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Thursday, September 13, 2012

The Trans-Pacific Partnership Negotiations and Issues for Congress

Ian F. Fergusson, Coordinator
Specialist in International Trade and Finance

William H. Cooper
Specialist in International Trade and Finance

Remy Jurenas
Specialist in Agricultural Policy

Brock R. Williams
Analyst in International Trade and Finance

The Trans-Pacific Partnership (TPP) is a proposed regional free trade agreement (FTA) being negotiated among the United States, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. U.S. negotiators and others describe and envision the TPP as a “comprehensive and high-standard” FTA, presumably because they hope it will liberalize trade in nearly all goods and services and include commitments beyond those currently established in the World Trade Organization (WTO). The broad outline of an agreement was announced on the sidelines of the Asia-Pacific Economic Cooperation (APEC) ministerial in November 2011 in Honolulu, Hawaii. If implemented, the TPP potentially could eliminate tariff and non-tariff barriers to trade and investment among the parties and could serve as a template for a future trade pact among APEC members and potentially other countries. Congress has a direct interest in the negotiations, both through influencing U.S. negotiating positions with the executive branch, and by passing legislation to implement any resulting agreement.

In Hawaii, the leaders of Canada, Japan, and Mexico also announced that they would seek consultations with partner countries with a view towards joining the negotiations. Canada and Mexico subsequently were invited to join the negotiations in June 2012. Japan and the TPP partners are conducting bilateral consultations on its possible entrance as well.

The TPP originally grew out of an FTA among Brunei, Chile, New Zealand, and Singapore, which came into force in 2008. Thirteen rounds of negotiations have occurred since the beginning of formal talks in 2010. In addition to negotiations on new trade rules among all the parties, the talks include U.S. market access negotiations—seeking removal of quotas and tariffs on traded products—with New Zealand, Brunei, Malaysia, and Vietnam as well as market access negotiations among other parties. The United States has FTAs in force with Chile, Singapore, Australia, Peru, and with North American Free Trade Agreement (NAFTA) partners Canada and Mexico, although these agreements may be reopened and new disciplines may be negotiated in the course of the talks covering issues beyond those in the existing FTAs.

The TPP serves several strategic goals in U.S. trade policy. First, it is the leading trade policy initiative of the Obama Administration, and is a manifestation of the Administration’s “pivot” to Asia. It provides both a new set of trade negotiations following the conclusion of the bilateral FTAs with Columbia, Panama, and South Korea and an alternative venue to the stalled Doha Development Round of multilateral trade negotiations under the WTO. If concluded, it may serve to shape the economic architecture of the Asia-Pacific region by harmonizing existing agreements with U.S. FTA partners, attracting new participants, and establishing regional rules on new policy issues facing the global economy—possibly providing impetus to future multilateral liberalization under the WTO.

The eleven countries which make up the TPP negotiating partners include advanced industrialized, middle income, and developing economies. While new market access opportunities exist among the participants with which the United States presently does not have FTAs, the greater value of the agreement to the United States may be setting a trade policy template covering issues it deems important and which can be adopted throughout the Asia- Pacific region, and possibly beyond.

Twenty-six chapters in the agreement are under discussion. Aside from market access negotiations in goods, services, and agriculture, negotiations are being conducted on intellectual 
property rights, services, government procurement, investment, rules of origin, competition, labor, and environmental standards and other disciplines. In many cases, the rules being negotiated are more rigorous than comparable rules found in the WTO’s Uruguay Round Agreement. Some topics, such as state-owned enterprises, regulatory coherence, and supply chain competitiveness break new ground in FTA negotiations.

As the negotiations proceed, a number of issues important to Congress are emerging. One is whether the United States can balance its vision of creating a “comprehensive and high standard” agreement with a large and expanding group of countries, while not insisting on terms that other countries will reject. Related to this may be what concessions the United States is willing to make to achieve a “comprehensive and high-standard” agreement overall. Another issue is how Congress will consider a TPP FTA, if concluded. The present negotiations are not being conducted under the auspices of formal trade promotion authority (TPA)—the latest TPA expired on July 1, 2007—although the Administration informally is following the procedures of the former TPA. If TPP implementing legislation is brought to Congress, TPA may need to be considered if the legislation is not to be subject to potentially debilitating amendments or rejection. Finally, Congress may seek to weigh in on the addition of new members to the negotiations, before or after the negotiations conclude..

Date of Report: September 5, 2012
Number of Pages: 55
Order Number: R42694
Price: $29.95

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