The US president has the opportunity to build on the momentum from a revised NAFTA, to extend his approach and legacy to a much larger potential agreement.
By Harsha Vardhana Singh
US president Donald Trump’s withdrawal from the Trans Pacific Partnership (TPP) on his first day in office left the TPP highly uncertain. After several attempts to clarify the way ahead, the rest of eleven TPP economies (TPP11) have recently agreed to continue the momentum to conclude the agreement, with some amendments. In particular, they have excluded certain topics of specific interest to the US (e.g., IPR), but the other text is intact including several issues that are important for the US. The name of the new agreement will be the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The renewed agreement CPTPP, with a changed name and somewhat different content, provides an opportunity for president Trump to develop his own legacy with a new trade agreement that meets the economic and strategic interests of the US, embodying his vision. This would be a good complement to his recently-concluded trip to Asia, and will provide a substantive basis to connect economies in the region within a forward-looking framework of a new, amended agreement. Trump is presently engaged in renewing NAFTA, the US trade agreement with Canada and Mexico (both members of TPP11). If the US considers engaging with CPTPP, perhaps there could be a basis to see the emergence of a Comprehensive Asia Pacific Free Trade Agreement (CAPFTA), which takes account of the sensitivities of both the US and the eleven economies that are a part of CPTPP.
The approach has to be for all parties to recognise that the CPTPP provides a framework for an evolving agreement where just like the transition periods it provides for reducing tariffs, the mechanisms and approaches in the agreement could be used by Trump to begin developing a new Asia Pacific Trade Partnership Agreement by the second half of 2018, by which time the contours of a revised NAFTA would be clearer. This would help give a significant effect to Trump’s emphasis on a “free, fair and reciprocal” trade agreement in the form of a new agreement, CAPFTA. Six points are worth keeping in mind in this context to help build a practical, step-wise approach to consolidate and further develop economic and strategic partnerships in Asia and the Pacific with members of the CPTPP. One, the tariff reductions incorporated in CPTPP would substantively meet the US concern that other economies have not adequately provided market access similar to that provided by the US. Since the agreement has both developed and developing economies, covering a wide range of GDP per capital, it will provide the possibility for others to learn from the experience of less developed economy members taking on ambitious market-opening commitments.
Two, much of the concern about non-level playing field in international trade relates to non-tariff barriers (NTBs). The provisions in CPTPP that enhance transparency, and establish a mechanism which allows member countries to raise their concerns regarding NTBs of other members for a timely resolution. These are important steps for addressing NTBs in external markets, and need to be developed together with other economies. Importantly, efficient operation of such mechanisms requires feedback based on experience. Therefore, based on their experience, members of the agreement participating in this process would help improve the system to better address specific concerns relating to NTBs, and also determine the extent and direction of change in these procedures. Without a country being part of the revised agreement, there would not be such an opportunity to do so.
Three, the provisions of the CPTPP include a process for review and evolution in the agreement based on experience. That is a very powerful mechanism which also includes the possibility of potentially raising new issues relevant to members, and discussing ways of finding solutions for them. Significantly, the CPTPP mentions some new areas which may soon require additional discussions or negotiations. In a potential CAPFTA, this could include new policies or issues considered to adversely affect the level playing field. Experience suggests that such new concerns will continue to arise over time, and a forum such as CAPFTA, including a large part of the global economy to discuss them would be very useful to address them. Four, an ambitious CPTPP agreement has been made possible by allowing longer than usual transition periods. This makes it easier to carry a larger burden that may arise due to the agreement. Without such flexibilities enabling the management of the difficulties faced by different members, it would not be possible to achieve either a high ambition or a wide membership of such an agreement. Thus, the framework of existing and potentially new flexibilities within an agreement would help provide a basis for expanding the scope of the agreement to a much wider set of countries than the original members.
Five, the new trade agreement could be developed through incremental steps towards the final revised agreement. Thus, for example, some parts of the agreement which relate to addressing NTM concerns and regulatory coherence, could be some “early harvests”. Thus, some benefits of CAPFTA could become available even before the final agreement is concluded. Six, the potential agreement CAPFTA could provide in a single step, the possibility of enlarging the scope of its trade regulations, as with US as a member, additional economies would be more likely join the agreement over time. Such a process had begun after the conclusion of TPP itself. Thus, president Trump has the possibility of building on the momentum from a revised NAFTA, to extend his approach and legacy to a much larger potential agreement, the CAPFTA, and more substantively addressing concerns relating to a “free, fair and reciprocal” trade agreement.
The author is an executive director of Brookings India (views are personal)