August 30, 2014
– Since the 19th negotiation round in Brunei last August, no other formal round for negotiations over the Trans-Pacific Partnership Agreement (TPP) has been held. Instead, a multitude of meetings at all levels have taken place.
The most recent are the chief negotiator-level meeting in Vietnam from May 12 to 15, which served as a prerequisite for the ministerial meeting in Singapore from May 19 to 20, and then an informal negotiating session in Ottawa, Canada, from July 3 to 12. Upcoming are plans for a chief negotiator-level meeting in September (in Hanoi), and a ministerial meeting in October.
Though the schedule is heavy and involving all levels, the TPP talks are still inching forward as old problems remain. Some solutions have been introduced but failed to deliver a breakthrough, while new problems keep arising.
No more hope for removal of all tariffs?
At the start of negotiations, the participants aimed for the elimination of all import tariffs (with a specific roadmap to be discussed during their talks). Still, reality shows that such an objective is almost unobtainable. It seems that each country wants to keep some of their own tariffs. This has become apparent after Japan jointed the talks, as this country refuses to lift its tariffs on the five most sensitive agricultural products.
Many people have already foreseen a future of the TPP where not all tariffs are abolished. This seems to have become true given recent statements of some high-ranking officials.
The New Zealand Minister of Trade on May 19 said his government leaves open the possibility of the TPP with tariffs on agricultural products not completely removed, looking to retain some of the country’s tariff lines.
Likewise, the website of the United States Trade Representative (USTR) has recently published a summary of the U.S. objectives when participating in the TPP, which no longer includes a call for a complete removal of import tariffs. Instead, the country just expects “elimination of tariffs and commercially-meaningful market access for U.S. products exported to TPP countries.”
Japan may only make concessions to the U.S.
As a late TPP negotiating participant (joining in July 2013), Japan has mainly focused on market access to the U.S. Unfortunately, no significant progress has been achieved by far.
The major conflict has arisen with Japan refusing to open its market to five agricultural products, namely meat, milk, sugar, rice and wheat, exported from the U.S. In return, the U.S. refuses to lift its tariffs on Japanese cars.
The impasse in the bilateral talks between Japan and the U.S. has slowed general negotiations over market openness for all commodities. It seems the other participants are awaiting the results of the negotiations between Japan and the U.S. to make their last offers. If Japan conceded to the U.S. only, then they would not have to be generous to Japan. On the other hand, if Japan was able to protect some sensitive agricultural items, they would also demand the same thing.
A TPP agricultural negotiator remarked that Japan’s final decision over its market openness would be the key to the entire TPP talks.
Progress in textile negotiations
Concerning the rules of origin for textile and apparel products, negotiators have made a progress in the two short supply lists – a kind of exceptions to the “yarn forward” rule of origin.
Speaking on the sidelines of the ministerial meeting in Singapore on May 20, Mexican Secretary of Economy Ildefonso Guajardo said Mexico, the U.S. and Vietnam were reaching an agreement on textile-garment in the TPP. Although no specific details were given, his comments indicated Mexico, the U.S. and Vietnam were arriving at a consensus on which products should be named in the two short supply lists: One for permanent benefits and one for temporary benefits.
Concerning the extent of market openness, knowledgeable sources said that instead of abolishing tariffs for all items when the rules of origin are observed, the U.S. this March released a new tariff offer for Vietnam’s textile-garment products with different schedules of market openness for three groups of products (known as the three baskets). In particular, the U.S. looks to protect most of the sensitive products (basket 1), to which Vietnam pays the most attention as they are the country’s major exports.
Talks on rules of origin become increasingly complicated
A source said that as of this April, the TPP countries had agreed on the detailed rules of origin for some 62% of the commodities of level six according to the HS classification. The remaining items are highly sensitive and complex, such as textiles and steel.
The negotiating countries have also reached an agreement on application of intra-cumulation rules for all commodities, including the most sensitive ones.
However, the U.S. is now seeking market access on a bilateral basis and offering a different list of items for different partners. In other words, once the TPP is concluded and comes into force, the U.S. will levy different tax rates on the same type of goods depending on which TPP country such goods are originated from. If this is the case, it is unclear how the cumulation rules would be enforced.
Regarding the process of origin certification, a source from the website of the Chilean Ministry of Foreign Affairs informed the TPP countries had agreed to adopt both methods: for most of the cases, enterprises will certify the origin of their own goods, but they will need to seek a certificate of origin from competent authorities in certain cases and in a certain time after the TPP becomes effective.
Service providers to be excluded in talks over SOEs
At the TPP ministerial meeting in Singapore from February 22 to 25, participants agreed to narrow the scope of application of the rules for state-owned enterprises (SOEs). They should be only applicable to those making goods, not those providing services.
In other words, member governments will not be restricted from supporting the SOEs offering services in the domestic market. Also, the principles of fair competition currently under negotiations to be included in the SOEs chapter of the TPP, if any, would only be applicable to those SOEs manufacturing goods and those providing services abroad.
New idea about intellectual property protection for pharmaceuticals
Reportedly, the TPP countries are considering a new approach to intellectual property protection for pharmaceutical products. A uniform set of obligations/standards will be introduced for all member countries, both developed and developing. Nevertheless, the roadmap will be longer for developing, low-income countries.
A goal for TPP completion in November
On June 20, U.S. President Barack Obama called for a conclusion, or at least a conclusion in principle, of the TPP negotiations this November, when the TPP countries met at the APEC summit in Beijing. Thus, once again the U.S. wants the TPP talks to be finished by the end of the year, following the failed attempts in 2011, 2012 and 2013.
An ambitious TPP negotiation schedule has been drawn up to achieve such a goal. In addition, to create a stronger push toward the conclusion of the TPP talks, the U.S. and Japan when meeting in Ottawa officially announced the publicization of the contents of their bilateral negotiations on market access in October, providing a basis for other countries to talk on related issues.
Even so, observers have reasons to doubt a TPP conclusion this November. First, it is unsure if the U.S. and Japan would arrive at an agreement on market access in October. Second, even if such an agreement was reached, it is unlikely that Obama would like to disclose any result at the sensitive time right before the parliamentary elections in the states in November. Third, even if the content of negotiations between the U.S. and Japan was announced in October, the one month left until November would not be enough for other countries to resolve all the remaining issues to finish the TPP.
Thus, once again the TPP countries are under a huge pressure to conclude the agreement highly anticipated by those who believe in trade liberalization.
(By Trang Nguyen)