SIPA Experts Discuss Potential Impact of Trans-Pacific Partnership

“The Trans-Pacific Partnership sets the standards for trade and regulations based on U.S. values, and it will shape the domestic agenda of all parties involved,” said Mari Pangestu. “We have to wait for the details to come out before we can know the impact.”

Pangestu, who served as Indonesia’s trade minister from 2004 to 2011 and is currently the George W. Ball Adjunct Professor of International and Public Affairs, spoke at an October 13 panel discussion on the new Trans-Pacific Partnership agreement, known as the TPP, and its implications for global trade. Recognized as the largest regional trade accord in history, the TPP brings together 12 Pacific basin nations into a single free-trade agreement that accounts for an estimated 40 percent of global GDP.

Pangestu spoke alongside Takatoshi Ito, a professor of international and public affairs and former deputy vice minister for international affairs at Japan’s Ministry of Finance, and Pravin Krishna, the Chung Ju Yung Distinguished Professor of International Economics and Business at Johns Hopkins University and deputy director of the new Deepak and Neera Raj Center for Indian Economic Policies.

Dean Merit E. Janow, herself an internationally recognized expert on trade, moderated the discussion, which, examined the deal from the stance of participating nations like the United States and Japan, while also discussing the view from nations that are not parties to the agreement, especially China and India.

“Is this a good agreement?” Janow asked to begin the conversation.

The panelists highlighted uncertainties regarding the potential impact of the TPP on the global economy. Since the full agreement has not yet been released and, in the case of the United States, must pass Congress before it becomes integrated into domestic law, the panelists made a case for an informed speculation on the TPP’s potential impact with respect to trade flows, the dispute settlement process, standards for accession, and the multilateral trade system.

“The question of implementation is key,” said Krishna, who suggested that the timing of the approval process—during the run-up to the 2016 U.S. presidential election—could present a challenge.

The scholars agreed that the implementation process of the new rules and regulations negotiated in the TPP would bear the greatest weight on the potential impact of the trade agreement. In particular, the TPP includes regulations around e-commerce as well as a provision for investor-state dispute settlement (ISDS) where a corporation can challenge the actions of a government signatory to the agreement.

Janow noted that ISDS is a neutral, international arbitration procedure and various forms of ISDS are already a part of more than 3,000 agreements worldwide, including 50 that the United States is already party to. Even so, passing TPP will nonetheless require a review of domestic law for many of the parties involved and add to the uncertainties around implementation.

 “It depends on the country and on the stakeholders within the country,” said Ito.

Japan, for example, was a relative latecomer to the TPP negotiations. Ito said the decision of Prime Minister Shinzo Abe to join negotiations in April 2015 was especially significant for trade relations between Japan and the United States.

“For Japan it is a good deal, but there will be winners and losers within Japan. I am pleasantly surprised that Prime Minister Abe can say to those outside the country that Japan is liberalizing, and to those inside, he can say we are protecting.”

For the United States, Janow said, failure to adopt the agreement would hamper the country’s ability to negotiate future trade deals.

Pangestu reminded the audience of the backdrop for the TPP and other multilateral trade agreements.

“We can’t forget about the WTO and the multilateral trading system,” she said.

As a regional agreement, the TPP is subject to international trade, labor, and environmental laws. The largest such regional agreement yet negotiated, the TPP includes explicit provisions regarding labor standards and climate change.

“Regional agreements need rules and framework from WTO, but they can also lead as catalysts for better multi-lateral agreements,” Pangestu added.

The TPP has been described as a means for the United States to consolidate its power against China and has strategically posited a vision of the future that embodies U.S. values of liberalization. However, this has created new tensions in the region.

“The TPP excludes India and China, so these countries have become closer,” said Krishna. “There’s liberalization, but exclusion at the same time; this is not without its own internal tensions.”

“The objective of the TPP is to serve as a comprehensive 21st-century gold standard trade agreement to address market access but also address other factors such as rules,” said Pangestu. “It’s designed so that China won’t set the rules. But there’s not much room for negotiation in the implementation.”

—Rebecca Krisel MIA ’16

Pictured (from left): Merit E. Janow, Takatoshi Ito, Pravin Krishna, Mari Pangestu

SIPA experts discuss Trans-Pacific Partnership