TPP ain’t over till it’s over


By Firdaos Rosli

Please allow me to put the discussion on the Trans-Pacific Partnership (TPP) into perspective.

Last week, there were at least 10 MPs asking International Trade and Industry Minister Mustapa Mohamed about the future direction of the TPP in his Budget 2017 winding-up speech.

A number of them are already well-informed about the subject matter as the minister periodically briefs members of the TPP Parliamentary Caucus himself.

The TPP Agreement clearly stipulates the ratification requirements in order to make the TPP a legally binding document. In other words, the TPP will only be dead if the ratification requirements are not met.

According to Article 30.5 of the Agreement, there are three conditions of which the TPP would come into force.

Firstly, the Agreement will be legally binding when all member countries have signed, ratified and notified the Depositary (New Zealand) in writing. If the first requirement is not met, then six or more members accounting for at least 85 per cent of the group’s GDP based on 2013 IMF Data could bring the Agreement into force once they have ratified and notified the Depositary in writing within two years from the date of signing, ie, Feb 4, 2016.

Otherwise, the third condition will apply where it is similar to that of the second condition but without a stipulated time frame.

Now, there are five points to note here. Firstly, the TPP allows for an early ratification if not all members have successfully ratified the Agreement. This will encourage others to complete their own domestic processes at a speedier pace.

Secondly, despite allowing for an early ratification, there is no mention of a deadline or expiry date mentioned anywhere in the Final Provisions chapter. If the first and second conditions are not met, the third condition will then apply. This rule allows member countries to bring the agreement into force anytime in the future.

Thirdly, due to the GDP percentage requirement in conditions 2 and 3, both the US and Japan must complete their own legislative processes in order to bring the Agreement into effect.

The US accounts for 61 per cent whereby Japan accounts for 18 per cent of the group’s GDP. The top six countries, which includes Malaysia, account for almost 96 per cent of the total GDP of TPP countries.

Japan is now in control as the government has successfully passed the TPP in its lower house about a week ago.

Fourthly, the Agreement seems to have priced in the significant political push back and time factor in bringing the TPP into force.

In a plurilateral agreement such as this, member countries must acknowledge the differences in the legislative processes of member countries due to diverse political systems.

For the record, Malaysia was the first country to table the Agreement in the Parliament in late January this year.

And finally, the TPP can only be declared “dead” if the US and/or Japan withdraws from the Agreement.

If President-elect Donald Trump wishes to bury the TPP for good as is widely speculated, it can then be argued that the US would need to submit a formal notification for withdrawal to the Depositary.

According to Article 30.6, a withdrawal can only be formalised six months after the date of notification, or unless member countries agree on a different time period.

It ain’t over till it’s over, says Lenny Kravitz. The ratification clock is still ticking even when the progress is static. It is imperative also to note that the only thing that is consistent about Trump is his inconsistency about debating various issues at hand, including the future direction of the TPP.

As such, whether or not Malaysia goes bilateral with Pacific partners is secondary.

As the project director of the National Interest Analysis of Malaysia’s Participation in the TPP study, I stand by the study team’s report that the agreement will bring about significant structural changes that result in net positive outcomes.

The government must proceed with its top-down reforms agenda and these are direly required to make Malaysia great again.

Firdaos Rosli is a Fellow in Economics with the Institute of Strategic International Studies Malaysia.

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