Will TPP Be Ratified & Implemented?
By: Steve Craven
No, this isn’t another article about how tough it will be to get the Trans Pacific Partnership through the U.S. Congress during an election year. There is enough of that sort of analysis going around and virtually all the authors assume that the United States will have the toughest time getting TPP into place. I don’t think so.
I expect all twelve of the TPP negotiating countries will eventually ratify and implement. But this isn’t a slam dunk. Here’s what has to happen. The twelve TPP signatories have two years in which to ratify their participation in the new TPP. If all twelve ratify it within the two years, then TPP will go into force sixty days after the last ratification. If some of the twelve decide not to ratify (i.e., not to participate), the new TPP can still go into force for the others if at least six countries ratify within the two years. But there is a big catch. The agreement requires that the ratifying countries account for at least 85% of the combined GDPs of the twelve. That means that TPP is dead if either the United States or Japan fail to ratify.
I asked friends who are still in the negotiating game which countries might have the most trouble ratifying or implementing TPP. I expected Japan or the United States to be at the top of the list. Any question of liberalizing Japan’s agricultural restrictions always has a tough road in the Diet. And the extremities of a U.S. election year are totally unpredictable. But that wasn’t what they Malaysia may have the toughest time. Seems the TPP provisions regarding investment policy and state-owned enterprises could be seen as requiring an end to, or at least modification, of Malaysia’s laws that boost local Malay employment and rights over other races. The infamous bumiputra laws. That is a lightening rod for opposition among Malaysia’s political parties. Next up after Malaysia is Vietnam. It is the provisions on the behavior of state-owned enterprises that has people worried. Much of the Vietnamese economy remains state-owned. Their bosses, many of whom are well-placed politically, will be loath to give up the monopoly profits they have enjoyed. Expect a big fight in Hanoi.
Everywhere else, there will be controversy, but it looks like TPP will be ratified. Keep your eyes on Malaysia and Vietnam.
Steve Craven advises companies on international business strategies and how to overcome problems encountered in foreign markets. He is a former consultant, American diplomat and a U.S. trade negotiator. He served as a Career Diplomat and Senior Foreign Service Officer, member of the U.S. Commercial Service, U.S. Department of Commerce. Mr. Craven also previously served as Chair of the Hawaii Pacific Export Council.