The Trans-Pacific Partnership Agreement (TPP) signed by 12 countries in Atlanta (USA) on October 4, 2015 represents a new phase in multilateral relationship with the potential to become a global partnership in trade and commerce.
It also represents victory for New Zealand, especially Trade Minister Tim Groser, who has spent years of negotiations, trotting the world and subjecting himself to sharp criticism both at home and abroad, over a deal which many did not understand and just a few appreciated.
The 12 countries that are signatories to TPP (including Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States of America and Vietnam) account for more than 36% of global economic output.
The Agreement banishes the failed Doha Round of Talks, the ghost of the World Trade Organisation, proving that multilateral trade deals are still possible.
The details of the deal have yet to be released, but leaks suggest that compromises have watered down the final version, reducing its potency. Nevertheless, any reduction of trade and investment barriers involving the US and Japan, two of the three largest economies in the world, will provide a significant jolt to global trade.
It was not easy to overcome sticking points in the areas of dairy, agriculture and automobiles. Negotiators also resolved disagreements on pharmaceutical patents and data protection. Still, the TPP pact will amount to nothing unless the legislatures in the 12 countries ratify the deal; a process that will be particularly difficult in some countries.
The agreement is 30 chapters long and politically contentious. The final text will undergo a legal review before it is released around the start of November.
The highest hurdles will be in North America. The US passed Trade Promotion Authority in June, which improves the chance of ratification by Congress, as lawmakers cannot derail the bill by adding amendments.
While the National Party has the numbers to get the TPP through Parliament, it may find sticky wickets elsewhere in the world where labour unions are strong.
It is not yet known as to how Americans will react as the documents goes on the public domain. There are doubts already that the Democrats (the Ruling Party) may not support Pact, especially since America faces Presidential elections in November 2016. Lobbyists from the pharmaceutical, auto and tobacco industries are already contacting lawmakers to protest.
President Barack Obama will need the support of the next Speaker of the House of Representatives, who will have to persuade Republicans that the Party’s free-trade ideals should outweigh antipathy towards the Democratic president’s broader policy agenda.
Canada’s parliament has been dissolved ahead of an election on October 19th, and ratification must wait until a new government is formed. The left-of-centre New Democratic Party, a fierce critic of trade liberalisation, has slipped to third in the polls, bolstering the chance of Canada approving the pact.
Although it may be a close call in some member countries, the TPP is the only hope for a world of free trade, especially since bilateral deals such as Free Trade Agreements are becoming increasingly prickly and sensitive.