and rules based outcomes for the United States. These include the following:
- lower tariff and non tariff barriers on U.S. goods through eventual elimination of all tariffs on industrial products and most tariffs and quotas on agricultural products;
- greater service sector liberalization with enhanced disciplines, such as nondiscriminatory and minimum standard of treatment, along with certain exceptions;
- additional intellectual property rights protections in patent, copyrights, trademarks, and trade secrets; first specific data protection provisions for biologic drugs and new criminal penalties for cybertheft of trade secrets;
- investment protections that guarantee nondiscriminatory treatment, minimum standard of treatment and other provisions to protect foreign investment, balanced by provisions to protect a state’s right to regulate in the public interest;
- enforceable provisions designed to provide minimum standards of labor and environmental protection in TPP countries;
- commitments, without an enforcement mechanism, to avoid currency manipulation, provide transparency and reporting concerning monetary policy, and engage in regulatory dialogue among TPP parties;
- digital trade commitments to promote the free flow of data and to prevent data localization, except for data localization in financial services, alongside commitments on privacy and exceptions for legitimate public policy purposes;
- enhanced regulatory transparency and due process provisions in standards setting; and
- the most expansive disciplines on state owned enterprises ever in a U.S. FTA or the WTO, albeit with exceptions, to advance fair competition with private firms based on commercial considerations.”
No trade agreement (yet) is perfect and the TPP represented a significant improvement for the U.S. and its trading partners of existing agreements.
The 11 signers, in addition to embracing standards that will promote economic growth in their own countries in the long run also sought originally to enhance America’s role and leadership in the Asian Pacific area (i.e., as a counterbalance to the rising strength of China). With or without the U.S. more countries are expected to join the CPTPP after the governments of the current 11 have ratified it. At the top of this list are Taiwan, Thailand, South Korea, the Philippines, and Sri Lanka.
President Trump has chosen to retreat from American leadership in setting and helping to oversee the rules of international cooperation and trade. It seems unlikely that Wilbur Ross and Peter Navarro will give up their fixation on protecting a hand full of inefficient, uncompetitive American industries, so Congress should take back its constitutionally given authority over trade policy delegated to the President in the Trade Act of 1974. https://fas.org/sgp/crs/misc/R44707.pdf
China’s misbehavior can be better addressed using the rules and provision of the WTO in ways that would strengthen the rule based international order rather than weakening it as Trump is now doing with the use of the national security provision. If China is selling its aluminum below cost, i.e., dumping it, we should impose a tariff on China under WTO rules against dumping. The use of the national security provision of the WTO is laughable on the face of it and would weaken rather than strengthen the rule of law in the trade area.