TPP-11 confident of salvaging trade deal

In this picture taken on January 9, 2016 shows shipping containers sit next to gantry cranes at Port Klang in this aerial photograph taken over Klang district, Selangor, Malaysia. (Bloomberg/Sanjit Das)

A blockbuster Pacific trade pact thrown into doubt by Donald Trump could be salvaged by suspending parts of the deal in order to get the 11 remaining nations to sign on, according to Malaysian Trade Minister Mustapa Mohamed.

Speaking in Vietnam ahead of a meeting of Asia-Pacific leaders, including the US president, Mustapa said there was fresh momentum to save the Trans-Pacific Partnership, a deal that would have spanned 40 percent of the global economy. He indicated Malaysia had shifted from its prior stance that Trump’s decision to withdraw the US meant the pact needed to be renegotiated.

Trade ministers are due to present their plan for the future of the TPP, minus the US, to leaders at the Asia-Pacific Economic Cooperation summit. Mustapa said talks were still going on – some leaders are arriving Thursday – but added there might be a way forward.

“We’ve been talking with our colleagues on some provisions which could be suspended,” Mustapa said in an interview on Tuesday. “Renegotiation would take a long time. All of us agreed that to renegotiate would probably take five, 10 years, so that’s not on. That’s a no go.”

The pact would have gone beyond traditional deals by including issues like intellectual property, state-owned enterprises and labor rights. After years of painful negotiation, and close to the ratification stage, it was thrown into disarray when Trump withdrew the US in one of his first acts as president, arguing the move was needed to protect US jobs.

‘Some Value’

“We believe that TPP has got some value even without US participation," Mustapa said. "Because of that we’ve all decided that renegotiation is not a viable option so we’ve been working on some compromises.”

The agreement was seen as a hallmark of US engagement with Asia under the prior administration and a buffer against China’s rising clout. Then Defense Secretary Ash Carter called it more strategically important than having another aircraft carrier battle group in the Pacific. Since the US withdrawal, remaining nations have struggled to take the deal forward.

While Vietnam and Japan now say they expect an agreement in Vietnam on the future of the TPP, Canada and New Zealand are among the countries expressing concerns about some parts of the agreement without the US

Still, Mustapa said a “good number of countries” were committed to going ahead.

“There is broad consensus there, that there’s value in having a TPP-11,” he said. “There are challenges in any negotiation. TPP was more than five years, TPP-11 has been only what – four, five, six months?”

He wouldn’t be drawn on specific provisions that Malaysia would want suspended from the deal.

‘One Can Guess’

“It’s not proper for me to come up with a definitive list,” he said. “As we speak, discussions are still going on. One can guess with some degree of precision, it’s got to do with the difficult issues for us. The difficult issues for us have always been state-owned enterprises, government procurement.”

He cast doubt on the prospects of the US rejoining the deal anytime soon, when asked how long provisions might be suspended. “For Malaysia it’s not realistic to assume that,” Mustapa said. “The position of the administration is very clear. In our opinion it might take some time.”

For now, Malaysia is not focused on the potential for a bilateral trade deal with the US, Mustapa said. But his comments indicate Malaysia has swung back behind the TPP from a separate 16-nation Asian pact known as the Regional Comprehensive Economic Partnership. The RCEP deal doesn’t include the US but has China and had been seen to gain priority when the TPP hit trouble.

'Rival Deal'

“RCEP has got its own advantages, one is China,” Mustapa said. “RCEP has been a priority after TPP almost collapsed without the US but in the last few months there has been some pickup in momentum for TPP. RCEP was a priority when we knew that TPP was not going anywhere.”

He was dubious on the potential for an end-year agreement on RCEP targeted timeline, saying the deal will be discussed at the summit in Manila next week of the Association of Southeast Asian Nations. Talks on the pact have been hindered by the presence of India and its insistence on opening up markets to its service workers, something Southeast Asian nations are not keen on.

“The fact is we still have challenges, there are still gaps,” he said. “To be realistic, we only have a couple of months to go before the year-end, a week before we go to Manila. In our view there’s still some work to do and it’s impossible to complete that work in seven days.”

“We have to have a good agreement, we can’t be pushing just for the sake of meeting deadlines,” he said. “We need to have quality." – Bloomberg

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