Ministers have been talking in Da Nang, Vietnam on the sidelines of the APEC meeting. Toshimitsu Motegi, who co-chaired the ministerial talks told reporters that "the most important thing is that all 11 member countries were able to reach a new agreement." It maintains the high standard of the previous TPP document, and is well-drafted and well-balanced. It sends a strong message to the US and other countries in the Asia-Pacific region,” he said.
The new agreement will take effect 60 days after 6 of the 11 member countries ratify the deal. Core elements of the original TPP are included, but a shortlist of rules spanning 20 categories was suspended. The 11 member countries agreed to reincorporate those items if the US returns to the deal in the future.
Japanese officials said on November 9th that an agreement-in-principle had been reached. But Canada disputed the claim and its international trade minister tweeted that "despite reports, there was no agreement-in-principle on the TPP." But the nations were able to agree on the terms and an official announcement followed.
The original TPP was signed in early 2016 with 12 members, including the US. Its future was thrown into question after the US withdrew from the pact in January.
What is TPP11?
The TPP is a free trade agreement originally signed by 12 countries of the Pacific Rim: Japan, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the US. They made the deal in February 2016, after seven years of negotiations. The agreement includes measures to lower or eliminate tariffs and non-tariff barriers, and create intellectual-property rules. The TPP has been regarded as the largest trade agreement in history, with the original 12 member nations accounting for nearly 40 percent of the world's Gross Domestic Product.
But President Donald Trump decided to pull the US out of the deal in January. He also reiterated that his country had no intention of returning to the TPP during his recent visit to Japan.
The 11 remaining member nations have been working to revive and finalize the agreement since Washington's withdrawal.
The original framework required formal consent by six nations that account for 85 percent of the members' combined GDP. With the US no longer a member, those conditions needed to be revised.
NHK WORLD's Ramin Mellegard discussed the issue in the studio with NHK's senior economic correspondent Reiko Sakurai.
Mellegard: Reiko, the trade pact has faced so many challenges. But Japan says that members are reaching a broad consensus...why is this a crucial time?
Sakurai: One incentive for the member nations may be to send a message to the US and other countries, that they oppose any kind of protectionism, and that free trade rules should be applied throughout the Asia-Pacific region.
And for Japan, which had earlier succeeded in reaching a broad agreement with the EU, it was a chance to show the US that multilateral free trade pacts may work better than bilateral deals.
And although the TPP doesn't discount the possibility of future members, some experts say it's a counterweight to China's growing influence in the region.
Mellegard: What will the 11 members get out of this deal?
Sakurai: From an economic perspective, the pact aims to eliminate tariffs on products across the bloc whose trade totaled more than $350 billion last year.
One economist calculated that Gross Domestic Product will be boosted by an average of 1 percent for the TPP11 member countries.
We have also yet to see if meat and agricultural producers in the US will pressure the Trump administration, as they see their rivals such as Australia and New Zealand enjoy the benefits of the pact.
A US government report has warned that pork exports to Japan could see a negative impact from the TPP.
Mellegard: While the US had been a driving force behind the TPP, it seems that President Trump remains adamant about staying out of the deal. What developments should we expect to see next?
Sakurai: It seems to be quite a challenge to persuade the Trump administration to go back to the TPP. But there are other things the member nations can do to enhance the pact. They could try to attract other Asian members that have already shown interest in the deal, such as Indonesia, Thailand, and the Philippines, so that the rules of the TPP would be applied beyond the original 11 countries.
Japan’s Prime Minister Shinzo Abe touched on the need to establish a rules-based economic order in the region in a joint press conference with President Trump. It will be up to the member nations to convince the US and others that this free-trade pact is a game changer.
Waseda University’s Professor Shujiro Urata, an international trade expert, also joined Mellegard in the studio to share his view.
Mellegard: What are the merits and the overall impacts of this new agreement? Some say the impact will be smaller than the original. What is your take on this?
Urata: You are correct that the impacts will be smaller than the original TPP. However the TPP with 11 countries can expect economic gain, GDP growth, and also consumers like us can expand consumption as the prices of imported goods and domestic products will come down as the result of the elimination or reduction of tax.
Producers and firms can gain by expanding their operations overseas because restrictions on activities overseas in 11 countries will be lower. That’s the number one benefit.
Another benefit is the very high-standard, comprehensive agreement. This could be a model for future FTAs.
Another, maybe even more important benefit is the fight against protectionist policies. Protectionist policies are increasing and TPP11 can play a very important role in the fight against these protectionist policies.
Mellegard: So how will this affect the other so-called mega FTAs?
Urata: One of the important mega FTAs now under negotiation is RCEP, which stands for Regional and Comprehensive Economic Partnership involving 16 countries including Japan, China and India. They are making limited progress, they are going very slow, and the conclusion of TPP11 will put pressure on the negotiation of RCEP, and I hope RCEP negotiations will move faster now.
Mellegard: Finally, let’s talk about the challenges ahead. President Trump has not really budged from his position of not returning to the TPP, but what can Japan and some of the other countries do?
Urata: They should try to attract, or invite, other new members like South Korea, the Philippines, and Indonesia. They showed interest in joining the TPP when the original TPP was agreed, so if we can involve them, if we can invite them to participate in TPP11 - that makes it like TPP16 - then we can expect large economic gain, maybe as large as TPP12, the original TPP.
That would put pressure on the US, hopefully they’ll change their mind and come back to the original TPP12.