A former trade negotiator once told me that he spent over an hour of his time on Earth arguing over whether or not the word “traveling” should be spelled with one “L” (American style) or two (British style). Such linguistic disputes are common in the final phases of trade agreements, as the legal texts get nailed down and then translated.
For the Trans-Pacific Partnership (TPP), the legal teams are holed up in Japan, confirming all the final details of the agreement. In both legal and trade terms, language is extremely important. There is a vast difference between a sentence that reads, “Members shall…” and “Members shall endeavor…” The former requires the action by members while the latter merely urges action.
Getting a dozen legal teams to comb out the final details on such a comprehensive agreement that runs to hundreds of pages is taking a long time. Fortunately, the official language of the TPP is English. This means that, although the final document will also be translated into Spanish and French, the legally applicable text is the English version only. This dramatically cuts down on the time required between the completion of negotiations and possible release of final texts.
While we all wait for the texts and associated schedules to be circulated (hopefully within another week or two), it seems a good time to review the timelines ahead for the TPP.
In general, there are two critical sets of timelines that matter for the agreement. The first deadlines are a whole set of complicated dates related to approval of the TPP inside the United States. The second deadlines are those related to entry into force for the entire TPP agreement.
To make matters more complicated, the US domestic procedures contain multiple timelines. To try to summarize (and simplify slightly) the situation:
1. President Obama, following Trade Promotion Authority (TPA) guidelines, has to notify Congress of his intention to sign the texts. This triggers a 90 day procedure under which the texts must be formally released to the public for at least 60 days. At the end of 90 days, the President is allowed to sign the agreement.
2. The formal signature of the agreement by the President must be accompanied (within 60 days) with a list of legislative changes necessary for Congress to consider in order to bring domestic laws into compliance with TPP rules (wherever needed).
3. At some point, the President will need to deliver to Congress the official text of the agreement, a draft implementing bill, and a statement about how the agreement matches requirements of Congress under TPA.
4. Once Congress receives the bill from the President, it must send the bill directly to relevant committees for expedited review. There are specific time deadlines that apply again once the bill has been submitted.
5. After limited floor debate, both houses of Congress must vote on the bill. No amendments are allowed, so members must vote either yes or no.
Hence, one important issue inside Washington is figuring out when is the most auspicious moment to trigger some of the deadlines. Most critical, of course, is the best opportunity for the final debates and reviews inside of Congress prior to final votes.
While many will feel particular urgency to get US approval for the TPP agreement, the implementation of TPP commitments across all 12 members remains some distance off. New Zealand’s government has been releasing a series of helpful fact sheets. One, on implementation and legal commitments, highlights the three options included in the TPP agreement for handling the entry into force deadlines.
The basic problem is that, while negotiations on the TPP agreement with the 12 members concluded on October 5, member states need to have domestic approval to move forward with implementation. An agreement with a dozen participants may run into difficulties at the domestic level in getting approvals at the same time.
Hence, the TPP has three possible methods for achieving entry into force. The first and easiest method is to have all 12 countries finish domestic procedures within 2 years of signing the agreement. Within 60 days of the last approval, the agreement automatically enters into force.
Under option 1, entry into force could be much sooner than 2 years since it is triggered by the speed of domestic procedures alone. Most TPP members have parliamentary systems, where the government usually has higher confidence that domestic legislators will follow government policy. It is conceivable that many TPP members could put the matter before parliaments immediately after signature and be ready to move forward in a matter of weeks.
Except, as noted, the United States. To add to the difficulties, as anyone following the United States knows, America is in the middle of a drawn-out electoral cycle in a bitterly contested, hyper-partisan environment. It is not at all clear whether the TPP will get the 51% of votes needed in both houses of Congress or when this approval might be most likely.
This concern has given rise to the next option for TPP approval. Under option 2, if all 12 parties have been unable to commit to the agreement at the domestic level inside of 2 years, the agreement can still come into force if at least 6 members are ready.
However, this comes with a catch—because TPP officials have been worried that either the United States or Japan would not get the agreement through their legislators and bureaucracies for approval, option 2 also requires that both countries must be among the six (or more) countries ready to move ahead to implementation. Hence, option 2 really means that, provided the United States and Japan can join up with at least 4 other good-sized members by the end of a two-year period, the agreement can proceed.
But what if either Japan or the United States are not finished with domestic procedures within 2 years? Then Option 3 kicks in, under which the agreement can come into force within 60 days of the last one signing the agreement (along with the other major party and at least 4 more members).
The TPP agreement, therefore, does give more weight to the Japanese and American approvals than the remainder. This is a reflection of economic realities, where the payoffs are greatest if, and only if, the biggest markets are included. Unless all 12 members are included at the outset, then members that collectively contribute at least 85% of the market size need to be ready to implement the TPP. Any country that is not involved at the date of entry into force (other than the U.S. and Japan) can enter the agreement at any later time.
This complex set of entry into force conditions makes it difficult to predict with accuracy exactly how soon the TPP will take effect. If all 12 parties moved at light speed, the soonest possible date could be fall 2016. It is a pretty safe bet, however, that this will not happen so smoothly or so soon. Instead, businesses might realistically be planning and pushing for TPP implementation in 2017.
***Talking Trade is a blog post written by Dr. Deborah Elms, Executive Director, Asian Trade Centre, Singapore***