THE OUTLOOK FOR A TPP 11 AGREEMENT

"What was previously 'impossible' is now achievable and especially in the wake of Mr. Abe's resounding reelection as Prime Minister of Japan."

Malcolm Turnbull

November 4, 2017

Perth is Australia's 4th largest city and sits on the Indian Ocean at the south western end of Western Australia.  Last Saturday, Perth was the setting for the 2017 Asia Pacific Regional Conference, which included a keynote address by Australian Prime Minister Malcolm Turnbull.  The event has also been described as an Australia-Germany regional conference, and indeed one of the speakers was the President of the Federal Republic of Germany Frank-Walter Steinmeier.  As one might expect, the Australia-EU trading relationship was a major topic of Prime Minister Turnbull's speech. 

So was TPP.  In this short entry, we shall focus on TPP.  Here are some excerpts from Saturday's speech by Prime Minister Turnbull:

"Importantly, if we succeed in securing a TPP 11, it must be designed to enable the United States to dock back in when it is ready to do so.  I personally remain confident about America's long-term interests and commitment, but we cannot afford to wait."

Along with more recent developments, the famous headline from November 1948 "Dewey Defeats Truman" is a powerful reminder of how foolish it is to count political chickens before they hatch.  One can simply note that those who would like to see a TPP of some sort come into being have their hopes pinned on the APEC meetings that are now under way in Da Nang, Vietnam.  Those meetings are scheduled to wrap up on Saturday, November 11. 

There is still some serious negotiating to be done, and no serious negotiation ends early.  So it will probably be Saturday before we know whether the effort to fashion a TPP 11 has been successful.  At the moment, those involved are slowly making their way through an ad seriatum obstacle course.  First there was the housing issue in New Zealand.  Jacinda Ardern, the prime minister of New Zealand, has declared that one solved.  Then there was, and still is, the ISDS issue, but the press reports we have seen suggest that that is not likely to be a deal breaker. 

Today the big question marks are products of Canada, which is seeking to add new provisions in the agreement, such as gender equality, and to revisit old ones, such as the amount of dairy products that will be allowed into Canada under the Canadian supply management system.  (It is hard to imagine New Zealand acquiescing to that.)

We expect to come back to this speech - especially its discussion of the trading relationship between Australia and the EU - later in the month, after this current round of key meetings in Asia - APEC and ASEAN - are over.  What we will note here are a take-it-to-the-bank prediction and a core observation, both of which were contained in Mr. Turnbull's November 4 speech in Perth. 

The prediction he made was this:

"In Da Nang, ... the most powerful statement I can make for free trade is by signing a Free Trade Agreement with Peru.  The Peru FTA is a first step towards a larger deal with a larger Pacific alliance which comprises the fastest-growing Latin American economies, in Chile, Colombia, Mexico, and Peru.  This in turn will be consistent with the all-important rule-making chapters of the TPP."

The insight was contained in this expression of hope:

"We seek a trading system that draws the region together, rather than cleaves the part, with our key security partner on one side and key trading partner on the other."

That is the Australian dilemma: caught (torn) between the United States and China. Australia is not alone in that, and, unfortunately, the tension in those relationships is more likely to grow over time than abate.  Would a TPP deal this week work to move things in a more favorable direction? We think it would. 

 On November 16, GBD will host discussion of the evolving trading relationship in the Asia Pacific Region at the National Press Club.  TPP After APEC is a link to the flyer for this event.