TPP 11 deal reached as Canada and Vietnam end holdout

Side deals will enact concessions needed to reach March signing

JUN YAMAZAKI, Nikkei staff writer

TOKYO — The final details of the revised Trans-Pacific Partnership to be signed in March have won approval from all 11 member states following concessions to such holdouts as Canada and Vietnam that will be spelled out in separate agreements.

The revised TPP covers 12.9% of the world’s gross domestic product and 14.9% of global trade. Despite the U.S. withdrawal, the current agreement is still on par with Japan and the European Union’s recently completed Economic Partnership Agreement.

“The U.S. announced its withdrawal from the TPP one year ago today,” said Toshimitsu Motegi, Japan’s minister for economic revitalization, at a press conference Tuesday after two days of trade talks among top negotiators in Tokyo.

The new pact — known officially as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or TPP 11 — will be signed in Chile on March 8, Motegi announced. Once signed, it will take effect upon ratification by six countries.

“All 11 countries will join the signing ceremony,” he said. “We will not change the date.”

“Even if Canada were to withdraw, the date will remain the same and 10 countries will sign,” said a Japanese official involved in the talks.

Out of more than 1,000 items in the original TPP in which the U.S. participated, only 22 were “frozen” — rendered inactive but not taken out — for the final agreement. The freeze list includes such provisions as an 8-year protection period for drug development data. Many advanced trade rules in such areas as e-commerce and labor protections were kept.

After the basic TPP 11 agreement was reached in November, the member states have mainly continued to negotiate about four articles. Rules liberalizing Malaysia’s state-owned enterprises as well as investment and services in Brunei were ultimately added to the freeze list. But the debate became particularly complicated for two issues at the negotiations that began Monday.

The first issue was Canada’s insistence on preferential policies to protect cultural industries and content. Canada regards domestically produced French-language content as important and has taken steps to protect it.

Ottawa partially dropped this request during the TPP 12 negotiations in response to Washington’s claim that such protections were a barrier to free trade. But the Justin Trudeau government has prioritized cultural diversity and demanded that the cultural exemption rules be revived before November’s minister-level negotiations in Vietnam.

Each member country will effectively grant cultural exemptions for Canada, which showed no signs of budging, through separate side letters.

Behind Canada’s tough stance is the looming renegotiation of the North American Free Trade Agreement. Although dropping the protections would embolden the Trump administration’s NAFTA efforts, readying the TPP 11 could conversely be used to apply pressure on Washington.

“We understand Canada’s domestic situation, but we ultimately expect them to agree,” said a Japanese trade representative before this week’s meeting.

The second issue was Vietnam’s grace period to prepare labor legislation allowing workers to form unions, among other rights. Vietnam’s communist government gave in on major labor reforms for access to U.S. markets. Hanoi and Washington reached a separate deal during the 12-member negotiations to define a specific time period.

But with the U.S. out, Vietnam’s biggest incentive to rush through these changes is gone. Taking into account domestic public opinion, Hanoi asked the other 10 members to prolong the grace period and will exchange side letters with each state outlining the deal.

Despite competing interests from each country, all parties agreed that they must not waste nearly eight years of negotiations on the cusp of completion. The deal represents the importance of rule-based multilateral trade and a counterweight to U.S. President Donald Trump’s penchant for bilateral deals.

Japan hopes to have the TPP 11 take effect by 2019, using the milestone to invite the U.S. back and bring in other countries.

“I want to think about expanding the TPP after it takes effect,” Motegi said. “We will continue to explain the importance of the TPP to the U.S., and we hope they rejoin the pact.”