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Philip Sutter,
Director – Governance Policy
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Getting a free trade agreement in operation or “in force” is a long and complicated process. It requires detailed negotiations by the administrations of each party country with each side trying to protect their economic and sovereign interests. Then, it must be ratified by each of the members in a domestic process that typically requires a vote of their legislatures. Throughout, the notion of a new trade agreement is a politically charged issue for various special interests such as unions and industry.
In the case of the Trans-Pacific Partnership (TPP) the start of what became the TPP can be traced back to January 2008. It was then that the United States agreed to enter talks with Transpacific Economic Partnership Agreement members (Brunei, Chile, Singapore and New Zealand). In the ensuing years, other countries joined on; Australia, Vietnam, and Peru in late 2008, Malaysia in October 2010, Canada and Mexico in October 2012, and finally Japan in July 2013.[1]
For prior trade agreements, the elapsed time from negotiation until the time it comes into force averages about five years. Large agreements involving more countries typically take longer. The North American Free Trade Agreement (NAFTA) took almost eight years.
So, the TPP negotiation phase ended on 5 October 2015. When does it come into force? Be patient, not yet!
Each of the twelve countries needs to make the case to their citizens and follow the domestic ratification process to accept the thirty chapter agreement. Although, the text of the agreement is not yet public, it appears the negotiators expect this process to take about two years. Given that there are twelve countries, the odds are that one or more of the countries will go beyond that timing or even fail altogether.
According to World Trade Online, 13 October 2015, there are three options for how the TPP may finally come into force.
- All parties complete necessary domestic procedures within two years after the initial signing. Once complete, the agreement is in force 60-days afterward.
- At least six of the original parties, accounting for 85% of the region’s gross domestic product (GDP) in 2013, complete their domestic process for implementation. Once complete, the agreement is in force 26 months after the initial signature of the TPP.
- No set timeline, but when at least six countries meet the 85% regional GDP, then the agreement is in force 60-days afterward.
With these requirements, it means that the United States at 60.4% and Japan at 17.6% of the members’ collective GDP must ratify the agreement along with at least four others that comprise GDPs summing to 7%. So, get ready for more TPP politics. It starts immediately, for example Canada’s federal election is on 19 October and the 2016 United States presidential election cycle is underway.
[1] If and when TPP comes into force, it is believed that additional memberships are possible. Countries such as China, India, and South Korea may want to or face economic pressure to join the agreement.
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