This article examines the process that must now be completed for the Trans-Pacific Partnership (“TPP”) to come into force as a binding trade agreement for the existing 12 signatories. Looking forward, it also discusses the mechanics for the addition of countries wishing to join the trading group in the future and provides an update on the status of discussions within some of the declared TPP aspirants. It also considers the mechanics for withdrawal from the TPP.
Coming into Force of the TPP
The TPP was signed on 4 February 2016, by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam, a grouping known as the “TPP12”. However, while it has been signed by all countries, it will come into force only following sufficient ratification at an individual country level.
Under Chapter 30 of the TPP, there are three pathways to the TPP coming into force:
Pathway 1: Prompt agreement by all TPP12 countries. If all TPP12 countries ratify the TPP within two years of the TPP’s signing (i.e., by February 4, 2018), the TPP will come into force 60 days after the final TPP12 country’s ratification.
Pathway 2: Sufficient ratification by February 2018 deadline. If all TPP12 countries have not ratified the TPP within two years of the TPP’s signing (i.e., by February 4, 2018), the TPP will come into force 60 days later if at least six of the original signatories that account for at least 85 percent of the combined GDP of the original signatories have ratified.
Pathway 3: Future ratification. If the TPP does not come into force under Pathway 1 or 2, it will come into force 60 days after at least six of the original signatories that account for at least 85 percent of the combined GDP of the original signatories ratify.
For the above purposes, a country is said to have ratified the TPP when it provides written notice of the completion of its applicable legal procedures. These procedures differ for each country and are described in more detail in our blog.
If ratification by all TPP12 countries is not achieved, the key players for Pathways 2 and 3 are the United States and Japan. The United States represents nearly 62 percent of the GDP of the block and Japan 17 percent, so without the support of both, it would be very difficult for the TPP to come into force. Equally, if both the United States and Japan ratify, the TPP would seem destined to come into force, with only the unlikely event of a significant number of other TPP12 countries failing to ratify being able to prevent that outcome.
Interestingly, if a TPP12 country has not ratified the TPP by the time it comes into force under Pathway 2 or 3, a determination of the TPP Commission will be required for that country to become part of the TPP. This should act as an incentive for countries to ratify by the February 2018 deadline.
Withdrawal from the TPP
A country can withdraw from the TPP by providing six months’ prior notice. Interestingly, the six-member / 85 percent test referred to above does not appear to be reapplied following the withdrawal of a member, so a smaller TPP group is possible if there are withdrawals.
Several countries have indicated an interest in joining the TPP, including Colombia, Indonesia, South Korea, Sri Lanka, Taiwan and Thailand.
Quotable Quotes: What Is Being Said about Joining the TPP
“We are apparently first in the list to join the Asia-Pacific Economic Cooperation (forum) and this will allow us to start the route to join TPP”.
— Colombian President Juan Manuel Santos, February 2016
“Indonesia intends to join the TPP”.
— Indonesian President Joko Widodo, October 2015
“Caution is of the utmost importance in calculating this. Everything must be calculated for the sake of national interests. It is still in process”. — Indonesian President Joko Widodo, February 2016
“Korea welcomes the TPP agreement reached last week…. Having already signed trade agreements with 10 of the 12 TPP member countries, I believe Korea is a natural partner for the TPP”.
— South Korean President Park Geun-hye, October 2015
“While a special trade preference program is our immediate priority, we would also like to explore with you the development of a process, which would make it realistic for Sri Lanka to consider TPP membership further down the line. In my view, establishing a joint Working Group to examine the implications of the TPP for Sri Lanka would be a good first step”.
— Sri Lankan Minister of Development Strategies & International Trade Malik Samarawickrama, April 2016
“Ensuring that Taiwan is ready for the future candidacy into the Trans-Pacific Partnership and other regional economic agreements will be an important cornerstone of my economic policy”.
— Taiwanese President Tsai Ing-wen, June 2015
“Regarding the TPP … right now Thailand is considering tak[ing] part in that agreement. Eventually, we will have to join the TPP”.
— Thai Prime Minister Prayut Chan-o-cha, March 2016
The Philippines was considered likely to seek TPP admission, although the position of newly elected President Rodrigo Duterte is still to be seen. Whether to pursue the TPP has also been the subject of debate in Cambodia and in India. And, as perhaps the most significant wild card, it is not clear whether China would seek to join the TPP in the future, and this is a complex topic with many interrelated considerations.
Of course, in addition to a desire to join the TPP, an aspiring country will need to ensure its domestic regulations and standards are adequate to allow it to comply with TPP standards. Aspirants face issues in a range of areas, inculding openness to foreign ownership, intellectual property protection and labour standards.