Key Facts: The Trans-Pacific Partnership

KUALA LUMPUR, Malaysia – The Obama administration’s ambitious Trans-Pacific Partnership (TPP) proposal would create a 12-country trade bloc covering about 40% of the global economy and bringing potentially far-reaching economic change to its members.

But secretive talks to iron out a deal have dragged on for years as negotiators struggle to bring divergent national economic priorities in line across the vast and varied TPP region.

The following is a look at the stakes and stumbling blocks faced by the pact’s potential signatories.

United States

The TPP is the main economic component of the Obama administration’s strategic shift of attention toward the vibrant Asia-Pacific, particularly as concerns rise over China’s growing economic and diplomatic clout.

Washington says the TPP will help enshrine global trading rules that safeguard labour rights, environmental protection, an unfettered Internet, and a level playing field for domestic and foreign enterprises operating in the same market – goals not always shared by Beijing.

China’s proposal for an Asian Infrastructure Investment Bank (AIIB), which could challenge Western-controlled multilateral institutions like the IMF that currently set trading rules, has added a sense of urgency.

But some critics say the process is being driven by US corporations seeking to crack open markets overseas, while they continue to insist on measures that protect their interests such as longer patent protections, making generic drugs more expensive, and giving foreign investors more legal leverage overseas.

Due to the political sensitivity of the trade issues under discussion, talks have been smothered in secrecy, further fueling suspicions.

Japan

The participation of economic powerhouse Japan is critical to the TPP’s success, but Tokyo’s reluctance to throw open its cosseted agriculture and automotive markets has been a major snag.

But Prime Minister Shinzo Abe is seeking to drag Japan out of more than two decades of economic stagnation, and joining the TPP could help him to force through structural reforms he desires.

Membership also would allow Japan to emphasize its trading clout in the face of rival China’s march toward becoming the world’s biggest economy, while further cementing Tokyo’s alliance with Washington.

Australia

Canberra says the TPP will offer expanded markets abroad for the country’s huge exports of agriculture and mining products, while also benefitting the services, e-commerce, and other sectors. 

But critics fear it could water down Australia’s stringent food-safety and quarantine standards, and that intellectual-property changes could raise medical costs.

Australia is also among prospective TPP nations who are concerned that investor-protection mechanisms under the pact could allow foreign companies to challenge domestic regulations.

Canada

The government’s resistance to opening up Canada’s heavily protected poultry and dairy sectors has emerged as a potential deal-breaker, particularly with national elections scheduled for October 19.

Asked whether Ottawa – which already is line with major trading partners like the US through other agreements – could opt out of the TPP, a Department of Foreign Affairs, Trade and Development spokesperson told Agence France-Presse the government “will only sign an agreement that is in the best interests of Canadians”. 

New Zealand The country is a major world exporter of dairy and other agricultural products, and the government touts studies saying the TPP could boost overall export receipts by US$4.1 billion annually by 2025, a 6.8 percent increase.

But the government insists it will not agree to a deal that harms its farmers.

The TPP secrecy also has fuelled warnings that an accord could undermine New Zealand’s sovereignty.

Malaysia

Dependent on exports of oil, gas, palm oil and rubber, Malaysia’s government has welcomed the TPP as an opportunity to penetrate further markets.

But negotiations have snagged on fears that the pact would challenge Malaysia’s politically sensitive system of preferential treatment for its ethnic Malay majority in areas such as government procurement contracts.

Also, concerns are high that drug prices could rise in a country where 80 percent of government-supplied medicines are low-cost generics.

Singapore

One of the world’s richest and most open economies, trade-reliant Singapore is a staunch TPP proponent.

It already has signed a slew of regional and bilateral free-trade agreements, and the government credits them with helping fuel the city-state’s highly successful economic growth, predicting the same for the TPP.

Vietnam

Vietnam’s developing economy could be a big TPP winner, analysts say, with the government expecting a boost in foreign investment and for key exports like clothing and rice.

It also is seen as a potential spark for much-needed domestic economic reform, and as a way of cementing relations with Washington at a time of deep concern in Vietnam over the assertiveness of its northern neighbour China.

But a requirement that signatories use yarn from TPP member-countries in textile manufacturing complicates negotiations. Most textile materials now used in the country’s economically vital clothing manufacturing market originate from China, a cheap producer.

Mexico

The TPP is viewed in Mexico as a way to secure the country’s interests in the all-important US market, while opening the door to Asia – a largely unexplored frontier considered critical to Mexico’s future growth.

The agricultural and livestock sectors, however, are strongly against any deal that could give countries like Australia or New Zealand a leg up in Mexico.

Peru and Chile

The two South American neighbours already have free-trade agreements with nearly all of their TPP partners, and thus have little to lose or gain directly.

But Peru and Chile, which also have free-trade deals with major trading partner China, continue to face significant non-tariff barriers in the Chinese market, and TPP membership is considered a way of joining a broader effort to challenge those barriers.

Brunei

Tiny oil-rich Brunei has joined a range of trade alliances as a way of helping to diversify a one-dimensional economy heavily dependent on energy exports.

But US lawmakers and activists have called for the Islamic sultanate’s exclusion from the pact over its adoption of a harsh sharia penal code. – Rappler.com