The chances of implementing the 12-nation Trans-Pacific Partnership (TPP) are shrinking rapidly as the positions taken by leading candidates in the United States election race grow increasingly hostile.
The TPP, signed in February in New Zealand, is the broadest trade agreement of its kind, representing around 40% of the world’s GDP.
The World Bank estimates that trade among the 12 countries would increase by 11% and TPP will add 1.1% to the GDP of member countries by 2030.
But long-time observers of the negotiations are becoming extremely pessimistic about its chances. “Conditions today are not good,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington. “There is definitely less than a 50% chance that the US Congress will approve this.”
The TPP is a legacy issue for US president Barack Obama, but the leading presidential candidates on both sides of the aisle do not share his enthusiasm.
The leading Republican candidates in the presidential race, Donald Trump and Texas senator Ted Cruz, are opposed to the TPP, as is Democratic candidate Vermont senator Bernie Sanders. Leading Democratic candidate, former Secretary of State Hillary Clinton, is opposed but not as strongly as her opponents.
Work is underway in the US Congress to make the deal more acceptable domestically, particularly on three areas — financial services, intellectual property rights and tobacco. But the window for getting lawmakers to vote it through is small.
OPPONENTS IN LATAM TOO
Hufbauer said the Republican leadership in the House of Representatives could call a vote in July, after the nominating conventions by the parties, while the Senate could take up the vote in the “lame duck” session after the November 8 general election.
“There is a possibility that it will not be voted down, simply because there will not be a vote,” said Hufbauer.
While the challenge of passing the law looks daunting, implementation will be impossible without the United States. The TPP can come into force if all 12 countries ratify it. It can also be implemented if at least six countries ratify it, but they need to represent 85% of their combined GDP. The US makes up 57% of the total TPP GDP of $27.6tr.
The TPP includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.
Failure by the United States to act on TPP would be a big blow to the other 11 countries that have spent years working on the deal since negotiations were announced in 2008 and have faced considerable blowback from opponents.
It also helps opponents abroad. Peruvian presidential candidate Veronika Mendoza cites US opposition when criticising the deal.
It could also strengthen China’s geopolitical reach. China and 15 other countries in the Asia-Pacific are working on the Regional Comprehensive Economic Partnership (RCEP) with negotiations set to conclude in September.