After seven years of negotiations, the Trans-Pacific Partnership (or TPP) has finally been agreed upon by the twelve signatories. The parties involved are the United States, Canada, Mexico, Singapore, Brunei, New Zealand, Chile, Australia, Peru, Vietnam, Malaysia, and Japan. There has been significant controversy regarding the TPP from within the United States, with naysayers arguing that the benefits accruing from the TPP are minimal, and that the US already has bilateral trade agreements with most (if not all) the participating countries, making the bulky agreement redundant. Yet there do exist considerable advantages for the US from the conclusion of the TPP negotiations. To name but a few, the TPP has ensured the updating of the frameworks applied to multilateral trade agreements. It also allows for the harmonization and regulation of standards across a global and dispersed supply chain.
A significant worry has been the investor-state dispute settlement mechanism (ISDS), key buzzwords thrown about by the American and international media. The inclusion of the ISDS in the TPP has been regarded by some, most notably Elizabeth Warren, senator from Massachusetts as a threat to regulatory sovereignty. It allows for corporations to sue governments for changes in the regulatory environment that have adverse impacts upon the former. The legal provision, however, does not allow the reverse, i.e. governments cannot take legal action against firms. Nevertheless, the inclusion of the ISDS is a major development for international law precedent, which has typically been restricted to matters of interstate disputation.
The glaring exclusion of China from the agreement has been highly debated in the intellectual circles of Washington. Some have argued that the nation chose to stay aloof – that the Chinese economy has outgrown the “meager” benefits that could accrue to it from the TPP that pale in comparison to the restrictions and conditions that China would have to meet if it joined. Optimists hope that the coalition of participating countries will be able to contain, offset and challenge China’s rapid relative economic ascent. They suggest that the success of the TPP will lead to a clamor by countries like China and India to be included, the conditions of which would be set by the triumphant and advantaged existing members. Whatever the future of China in relation to the TPP may be, its current exclusion clearly limits its geopolitical reach.
Michael R. Czinkota (email@example.com) teaches international business and marketing at Georgetown University’s McDonough School of Business. His key books is International Marketing, 10th edition.