Trans-Pacific Trade – Darkening Clouds on the Horizon

By | January 12, 2014

The Trans-Pacific Partnership (or TPP) trade negotiations, the biggest floating trade game on the planet, will be re-engaging in earnest this year, having missed their 2013 deadline, an impossible goal to begin with.

Should the talks succeed, Canada and all TPP participants will gain from the effects of reduced barriers and other market-opening measures, especially for services and investments. But there are dark clouds that threaten this deal, whether in 2014 or later.

With the spectre of the failed WTO Doha Round hovering in the background, the TPP agenda is unfortunately over-layered with extreme complexity. As well, many of the twelve participating countries have deeply entrenched and diametrically opposed positions, all of which is frustrating consensus.

Second, the talks are over-weighted by the dominance of the United States, which has a highly aggressive agenda of its own. This doesn’t set the stage for the normal give-and-take and consensus building in trade talks.

Another problem, at least up to now, has been the lack of President Obama’s trade negotiating authority – which must be bestowed by the Congress.

Officially called Trade Promotion Authority or TPA (but more often called “fast-track”), negotiating authority is absolutely critical for the American team. Fast-track authorizes Obama to conclude a deal but prevents the Congress from later demanding that provisions be re-negotiated as a price for its approval. Under fast-track, the only thing the Congress can do is accept the deal as signed or reject it entirely.

Without fast-track authority, there’s no guaranty that any Trans-Pacific deal struck with the Americans will get the necessary Congressional approval. No country would be foolish enough to sign off on any agreement with the US in the absence of the fast-track guaranty.

The long-delayed fast-track bill was to be introduced in both the Senate and House of Representatives this week, but is again being held up by partisan wrangling, hostage to the toxic political atmosphere in Washington.

It’s unusual that the TPP negotiations have proceeded thus far without the American team having fast-track authority. Other TPP countries have been negotiating basically on faith, assuming that fast-track will one day be forthcoming.

An unfortunate development is that the chair of the critical Senate Finance Committee, Max Baucus of Montana, has been designated by President Obama as the next US ambassador to China. With Baucus’ impending departure, a major force in channelling fast track through the Congress will be gone, causing uncertainties over the ultimate fate of the legislation.

There’s another problem. While fast-track, if it comes, will give the US negotiators the required mandate, the price for getting that mandate through Washington’s byzantine legislative maze will be the tacking on by Congress of many conditions for fast-track approval. Those conditions will cause a lot of angst for a lot of other TPP countries.

All of this feeds concern that a final trans-Pacific deal can be successfully pulled off. Concerns are not assuaged by the fact that at each negotiating session there are more than 1,500 officials in attendance. That sends shudders, reminding us of the over-burdened WTO Doha Round negotiations in the Doha Round which, after 10 years of effort, ultimately collapsed under their own weight.

One of the lessons learned in the WTO talks, however, is that smaller, pragmatic trade deals can be achieved, less ambitious in scope but still important to global business. Witness the recent WTO agreement on trade facilitation – border procedures – reached at the WTO Bali meeting last December.

While a large-scale and broad-based TPP deal would be a huge step forward and in the collective interests of all participants, including Canada, there are these clouds across the Pacific that raise concerns that a comprehensive ptrade deal will be achievable.

Given the gathering clouds, it may be timely for Canada and the other Pacific countries to consider a more pragmatic course, to pull in their collective horns, and to pursue a smaller but more realistic set of objectives. It’s not in anyone’s interest to see the TPP talks drag on forever or collapse in disarray.

Without clear, meaningful movement and a realistic possibility of success in TPP over the next few months, less ambition and a more pragmatic focus by trans-Pacific governments will be needed.