TPP-11 now turns focus to recruiting new members

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Thailand hopes to boost farm exports by joining the 11-member Trans-Pacific Partnership trade pact

Nikkei Asian Review | 1 November 2018

TPP-11 now turns focus to recruiting new members

by TAKASHI TSUJI

TOKYO —With the Trans-Pacific Partnership coming into force in December, its 11 members are planning a meeting early next year to discuss inviting Thailand and other nations, hoping to quickly expand the trade bloc positioned as a bulwark against protectionism.

Cabinet-level representatives from the 11 Pacific Rim nations will meet in Tokyo as early as January to decide on the procedures to let in new members, with expansion targeted for next year. In addition to Thailand, the U.K. and South Korea have expressed interest.

As the U.S., which pulled out of the pact in early 2017, wages a trade war with China, the TPP members hope to counter the rise of protectionism by inviting countries concerned about the trend. For Japan, the pact could provide leverage as it starts bilateral trade talks with Washington.

Thailand is one country looking to join the TPP in 2019. The Southeast Asian nation competes heavily with TPP partners Malaysia and Vietnam in electronic devices, seafood and farm produce.

"With the U.S.-China deepening global economic uncertainty, joining the agreement carries significance," a local paper quoted Deputy Prime Minister Somkid Jatusripitak as saying.

The U.K., which is due to exit the European Union in March, is planning to negotiate with the Pacific bloc after the departure.

South Korea is also looking to join. "By taking part in multilateral trade pacts, we plan to counter the spread of trade protectionism," Kim Dong-yeon, finance minister and deputy prime minister for the economy, said last week.

The accord, formally known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, will unify rules for business over economies spanning 500 million people and $11.38 trillion, or 13% of the world’s gross domestic product. Among other benefits, the pact would immediately eliminate tariffs on a wide variety of fish, and do away with duties on wine in the eighth year.

For the countries that have already ratified the agreement — Mexico, Japan, Singapore, New Zealand, Canada and Australia — the deal goes into effect at the end of the year. For the rest of the members — Vietnam, Malaysia, Chile, Peru and Brunei, the rules will take effect 60 days after they ratify the pact.

Japan expects the TPP will provide an annual economic boost of roughly 8 trillion yen ($70 billion), and create 460,000 jobs. For one, tariffs on automotive exports to Canada will fall to zero from 6.1% in five years.

Tokyo has bee eager to see the TPP take effect quickly as it prepares for bilateral trade talks with Washington as early as January. The White House is expected to pressure Japan to drastically lower tariffs on agricultural products, but Tokyo intends to hold the line at what the TPP prescribes. For example, Japan’s customs duty on beef will fall from 38.5% to as low as 9% over 16 years.

Because Japan and the U.S. agreed to those terms in a previous iteration of the TPP — the one abandoned by President Donald Trump after his inauguration — the government thinks it will not face pushback from the domestic farm lobby if it sticks to those provisions.

But the talks may not play out the way Tokyo hopes for. The White House has talked Mexico and Canada into rewriting the North American Free Trade Agreement into the United States-Mexico-Canada Agreement — a deal that looks more leaned toward state-managed trade. Because the Trump administration continues to take a hard line in trade negotiations, there is no guarantee that Washington will change its stance once the TPP goes into effect.

At the same time, Japan continues to pursue free trade spheres, in the hopes of bringing the U.S. back into the multilateral fold. An economic partnership agreement with the EU is expected to go into force early next year. Tokyo is also focused on the Regional Comprehensive Economic Partnership that brings together 16 Asia-Pacific states. But talks have seemingly stalled, with China resisting Japan’s calls for a high degree of trade freedom.

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