RIETI Report November 2017

Outcome of TPP11: Persuading the United States of the disadvantages of withdrawal

The Trans-Pacific Partnership (TPP) took five and a half years to negotiate, and was signed in February 2016. However, in January 2017, U.S. President Donald Trump signed an executive order to withdraw from the agreement, rendering it ineffective. With the United States' return to the TPP unrealistic while under the Trump administration, Japan and Australia have taken leading roles in discussions on creating a TPP11 without the United States which began in May 2017. In the November issue of the RIETI Report, we present the column "Outcome of TPP11: Persuading the United States of the disadvantages of withdrawal" by Faculty Fellow Shujiro Urata and Peter A. Petri of Brandeis University.

Urata and Petri conducted simulation analysis to examine FTA policies which the United States and other TPP nations should adopt in the Asia Pacific region, finding that the United States would suffer losses from withdrawing from the TPP. They then present their four reasons on why the TPP11 should take effect early from Japan's perspective. Finally, they discuss the effects of the TPP11 on other mega FTA negotiations, and emphasize that the Japanese government must transition to a policy of pursuing trade liberalization while simultaneously conducting structural reform to regenerate the Japanese economy.

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Outcome of TPP11: Persuading the United States of the disadvantages of withdrawal

URATA ShujiroFaculty Fellow, RIETI

Peter A. PETRIProfessor, Brandeis University

The Trans-Pacific Partnership (TPP) took five and a half years to negotiate, and was signed in February 2016. However, in January 2017, U.S. President Donald Trump signed an executive order to withdraw from the agreement, rendering the TPP ineffective. For the TPP to take effect, it must be ratified by a minimum of six countries which account for at least 85% of the 12 countries' collective gross domestic product (GDP). As it was not ratified by the United States, which accounts for 60%, this condition was unfulfilled.

The TPP is a free trade agreement (FTA) comprising 12 countries which belong to the Asia-Pacific Economic Cooperation (APEC), including Japan, United States, and Australia. These countries account for 36% of the world's GDP and 26% of its trade, and it was considered a high possibility that, in the future, the TPP would become the world's trade rules.

Under the Trump administration, the United States' return to the TPP is unrealistic, and so with Japan and Australia taking leading roles, discussions on creating a TPP11 without the United States began in May. Trade negotiators of the remaining 11 countries have conducted repeated talks with the aim of securing agreement in principle at the Leaders' Meeting in November. There are many cases of demands for the freezing of provisions on which each country conceded due to requests from the United States. The suspension of some provisions, such as the data-exclusivity protection for biologic drugs, will be readily accepted by the countries, however, there are some for which opinions will differ, such as the limit on preferential treatment for state-owned enterprises.

To read the full text
http://www.rieti.go.jp/en/papers/contribution/urata/10.html

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