The Long Road to TPP’s Entry Into Force

After years of negotiations behind closed doors, the 12 governments negotiating the Trans-Pacific Partnership (TPP) came to an agreement in October 2015. Shortly thereafter, more than 3,000 pages of the agreement were released to the public for open scrutiny. In many ways, even more so than the nuclear deal with Iran, the TPP may stand as one of the most significant diplomatic accomplishments to come out of 2015. With a unique focus on high standards and a range of environmental and labor protections, the TPP will expand economic connectivity across the Pacific and yield geopolitical dividends for its signatories in the process. For the Obama administration’s Asia pivot, the TPP is indispensable.

If the hard part of the TPP was getting its 12 founding members to agree on a text, the hardest part is yet to come. Ratification of the TPP is just as important to settling on the text because without ratification, the deal might well not come into effect. Unlike the diplomatic complexities of coming to an agreement on a text, ratification depends on the vagaries of domestic politics in the 12 signatory states. However, by design, the TPP’s entry into force depends almost entirely on the successful ratification of the deal by the United States and Japan.

The requirements are quite simple. There are two paths. The least complicated way is for the 12 signatories to each ratify the text of the TPP via their respective legislatures. According to the agreement, the TPP would enter into force 60 days after the 12th and final member completed ratification. Should one or more states run into difficulties with ratification due to domestic political circumstances, the TPP can still enter into force if two years have passed and at least six of the 12 original signatories succeed in ratifying the agreement and those six signatories, between them, account for at least 85 percent of the total GDP of the 12 original treaty signatories.

That final requirement is revealing and emphasizes why the only real concern for the TPP’s eventual entry into force should focus on the agreement’s successful ratification in just two of the 12 signatories: Japan and the United States. Between them, the two countries alone represent a percentage of GDP comprising just under 80 percent of the 12 signatories. Indeed, the United States alone comprises 62 percent of the TPP’s GDP while Japan accounts for 17 percent. There is simply no way the TPP could enter into force if either the United States or Japan fails to successfully ratify the deal. Even if the United States and all other signatories with the exception of Japan ratify, the eleven would stand at 83 percent of GDP, falling short of the requirement for entry into force.

This is by design. For it to be worth it for the smaller and less developed economies within the TPP to sign onto the cumbersome intellectual property, electronic commerce, and telecommunications requirements of the TPP – provisions that, strictly speaking, go beyond the ambit of “free trade” understood as zero tariffs and zero quotas – access to U.S. and Japanese markets is a must. Put another way, market access to the United States and Japan gives the TPP ballast as a trade deal. Even states like Thailand, the Philippines, and Indonesia, which have stated their interest in eventually joining the agreement, would think twice if access to U.S. and Japanese markets wasn’t on the cards.

So, given the central importance of the United States and Japan to this trade, just how likely is ratification by their respective legislatures? Fortunately, despite challenges and domestic opposition in both countries, ratification is highly likely. Indeed, the political challenges in the United States and Japan have long been known by all negotiating parties. A final deal would have been considerably less likely if there was an expectation that ratification would be politically implausible. Additionally, most TPP governments – certainly those of the United States and Japan – considered the concerns of interest groups skeptical of the TPP during the negotiation process.

In the United States, the usual partisan alignments haven’t quite stuck with the TPP issue. U.S. President Barack Obama’s own Democratic Party has largely turned its back on the deal, sticking to the center-left party’s tendency to oppose trade liberalization, which can adversely affect working-class Americans. Meanwhile, the Republican Party, which presently exercises control over both the House of Representatives and the Senate, largely backs the president’s trade agenda. Since the text became public however, Republicans have been negative about the agreement. This may change with time, but Republican support for the agreement cannot be taken for granted.

This strange marriage between a Democratic president entering the twilight of his presidency and a normally intransigent Republican opposition hasn’t always held up. A notable exception was the vigorous debate in May over Trade Promotion Authority – also known as “fast-track.” Several otherwise pro-free-trade legislators opposed the idea on the principle that the executive shouldn’t be empowered to negotiate treaties without congressional input.

In reality, nearly every diplomatic insider acknowledged that the U.S. Trade Representative’s ability to put pen-to-paper on the TPP without consulting Congress for suggested amendments was critical to the finalization of the deal. After all, why would the other 11 negotiating parties sign on to an agreement that could then be freely amended by legislators? As matters stand, the TPP will come before the Senate for a binary yes-or-no vote. Obama expects that the agreement will clear Congress.

“I expect that, after the American people and Congress have an opportunity for months of careful review and consultation, Congress will approve it, and I’ll have the chance to sign it into law,” he has said.

Meanwhile, on the other side of the Pacific, Shinzo Abe, the prime minister of Japan, will be looking to push ratification through the Japanese legislature as well. The expectation is that the Diet will consider the TPP issue sometime early in 2016. Abe’s Liberal Democratic Party (LDP) is politically dominant, but criticism of the TPP has been fierce in Japan, even within the party. In fact, Japan’s delayed entry into negotiations was, in part, due to scores of LDP legislators opposing Japan’s participation. When Abe swam against the current and entered negotiations, many of those legislators shifted to pressuring the government to protect Japan’s economic interests, particularly in the agricultural sector.

The text of the TPP shows that Tokyo won important concessions and exceptions, satisfying the demands of powerful agricultural lobbies, but there will still be a debate in Tokyo. Abe will be eager to see ratification sooner rather than later lest the TPP become a highly politicized issue leading up to next summer’s elections for the House of Councilors (the upper house in Japan’s bicameral legislature).

Abe appears well-positioned to usher the TPP through the Diet. Public approval of Abe is rising after reaching a nadir with September’s controversial legislative session on a new package of laws revising Japan’s national security posture. Additionally, November’s economic data showed that Japan is experiencing its second recession in the Abenomics era. Abe and the LDP can make the case that the TPP may invigorate the Japanese economy. Finally, in Japan, the opposition continues to remain largely fractured in its hostility to the LDP’s broader economic agenda. It seems unlikely that Japanese opposition parties will be able to field a unified front against the TPP.

All this said, it is unlikely that the TPP will enter into force during the next calendar year – even with a likely early ratification by Japan. In the end, the pact’s future rests on the ability of the U.S. Congress to approve the agreement. The final quarter of 2017 represents the most plausible timeline for ratification, particularly since, in the United States, the question of ratification may not arise during Barack Obama’s remaining year in office. An important swing factor will be the 2016 U.S. presidential election. Hillary Clinton, the Democratic front-runner, has most recently said she opposes the pact.

Much of the legacy of the Obama administration’s “Pivot to Asia” will depend on the successful entry into force of the TPP. The agreement is the economic pillar of the pivot and would serve to greatly reinforce U.S. leadership and values in the Asia-Pacific. Other regional states, including Thailand, Indonesia, and the Philippines have expressed interest in joining the pact. The TPP is also significant in the ongoing struggle between the United States and China for normative dominance in the Asia-Pacific. With the world on the cusp of seeing its largest free-trade agreement take effect, the stakes could not be higher. Time will tell if the TPP will be the harbinger of a new era in transpacific commerce or a lost opportunity. All will rest on the agreement’s successful ratification in the United States and Japan.