Hopes for Quick End to TPP Talks Fade as Hanoi Summit Yields Lackluster Results

Negotiating partners also agreed to hold another chief negotiator summit in October, according to a number of trade executives in interviews. The Office of the USTR declined to comment. But the November target for comprehensive conclusion of TPP negotiations, set by President Barack Obama in June, appears increasingly unlikely, said the analysts and consultant, noting that both the New Zealand and Australian trade ministers have recently conceded negotiations will continue into 2015.

It's still unclear whether TPP officials did in fact eliminate any significant negotiating gaps in Hanoi, said the analysts. Some said emboldened Vietnamese demands, floated previously but pushed during the Hanoi round, are exacerbating disagreement over state-owned enterprise (SOE) rules. “I don’t think much progress was made during the summit,” said Peterson Institute of International Economics Senior Fellow Gary Hufbauer in an interview. “The reason they cited a laundry list of issues discussed in Hanoi is probably that they couldn’t nail down anything specific to talk about. In particular, Vietnam is trying to exempt a significant number of its SOEs from the commitment on how SOEs behave.” Those Vietnamese demands actually mark a “step backward” in negotiations, said Hufbauer.

Disagreement over SOE rules may be generating skepticism about progress at the moment, but the negotiations still boil down to U.S.-Japanese bilateral market access talks, said some of those interviewed. Japanese officials have for months resisted U.S. pressure to liberalize rice, beef and pork, wheat, dairy and sugar market access (see 14090801). The list of products the Japanese have aimed to exempt from liberalization top 500 tariff lines, far more than twice the amount of lines the U.S. has exempted from tariff elimination in its 17 free trade agreements, according to recent National Pork Producers Council (NPPC) analysis (here).

Acting Deputy USTR Wendy Cutler and Chief Agriculture Negotiator Darci Vetter also wrapped up on Sept. 10 two days of market access negotiations in Tokyo. The Japanese are targeting retention of pork and beef tariffs between 9 to 11 percent, said Hufbauer, adding that the U.S. will likely not press further its demand for rice and sugar tariff liberalization. A potential compromise on tariff phase-out periods and a potential Japanese tariff-rate quota for pork and beef is not yet clear, Hufbauer said.

That arrangement, however, is wholly unacceptable to the U.S. pork industry and a wide swath of the trade community, said Nick Giordano, NPPC vice president and counsel, international affairs, in an interview. “Until the Japanese come forward more concessions, either the gridlock will continue or the U.S. and others will succumb and you’ll have a downward spiral until you get ‘TPP light,’” said Giordano. “We’re not close. This is a life or death issue for the NPPC and we are going to fight until every last drop of blood is spilled. We are going to work with everyone we can partner with, in other sensitive areas and elsewhere, to get the Japanese to eliminate tariffs on virtually on all products.” Giordano declined to comment on the specifics of the current positions in the market access negotiations.

The U.S.-Korea free trade agreement (KORUS), referred to as something of a paradigm for the TPP, eliminated all South Korean pork tariffs, but did in the end retain tariffs on rice. Pork is equally sensitive in South Korea as it is in Japan, said Giordano, but KORUS will bring all pork tariffs to zero within 10 years of implementation. Tariffs on frozen and processed pork product will be eliminated by the end of this year (here). “All of our FTAs go to zero tariffs. In the TPP, a small group of Japanese farmers want to manage sensitivities in a way that the U.S. has never done,” he said. “We manage sensitivities with the amount of time it takes to get to zero. Some lines reach zero at year one. The more sensitive products go to zero at year five, ten, or 15, and a very limited number of products take even longer.”

Nearly 140 bipartisan members of the House in late July called on Obama to pressure the removal of Japan from TPP negotiations if Japan refuses to increase concessions (see 14073110). The NPPC and other trade groups are unable to currently support Trade Promotion Authority unless the Japanese propose an agreement that the U.S. Congress will support, said Giordano, adding that the current market access status would make TPP implementation legislation dead on arrival on Capitol Hill.

But not all trade experts are as critical or skeptical of the current condition of negotiations. The sheer time and money TPP participants are investing in the ongoing negotiations suggests progress is being made, said Ron Sorini, a trade consultant and former textile negotiator with the USTR. "I think they’re at the stage of the negotiations where it appears there is progress, but the officials are being very closed mouthed about the details. Given the amount of resources they're dedicating, they have to be getting close," said Sorini. "The nature of any negotiation is all those outstanding issues get solved in the final few days. Countries are reluctant to concede on sensitive issues, because they know they will get blowback at home."

Many observers have said Congress should provide Trade Promotion Authority to Obama in order to motivate TPP partners to offer the most important concessions. If lawmakers can secure TPA in the impending lame duck session or at the immediate outset of the next Congress, the Obama administration could send TPP implementation to Congress within roughly a year, said Sorini. U.S. International Trade Commission reports will then have to be crafted, and the legal scrubbing alone will likely take at least nine months, Sorini added.

In the near future, the commitment of TPP chief negotiators to convene again in October also bodes favorably for progress, said Scholl chair in international business at the Center for Strategic and International Studies, Scott Miller, in an interview. TPP heads of state will meet in November for the Asia-Pacific Economic Cooperation, the East Asia and G20 summits. “Meeting again in October to get things further along is entirely sensible and predictable,” said Miller. “But absent U.S. negotiating authority or a signal from Congress or an administration admission on where the landing zones are, we won’t conclude negotiations for some time. There will have to be a coalescing of a number of agenda items.” -- Brian Dabbs