What is the TPP?

The Trans-Pacific Partnership Agreement

(TPP) is a trade agreement currently being
negotiated between Australia, Brunei
Darussalam, Chile, Canada, Japan, Malaysia,
Mexico, New Zealand, Peru, Singapore, the
United States and Vietnam. It will account
for roughly 40% of global gross domestic
product and a third of world trade. The
comprehensive plan covers, among other
areas, government procurement,
intellectual property, electronic commerce,
labor protections, food safety, animal and
plant health, competition policy and state-
owned enterprises. Membership is by
invitation only.
N
ot among the current twelve TPP countries, the Philippines
will likely become better off economically if it is among a second-
wave of TPP member states including Thailand, South Korea,
Chinese Taipei, Columbia, and Indonesia. This was the conclusion
of Prof. Ramon L. Clarete, Dean of at the University of the
Philippines School of Economics who estimated that Philippine
exports would expand by 42% and her GDP would increase by
59% with TPP membership.

Prof. Clarete used a gravity model of trade involving 109 countries
from 1948 to 2012, and a computable general equilibrium (CGE)
model of the Philippine economy comprising 50 industries and ten
household groups. He had briefed top officials of the Department
of Trade and Industry, including Undersecretary Adrian Cristobal,
Jr. and Assistant Secretary Ceferino Rodolfo, regarding the results
of his study on TPP.

US President Barack Obama, in his recent visit on 29 April, urged
the Philippines to join the TPP. Philippine exporters see
membership as necessary for defending the countrys
competitiveness among the worlds largest export markets like the
US and Japan, and the results of the TPP study provided policy
makers the order of magnitude of what the country may lose by
staying out of the TPP.

Prof. Clarete stressed that mere accession to (continued next page)
TPP seen to increase
PH exports, GDP
TRADE seeks to advance inclusive growth by
improving the Philippines global standing in the
international economy through higher levels of
trade and foreign direct investment. It also works
to ensure that national trade regimes conform to
international standards.
TPP Updates
Volume 1 Issue 8 May 2014
Recent developments on the Trans-Pacific Partnership gathered from third party sources as
indicated in the provided hyperlinks.
TPP Briefs: A final agreement
may have to wait until the
next US president if Congress
doesnt renew fast-track
authority; New Zealand is
open to alternative solutions
on farm market access;
Japans economy minister
says countries are suffering
from negotiation fatigue.
3
International
news:
3

An ISEAS study says the US-
led TPP and the Regional
Comprehensive Economic
Partnership (RCEP) are
complementary ways to
regional economic
integration.
Local news:
Finance Secretary Cesar
Purisima says the Philippines
is definitely aiming for
inclusion in the second
wave of TPP members.
The TRADE Project
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2





T
he Philippines is eager to join the Trans-
Pacific Partnership agreement, with no less than
President Benigno Aquino III signifying this in his
meeting with US President Barack Obama during
the latters state visit in April. This was the
statement of Finance Secretary Cesar Purisima in
a video interview with CNBCs Martin Soong on
19 May.

Secretary Purisima told CNBC that already, 90%
of the Philippine economy is open to 100%
foreign participation, with even some sectors like
retailing and mining fully open to 100% foreign
ownership for as long as a minimum investment
amount is met. He cited as exceptions some
professions but added that the country is clearly
moving towards opening [that] up further.

Purisima added that if the TPP achieves its intent
and vision, it would be very important as a high-
standard agreement covering not just trade but
also government procurement and investments.

Were definitely aiming to become part of the


second wave, he said.

Purisimas declaration affirmed an earlier
announcement by Communications Secretary
Herminio B. Coloma who told BusinessMirror
that President Aquino had confirmed to the US
president the Philippines keen interest in the
TPP. Coloma said that, for his part, President
Obama said he was willing to help bring the
Philippines into the currently 12-member trade
alliance.

At the same time, however, Purisima also told
the BusinessMirror on 20 May that the
administration would not admit to supporting
constitutional amendments even if these are
limited only to those parts affecting foreign
investments. Referring to the TPPs current
members, he said that this first group of
countries have yet to agree to a baseline, and
that until such a baseline is set, We do not
know for sure what structural reforms we need
to undertake.
TPP SEEN (from p. 1)
2 TPP Updates/May 2014

an agreement does not deliver the
estimated expansion of exports
and GDP, but that the economic
policy reforms called for by the
accord would.

The Trans-Pacific Partnership
(TPP) agreement is the largest and
dubbed the gold standard of
preferential trade agreements. Its
twelve founding countries account
for 40% of global GDP and 30% of
world trade, and are among the
most trade-open in the world
today.

In a seminar Prof. Clarete
presented on 30 April at the
Economics Department of Western University in
Canada, he discussed the plausibility of these
numbers with Prof. John Whalley who is among
the worlds leading thinkers in global trade policy,
and a pioneer CGE modeler.
Empirically, these numbers
are even conservative,
according to Clarete.
Vietnams exports, for
example, expanded 27-fold as
it integrated with the world
economy. But he stressed
that the more important
point, according to Prof.
Clarete, is that the speed at
which these numbers are
realized depends upon the
country itself, i.e., on how fast
it boosts its capacity to trade
with policy reforms and public
spending, while keeping the
adjustment cost to trade
openness at a low level. Preferential agreements
like the TPP provide a menu of policies that need
to be in place to realize these gains.
The speed at which
these numbers are
realized depends
on how fast the
country boosts its
capacity to trade
with policy reforms
and public
spending, while
keeping the
adjustment cost to
trade openness at
a low level.
PH definitely aiming for TPP

TPP Updates/May 2014 3


Without fast-track, TPP may wait
until next US president

President Barack Obama will have to work with
Congress to get the fast-track authority bill
passed, otherwise further delay past this
midterm election year would likely derail the
TPP until after the next US president assumes
office. Republican Representative Devin Nunes,
chairman of the House of Representatives Ways
and Means committee, made this declaration at
an event hosted by the Center for Strategic and
International Studies (CSIS) on 30


April, World Trade Online reports.

Were going to get a TPP agreement
ultimately, Nunes told the gathering, while
adding that the challenge was ultimately
whether President Obama is going to get it
done, or whether the next president of the
United States is going to get it done. He said
this was because if fast-track authority did not
pass by the lame-duck session this year, you
get into crazy times of presidential primaries.

Fast-track authority, also known as the Trade
Promotion Authority (TPA), would allow the
president to negotiate free-trade agreements
that Congress could approve or reject, though



TPP Briefs
(continued next page)











T
he Institute of Southeast Asian Studies (ISEAS)
in Singapore has published a piece in the ISEAS
Perspective tracing Chinas attitude towards the TPP,
shifting from one marked with caution, to a stance
that sees the US-led trade pacts economic and
non-economic benefits for China. In his study,
visiting senior fellow Zhao Hong concludes that the
TPP and the Regional Comprehensive Economic
Partnership (RCEP) in fact have complementary
elements, and that China and the US should
together mold the two trade agreements as
pathways for stronger economic integration in
the Asia-Pacific.

For some time since the US joined the TPP,
according to Zhao, many in China viewed the TPP
as a vehicle for the US to ensure control of future
international trade rules and thus effectively balance
Chinas increasing economic influence in the region.
In turn, Americans believed the TPPs high-standard
requirements would be too formidable for Chinas
compliance. Chinas response has been to develop
its own ties with ASEAN, entering into free-trade
agreements with neighbors and promoting instead
the RCEP between all ASEAN member states plus
Australia, China, India, Japan, Korea and New
Zealand. But these two competing visions of the
TPP and RCEP, Zhao says, have been due largely to
misunderstanding and mistrust on both sides.

Zhao notes that the TPPs uniformity of rules
requires members to adopt, for example, strong
labor provisions such as collective bargaining
allowances and freedom of association, which
means current members like Vietnam could be
barred entry. In contrast, the RCEPs negotiating
objectives are more modest and allow for flexibility,
considering each member states needs and
particular circumstances. By building on the
consensus of participants, the RCEP may, as China
believes, better promote East Asian cooperation.

The article also cites reasons for Chinas
increasingly more positive attitude towards the
TPP. First is that China has become the 6
th
largest
foreign investor in the world, and TPP members
have become important investment destinations for
the Chinese. Second, with Japan the worlds third
largest economy now a TPP member working
closely with the US, China sees TPP membership as
a way of ensuring that it remains a part of the rule-
making process in the region. Finally, many
Chinese scholars see the TPP as a vehicle for
accelerating domestic reform, particularly in areas
such as state-owned enterprises (SOEs),
environment and labor standards, intellectual
property rights and liberalization of services trade
all already part of Chinas reform agenda.
TPP, RCEP
complementary
pathways
to Asia-Pacific
economic integration

4 TPP Updates/May 2014




not amend. According to Nunes, the lack of
TPA had already delayed the conclusion of
TPP negotiations as seen by the difficult trade
talks between US and Japan over market
access.

Other observers have previously brought up
the need for fast-track if the TPP is to see a
successful conclusion soon. In April, Malaysian
Star Online columnist Michael Khor
questioned why other countries would
bother to name their bottom line in the
TPP talks when what is agreed to can be
opened up again by Congress?

NZ open to keeping some tariffs,
but concessions must apply to all

New Zealand Trade Minister Tim Groser said
on 19 May that his government was not
holding an absolutist position on full
elimination of tariffs for all agricultural goods,
and that they were open to alternatives as
long as countries seeking exemptions could
deliver a high-quality result overall.
InsideEPA.com reports Grosers remarks
made on the sidelines of the ministerial
meeting held in Singapore.

The NZ minister was referring in particular
to Japans position of protecting five farm
products, including beef and pork, though he
noted that the US and Canada also had very
high tariffs on certain agricultural products.
But he stressed that any market concessions
Japan and the US agreed to bilaterally must
also be available to other TPP parties.

Grosers views were echoed by the special
NZ agricultural trade envoy, Mike Peterson,
who in the same news article said the TPP
talks were being stalled by the question of
whether concessions to Japan would be
extended to all member-countries. This is a
12-country agreement, Peterson was quoted
as saying. But the reality is, until we get
some progress amongst Japan and the USA,
its very hard for others to really come to the
table with meaningful discussions.




Meanwhile in the US, a coalition of
agricultural groups has called for government
to continue TPP talks without Japan if the
latter does not grant market access for US
farm goods. World Trade Online reports that
the call came as US and Japan prepared for
another round of negotiations scheduled for
29-30 May.

Japan cites
negotiation fatigue

A Wall Street Journal correspondent has
compared the four-year-old and still ongoing
TPP negotiations to the World Trade
Organizations (WTO) Doha round of talks
that, after 13 years, has failed to secure any
comprehensive deal. Mitsuru Obe says while
the 12-member TPP pact should be easier to
conclude than a deal involving the 160-strong
WTO, and despite how the TPP has been
billed a 21
st
-century agreement involving
issues not covered in traditional free-trade
agreements, such as intellectual property
rights and state-owned enterprises, it is still
more traditional issues like protections on
farm products, especially by Japan, that have
been the biggest obstacles.

Countries are suffering from negotiation
fatigue, Japans Minister of Economy, Akira
Amari, is said to have told reporters after the
latest Singapore talks ended in May without
substantial progress. Amari said Japan didnt
deny the spirit of the TPP, which is 100%
tariff elimination, but also added it would be
more productive to negotiate while
acknowledging there are a few sensitivities
that may be difficult to eliminate completely.

The situation, writes Obe, is similar to the
WTO where, according to Director-General
Roberto Azevedo, most countries believe
theyre being balanced and fair and ethical but
think others are being unrealistic,
unreasonable or unfair.



TPP BRIEFS (from p. 3)