New TPP text brings change, outstanding issues

After a dramatic few days of talks, the 11 TPP countries have reached an agreement on “the core elements” of the trade deal. But what has changed from the original text, and what issues remain to be resolved? Sam Sachdeva reports from the Apec summit in Da Nang, Vietnam.

It was “down to the wire”, then “in the wind”, postponed indefinitely - but finally, tentatively, over the line.

After false starts, late nights and a last-minute no-show which threatened to scupper the Trans Pacific Partnership, ministers from the 11 countries gathered on the sidelines of the Apec summit announced they had agreed on “the core elements” of the trade deal with only a few outstanding issues.

Along with a new, less than snappy name - the Comprehensive and Progressive Agreement for Trans Pacific Partnership, or CPTPP for (not so) short - there have been a number of changes to the original TPP-12 text signed in early 2016.

Speaking to media in Da Nang on Saturday evening (NZT), Prime Minister Jacinda Ardern said she was happy with what her negotiators had managed in the weeks since her government came to power.

“This is not a perfect agreement, but it is a damn sight better than what we had when we started.”

So what is in, what is out, and what is still being hammered out?

ISDS clauses suspended

Following the withdrawal of the United States after President Donald Trump took office, the 11 remaining nations sought to remove aspects of the deal they had only agreed to with the carrot of access to the American market.

The countries decided the best way to deal with the concerns was to suspend, rather than amend the offending clauses - essentially putting them on ice until and if the US was to return.

Negotiators managed to whittle down the laundry list of concerns to just 20 partially or totally suspended clauses.

Most relevant to New Zealand are the suspensions relating to the Investor State Dispute Settlement (ISDS) clauses. Leading up to the talks, Ardern described the provisions which allow investors to sue countries as “a dog”, and Kiwi negotiators were instructed to do their utmost to amend the clauses.

Ardern said they had been successfully in narrowing the ISDS provisions in three areas: they no longer apply to investment screening (which will protect the Government’s restriction on foreign buyers from challenge), will not allow a company that takes up a contract with a government to sue through the ISDS, and changes to the way it applies to financial services.

She said the provisions had been narrowed to resemble clauses in previous deals signed by New Zealand, including the China and Malaysia FTAs.

New Zealand had also reached agreement in principle with “a handful” of TPP countries on individual deals watering down the ISDS, although there was still work to be done.

US 'veto' in place

There have been wins in other areas: extended patents for biologic medicines have been suspended, along with a proposal to change copyright from the creator’s life plus 50 years to life plus 70 years (which was expected to cost New Zealand $50 million a year), and new administrative measures for Pharmac (which would have cost $5.5m upfront and $2.5m each year).

While the clauses are suspended, rather than excised entirely, the United States will not automatically be able to bring them back into force if it chooses to rejoin.

Instead, Ardern said negotiations would need to take place, with a consensus required across all countries before any suspensions were lifted.

That gives any TPP country - including New Zealand - an effective veto over the reinstatement of any clauses, although it remains to be seen whether we would hold firm in the face of pressure from one of the world’s superpowers.

Another US-related change is to the enactment clause for the CPTPP.

The original TPP could not come into force unless six of the 12 original members, representing at least 85 per cent of the GDP of all signatories, ratified the deal - a clause which essentially gave both the United States and Japan a veto over the deal.

That has been replaced with a more orthodox provision, requiring at least 50 per cent of the signatories to ratify the deal - whether that be six out of the 11 countries, or a majority of those remaining if anyone drops out.

Further talks needed

While there is consensus on most of the CPTPP text, there are four areas where further negotiations will have to take place - each pushed by a different country.

Vietnam is seeking to implement a transition period where it does not face trade sanctions if it fails to meet labour standards. While the countries may be able to agree on a transition, the outstanding questions include how long it is for and which standards will be covered.

Canada has concerns relating to a “cultural exception” - believed to be its desire to be able to provide government subsidies for French-speaking programming, triggered in part by a controversial investment agreement between Netflix and the Canadian government.

Malaysia and Brunei both want changes made which will allow them to hold off on making changes in specific areas until a deal enters into force, rather than at the earlier time of signature.

While that may seem simple enough, the fact that both countries’ concerns relate to their energy sectors, where other TPP countries hold interests, means more talks are required.

When they will be resolved is unclear: Ardern said there was no set timeline for further talks, although it was likely the issues would be addressed when ministers were next gathered at a multilateral forum.

However, there’s an incentive for the countries with concerns to resolve them: if the CPTPP members cannot reach a consensus, the deal will move ahead with the relevant provisions intact - forcing individual governments to decide whether their concerns are enough to justify losing out on the benefits of the deal.

Rumours of TPP's demise greatly exaggerated

The ministerial statement acknowledges that each country will have to pursue “its own domestic processes”, and New Zealand is no exception.

Ardern said the Government needed to bring the CPTPP back through the select committee process “to make sure the public and the Parliament has a chance to assess again this final agreement”.

New legislation will be needed, covering the new rules for entry into force and other provisions around the suspended clauses.

If a deal is approved and enters into force, there will be another chance for New Zealand to air its concerns.

The CPTPP includes a review clause, which Ardern said would allow countries to reflect on how the agreement had worked and whether it had produced the desired results.

“My take from these negotiations is that these are the dying days of ISDS clauses, and so my expectation would be we’ll have a revisiting of those at those next milestone.”

There is some road yet to be travelled, and given the fragility of the Apec talks it would be foolish to predict a successful result with any confidence.

Yet it appears rumours of the TPP’s demise were greatly exaggerated - there is a pulse.

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