T

he impasse that ensued after the United States government’s withdrawal from one of the most anticipated mega-regional trade agreements, the Trans-Pacific Partnership (TPP), has finally been resolved with the 11 remaining signatories making a fundamental change to the agreement.

As announced by Vietnam’s Trade Minister during the APEC forum that closed on Nov. 11, the 11 member countries agreed to continue the TPP under a new brand, officially called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The original Trans-Pacific Partnership Agreement (TPPA) asserts that the TPP will come into effect 60 days after all members complete the ratification process.

However, if this condition is not met two years from the date the agreement is signed, the TPP would come into force when at least six of the original signatories, which represent 85 percent of the total GDP of members, must have ratified the agreement.

In this regard, the ratification of the US, which represents 62 percent of the original members’ combined GDP, would be necessary for the TPP to be implemented. Without US ratification, it would be unfeasible for the TPP to come into force.

The US withdrawal from the initiative, then, left the remaining signatories with two options. One, they must renegotiate and undertake major revisions to original design of the agreement, particularly on the TPP’s requirement for implementation.

Two, they need to consider the option of pursuing an alternative agreement with the addition of another global superpower. Relaunching the TPP under the new name with fundamental changes shows that the first of the two available options was the one the 11 remaining signatories finally chose.

Interestingly, it is possible to launch the CPTPP because of some fundamental changes to the TPPA. These include the suspension of 20 provisions, particularly on controversial issues such as foreign investment and the scope of the Investor-State Dispute Settlement (ISDS), as well as some aspects related to intellectual property rights protection.

These are some of the issues in the TPP that were perceived to pose a threat to a country’s sovereignty. In addition, four other aspects related to the interests of individual members still need to be finalized and require a consensus.

These contain aspects on State-Owned Enterprises (SOE) relating to Malaysia, services and investment relating to Brunei Darussalam, Vietnam’s concern regarding trade sanction and dispute settlements, and Canada’s interest in the issue of cultural exception.

In addition, other crucial aspects still need further negotiating on the mechanism for entry into force and withdrawal, as well as accession (for more detailed information, see the latest TPP Ministerial Statement).

It should be noted, however, that at the time of writing, the full text of the new TPP form (called the TPP 11 Agreement) as the basis for the commencement of the CPTPP had not been released.

The TPP Ministerial Statement also reasserts the participating countries’ dedication to maintain the TPP’s core elements, including the high trade deal standard and to reaffirm their commitment to free trade and anti-protectionism stance.

For these reasons, therefore, they consented to adopt the “comprehensive and progressive” agreement to embrace the spirit and objectives of the TPP.
______________________

This new development shows a more optimistic gesture from the 11 remaining signatories.

On the other hand, they also acknowledge the importance of the participating countries’ flexibility, particularly to retain legislative and regulatory priorities. Moreover, these countries recognized the dynamics of each member’s domestic politics prior to the conclusion of negotiations.

This recognition shows their respect for each other and allows each member to follow their own domestic process before signing the final agreement. This obviously reflects a more accommodating approach to a trade deal under the CPTPP compared to its predecessor, the TPP.

This rebadging of one of the most significant regional trade pacts poses at least two critical questions: What does it mean for the global political economy; and how should Indonesia respond to it?

Politically, this new development shows a more optimistic gesture from the 11 remaining signatories in continuing the trade agreement in spite of the US withdrawal.

It sends the strong message that the show must go on, even without US involvement. This may also answer the anxiety of many parties regarding the future of the global political economy in face of the US’s isolationist policies.

Second, the fundamental changes made to crucial issues in the TPP displays a compromise between two opposing goals, an ambitious objective to maintain the trade agreement’s high standards and pragmatism with regard to the dynamics of its members’ domestic politics. The compromise is necessary; otherwise, the trade pact will not become a reality.

The third key aspect concerns how the Indonesian government should respond to it. One of the main impacts for Indonesia is that this rebadging of the TPP as the CPTPP may reinvigorate domestic debate as to whether Indonesia should or should not join this initiative.

This debate, which gradually faded after the US withdrawal, will most likely reappear.

With the fundamental change to the agreement, however, the CPTPP adopts a different approach that makes it worth the Indonesian government’s consideration. Nevertheless, the full text of the agreement needs to be examined first to gain full understanding of the CPTPP.

Likewise, and more importantly, comprehensive assessment is critically needed to form the basis of the Indonesian government’s response to the rebadged TPP.
_____________________________