Preparing for Tomorrow's Trans-pacific Partnership

• Publication year: 2015
• Author: By Robert Bowen*

Preparing for Tomorrow's Trans-Pacific Partnership

By Robert Bowen*

I. INTRODUCTION

Many California practitioners advise on transactions, investments, and other matters involving international commerce between private parties. Often, such commerce occurs against the backdrop of legal frameworks established by national governments after extensive negotiations. Multilateral and bilateral free trade agreements are good examples of frameworks that allow for and benefit subsequent private commerce. This article provides an overview of the framework and potential implications of a major multilateral trade agreement—the Trans-Pacific Partnership ("Tpp")—that appears likely to become operative in the near future and, if adopted, would have important ramifications for many California practitioners.

II. HISTORY

Under secret negotiation for many years, the TPP is a regional trade agreement for Asia-Pacific countries. A principle objective of the TPP is to deepen economic, financial, and commercial integration among its signatories by expanding mutual trade and investment opportunities and aligning regulatory practices in certain core disciplines. While not themselves novel goals (similar objectives propel many other trade accords), the TPP aspires to be a "21^st century trade agreement."¹

The TPP traces its roots to proposals by three countries (Singapore, New Zealand, and Chile) in 2003 to form what later became the "Trans-Pacific Strategic Economic Partnership"—a proposed pact to deepen trade liberalization within the Asia-Pacific region.² Since that beginning, both the number of negotiating countries and the range of topics under negotiation have expanded. This expansion is the result both of a desire among the countries to create a counter-weight to the European Union, and of the continued inability of the World Trade Organization ("WTO") to successfully conclude its Doha Round of trade liberalization negotiations.

The United States formally joined the TPP negotiations in 2010 and has participated in the ongoing negotiation rounds since that time.³ The U.S. government agency with lead negotiating authority in the talks is the Office of the United States Trade Representative ("USTR").⁴

Along with the United States, the eleven other countries participating in the negotiations account for approximately 40% of global gross domestic product.⁵ The negotiating countries include some of California's closest trading partners ( e.g. , Mexico, Canada, Japan, and Vietnam). Missing from TPP negotiations, however, are other major California trading partners such as South Korea and China.⁶ While such partners or other countries eventually could seek to join the TPP, that is unlikely to occur until after the current twelve negotiating countries have finalized and formally launched the TPP.

The negotiations of international trade agreements often witness a tension between a perceived need for secrecy, so that the parties can discuss matters candidly in an effort to hammer out compromises, and the need for broader stakeholder participation, so that any resulting proposed trade pact will be more familiar to—and more easily embraced by— lawmakers. The TPP discussions evidence this same tension. Substantive TPP negotiations have been conducted in secret and public information about the substance of the pact is largely the result of leaks (some of which have been amplified by WikiLeaks and other websites) and general statements from government agencies.⁷ From this information it can be gleaned that the TPP aims to address diverse disciplines that go well beyond the scope of most existing multilateral trade agreements. For example, the final TPP agreement is likely to have chapters on competition law as well as on anticorruption measures—topics that are not often addressed in multilateral accords.⁸

III. CURRENT STATUS AND FUTURE DEVELOPMENTS

Negotiations to finalize the TPP are ongoing as of this writing but appear to be in the closing stages. It is nearly certain that most chapters of the final TPP agreement have been completed or are nearing completion. While it is understood that the final TPP structure may contain up to twenty-nine chapters on generally applicable disciplines, the USTR website only identifies sixteen.⁹ From the United States perspective, a major obstacle to an overall TPP agreement is securing market access commitments from Japan.¹⁰

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Barring major world events and in light of the fact that President Obama has received Trade Promotion Authority ("TPA") from Congress, it is quite likely that a comprehensive TPP agreement will be reached later in 2015 or perhaps in early 2016. While opposition to the TPP is not insignificant, substantive differences among the twelve TPP participants are modest and bridgeable. As discussed below, TPA will catalyze the bridging of some of these differences and facilitate the conclusion of a framework agreement that will entice other countries to seek TPP party status in the future.

A. U.S. Politics and Trade Promotion Authority

A final TPP agreement would not be a self-executing agreement for purposes of United States law. For the TPP to have binding effect, the U.S. Congress will need to implement the final agreement through supporting domestic laws. If subject to the normal legislative process, a TPP pact negotiated by the USTR would then be subject to the range of hurdles typically encountered in the U.S. legislative process, including amendments, delays, and filibustering. For example, in such a situation Congress could insist on material amendments to the TPP agreement accepted by the USTR such that the USTR would be forced to return to the negotiating table with the other eleven countries. Aware of these dynamics, trading partners usually are reluctant to make their best negotiating offers absent assurances that what they offer the USTR at the negotiating table will survive the U.S. legislative process.

To strengthen the USTR's hand in the TPP negotiations, and to avoid the above scenario of Congressional erosion of a negotiated agreement, President Obama and prominent figures on Capitol Hill aggressively pressed to secure Trade Promotion Authority (previously referred to as Fast Track Negotiating Authority) in late 2014 and early 2015. Under TPA, Congress grants the President the...