A Paradox of Trade Agreements: From Global to Bilateral Negotiations

Coming out of the negotiations in Hawaii, some officials in the Trans-Pacific Partnership (TPP) talks suggested that the failure to get a deal done was not catastrophic.  Ministers could meet again potentially within mere weeks on the sidelines of an ASEAN Economic Ministers (AEM) meeting in Malaysia.  This timeline appears to have gone by the wayside now.  Loose talk of a possible meeting in September also looks unlikely.

Hence, we are mostly back to what I suggested already:  if a preliminary deal is to be struck, it could be in November when leaders at all levels have a series of planned meetings around APEC and assorted other international gatherings. 

Again, many people will try to argue that the timeline is not terribly important—getting it done right, after all, is better than rushing to get it done.  I might argue that more than five years of negotiations, more than 20 full negotiating rounds, and four different multi-day ministerial meetings (not to mention endless assorted intercessional meetings, chapter negotiations, sideline meetings, video conference sessions and the like) hardly appears to suggest unseemly haste in closing.

As we linger over the dog days of August, it is worth pondering again an interesting paradox in trade talks:  while the benefits of larger agreements are becoming ever greater, it may have gotten even harder to conclude larger deals. 

This observation, which I will elaborate in a moment, also leads to an even more troubling paradox: current difficulties in getting large-scale agreements done with many participants will likely lead officials back to creating more bilateral arrangements.  But more bilateral agreements make it increasingly less likely that larger deals can ever be completed.

Trade agreements get signed for all sorts of reasons—to cement relationships, reward friends, give bureaucracies something to do, promote officials, provide newscopy, and more.  But fundamentally, a good trade agreement is supposed to help businesses create more trade between partners. 

For businesses, the most helpful kind of trade agreements are those that include the largest set of members.  After all, few companies plan to buy and sell to or from only one other country.  Even the smallest firm usually has aspirations of someday being able to tap on a global marketplace for materials, contracts, vendors, and consumers. 

Firms would like to have a seamless experience (or as close to seamless as possible) in navigating multiple markets.  This includes things like consistent border and customs procedures using the same set of required paperwork.  Companies would like consistent coverage of their products with similar rules, including sorting out differing standards that make trade difficult. 

This desire for fewer barriers to trade does not mean that firms are automatically hostile to regulations or are resistant to rules and procedures.  Very few firms are clamoring for unfettered trade access.  Instead, most would argue more strongly for consistency since what firms really need is to minimize uncertainty and risk. 

This is where trade agreements have a role to play in setting the ground rules for business and in creating market opportunities for firms.  From a business perspective, the largest possible trade agreement is infinitely preferable to trying to sort out multiple smaller arrangements that may—or may not—provide improved access to partner markets.

However, the global trade regime is clearly stuck.  The Doha round of the World Trade Organization (WTO) began in 2001.  Officials were tantalizingly close to finishing in the summer of 2008 and have barely been able to move ahead since then.  An “intense” period of consultations earlier this year failed to make much headway either and the WTO has just missed another deadline for moving ahead with the Doha agenda. 

Even the area with particular promise for businesses—the Bali agreement on trade facilitation—remains jammed.  Although the agreement would help smooth some of the barriers faced by companies at the border, countries have been extremely slow to ratify the deal.  Until significantly more WTO members sign on, the agreement will not be implemented.

The fine print has not yet been released on the Information Technology Agreement II (ITAII).  This agreement is meant to lower tariffs on a range of electronic products of interest to IT companies.  However, since the text has not been released as far as I know, it’s not exactly clear how much additional benefit firms will receive from this deal.

The lack of forward movement by the global trade regime has raised the stakes for regional agreements like the TPP.  If important deals cannot be struck in Geneva, then perhaps commitments can be undertaken by like-minded countries operating in smaller settings.

Now, however, the TPP has also become stuck (hopefully not as permanently as the WTO).  Similarly ambitious agreements like the Trans-Atlantic Trade and Investment Partnership (TTIP) between the United States and Europe are also progressing slowly.  As I mentioned from Myanmar over the weekend, the Regional Comprehensive Economic Partnership (RCEP), while not in quite the same leagues of high ambition as the others, has been moving along at a crawl.

The net result of a lack of movement at the global level and foundering efforts at the regional level is likely to leave governments searching for new ways to unleash new sources of competitiveness and economic growth.  If getting a deal done with more players is hard, perhaps, officials will surely start to think, perhaps we should return to negotiating smaller deals with fewer partners?  Or even revert back to bilateral agreements? 

A bilateral deal is faster to negotiate and requires fewer resources.  An agreement between two parties could be more ambitious (although it might not be ambitious at all).  The consequences of both success and failure are lower.

Yet a stampede back to bilaterals could just compound the difficulties of getting to yes with a larger group of members in the future.  This is because each layer of agreement between members adds to the complexity of the new deal. 

Of course, this makes intuitive sense.  But I do think the scale and scope of the problem has not been sufficiently appreciated. 

For example, the TPP talks foundered in Hawaii in part because of two different commitments from the North American Free Trade Agreement (NAFTA).  Under NAFTA, Canada was allowed to shield dairy and poultry from market opening.  This set up additional challenges in the TPP since continuing the stance would undermine the high quality aspirations of the TPP.  But not continuing the stance, as we have clearly seen, undermined the enthusiasm of the Canadian government to wrap up the talks—particularly with an election looming in Ottawa in October and the potential for facing a very upset group of voters in key provinces. 

The TPP also got stuck over rules of origin in autos.  Mexico objected to changes in the level of local content proposed for the TPP that would undermine the balances struck in NAFTA for autos. 

Similarly, a bilateral agreement between the United States and Australia over sugar access has compounded challenges in addressing sugar in the TPP.  In another example, Singapore’s (and now Vietnam's) commitments to protecting geographical indications with the European Union also caused hiccups in the TPP as both ASEAN members cannot agree to new regional rules that contradict promises made to Europe. 

The more countries sign up to wide-ranging, deeper commitments with one another, the harder it may be to craft good regional and global deals in the future.  Members rushing to sign and upgrade “easier” bilateral agreements could paradoxically find themselves increasingly constrained.  Many governments could be unable to create the kinds of large scale agreements that might be most helpful for businesses going forward.

***Talking Trade is a blog post by Dr. Deborah Elms, Executive Director, Asian Trade Centre, Singapore***

RCEP Shifts Into a New Gear?

Nay Pyi Taw, Myanmar— The ninth round of negotiations is wrapping up in Myanmar for the Regional Comprehensive Economic Partnership (RCEP).  The unbelievably massive convention centre (and Nay Pyi Taw has two convention centres!) is full of serious looking delegates sporting various colored country badges. 

Talks are ongoing in a wide variety of working groups, sub working groups, expert groups and the main negotiating committee.  Some sessions meet with just ASEAN officials, others with the ASEAN Foreign Partners (AFPs: Australia, China, Japan, India, New Zealand, and South Korea), and others with all 16 parties in the room.  Topics include goods, services, investment, rules of origin, customs, intellectual property, competition, legal affairs, and economic and technical cooperation. 

I’m even delighted to report that e-commerce has finally moved beyond discussions into a negotiating phase!  We attended two previous rounds to promote the inclusion of this agenda item into RCEP. 

The mood overall appears to be mixed.  Many delegates expected to be attending this round in the wake of provisional agreement of the Trans-Pacific Partnership (TPP) negotiations.  Seven countries are involved in both negotiations: Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam. 

The closure of the TPP would have put considerable pressure on RCEP negotiations.  At the moment, talks here remain at a relatively early stage, despite having been underway for more than 2 years. 

The original intention was to complete the agreement by the end of this year.  The timing had been chosen to link up RCEP with the introduction of the ASEAN Economic Community (AEC).  However, when RCEP ministers met in Kuala Lumpur last month, they finally agreed that closure in 2015 was not possible.  No new deadline has been announced (which is frankly an excellent idea, given the problems attached to “missing” a deadline). 

Instead, ministers suggested that they should redouble their efforts in an attempt to move talks along.  Offers have now been exchanged in services and investment. 

But this forward progress is partly obscured by difficulties in negotiating market access for goods.  These discussions are still stuck in a dispute over modalities.  This is trade-speak for the procedures or process under which members will conduct the talks—in other words, at the end of the RCEP negotiations, are the members ready and willing to have one offer that is extended to everyone else or can members offer up different types of commitments for different parties? 

At the start of discussions this week, India was pushing for a three-part offer in goods with differing levels of market access or openness to different members.  China, Australia and New Zealand, for instance, would have the worst amount of access to the Indian goods markets as members of India’s third tier.  Some of ASEAN, by contrast, would enjoy improved access.

The difficulties in locking down the procedures for negotiating in goods is somewhat ironic, given the origination story for RCEP.  This megaregional trade agreement got underway as a mechanism to improve supply chain integration in Asia by stitching together the five existing ASEAN+1 agreements (that brought ASEAN together with Japan, South Korea, China, India and Australia/New Zealand).  While not all five of these agreements have commitments on services and investment, all did include market access for goods.  Thus, the goods negotiations in RCEP should have been the easiest to get underway (even if getting closure could be difficult). 

But a multi-part schedule for market access in goods does not provide the kind of seamless integration benefits that make the most sense for companies.

As it stands now, a company that wishes to use either ASEAN agreements or (some) of the ASEAN+1 agreements will struggle to find specific market access schedules.  While most goods between ASEAN members can be shipped duty free now, there are some deviations.  These exceptions are hard to find. 

When it gets to determining market access commitments for services and investment within ASEAN, the situation is even worse.  (If you think I am making this up, try to see if your favorite service like chiropractic care or tour guides or opening a 4 star hotel is listed as opened to investment/services access on the ASEAN website or member state websites.  The only good news about the lack of clarity is that it leads to a surge of services activities for consultant firms trying to sort these things out for firms.)

But I digress a bit.  The general point is that RCEP was intended to make integration easier by linking up 16 important markets in Asia.  As we get close to the end of Round 9, the jury is still out on whether this is more or less likely in RCEP. 

One thing that has become quite apparent from this meeting, however, is that officials have dramatically expanded the scope of coverage for the negotiations.  Working groups are now underway in important areas like sanitary and phytosanitary (SPS) to help (potentially) sort out inconsistent rules around food and food safety standards, and another group is examining standards, technical regulations and conformity assessment procedures.  Officials are discussing trade remedies and members even held an experts meeting to start a conversation about government procurement issues. 

All of this activity is, I would argue, excellent news.  It means that the final agreement is more likely to contain provisions that address the issues on the ground for firms in the region.  For instance, companies frequently run into problems with testing procedures for products that vary from country to country and from even entry port to entry port.  A product that qualifies as safe in one country may have to undergo expensive and lengthy qualification procedures again in another country.  Not all of these tests are strictly necessary and RCEP efforts to streamline and remove duplicative testing procedures could be more important for many firms than cuts in tariff levels.

However, increasing the complexity of the final agreement could make it more difficult to conclude negotiations.  With 16 members at very diverse levels of economic development, these talks have already proven challenging to manage.  Expanding the agenda sometimes makes it easier to find win-win outcomes than more narrowly focused agreements.  But adding more topics can also increase the risks of collapse.

One of the best pieces of news from negotiations this week was the inclusion of a discussion on stakeholder engagement to the leader agenda.  In a complex environment with multiple parallel sessions, I think it is more critical than ever to get feedback from participants on the ground.  There is no point in flying officials all around Asia to various hot spots like Nay Pyi Taw for a week or more at a time if the deal under discussion does not meet the needs of stakeholders. 

In Asia, the connections and formal feedback loops between government and business are weak and often inconsistent.  Thus it is not automatic that officials here have a clear sense of what issue areas ought to be top of the agenda and which can be safely discarded or at least minimized. 

Finally, as the hiccup in the TPP negotiations have just clearly shown again, failure to line up stakeholder support in advance of closure can lead to disaster.  At the end of the day, even countries with varying degrees of responsiveness to constituents will struggle to approve and properly implement an agreement that runs contrary to sentiments on the ground. 

If the stakeholder consultation process gets approved, it will fall to companies to step up their own engagements with officials in future negotiating rounds.  Otherwise, if the final agreement fails to deliver sufficient benefits to companies and consumers across Asia, firms may share part of the blame.

***Talking Trade is a blog post written by Deborah Elms, Executive Director, Asian Trade Centre, Singapore***

The Collapse of the TPP: Unpacking the Disaster

No deal.  

What happened?  I was so optimistic that they would get things done for the Trans-Pacific Partnership (TPP) negotiations this week in Hawaii.  I ignored the (excellent) advice of my professor and issued predictions of success on a fast-moving target.  We even had a booklet ready to go on the benefits of the agreement for businesses.  My planned blog post for this week had us drinking champagne by now. 

But no champagne (or sparkling wine) is going to be popped open for most people after the collapse of negotiations in Hawaii.  The bottles will go back on ice for a very long time—at least early 2017.

Why?  Because Hawaii really did represent the last, best chance for a deal in the near term.  Ministers have apparently decided to reconvene on the sidelines of APEC in November to try again. 

The cold logic of deadlines, however, shows that a deal reached in November is not going to be helpful.  Recall that once the officials agree on a draft text, this is not the end.  Instead, internal procedures in the United States (and others) means a delay of at least 90 days prior to final signatures on the agreement.  Entry into force is even further off.

Even if ministers solve the current impasse in the TPP in November, then, the deal would be ready (best case) in February or March for presentation to Congress.  Congress has to agree under new TPA rules before the President can sign the agreement.  Congress will also be voting on all the implementing legislation necessary for the agreement to come into force for the United States. 

There is no way that Congress will want to take a politically suicidal vote in favor of trade in March 2016 with an election looming.  Hence, the deal is stuck until after the elections (November 2016) or even until after the new president is installed in January 2017.  Even then, passage cannot be assured.

So what happened on the ground in Hawaii?  There will be much finger pointing and recriminations in the wake of the talks.

If I had to put my own finger on it, the immediate cause of collapse can be traced to Canada’s refusal to discuss dairy in any meaningful way until the final 3 days of negotiations.  This was, as I have previously noted, a high risk strategy. 

I assume officials gambled that, if they waited until the bitter end, everyone else would be so willing to get a deal done that they would take whatever poor offer Canada made on dairy liberalization. 

The gamble could be taken, in part, because negotiations over dairy are infinitely more complex and time-consuming than equivalent difficulties in other sectors.  For instance, another problematic issue for ministers in Hawaii concerned the patent length for biologic medicines.  But the fight over patent length, while serious for participants, could at least be sorted quickly.  The number was gong to be 12, 8, 7 or 5 years of protection.  The choice might be hard, but once made, the final figure could be quickly slotted into the waiting text.

Dairy, by contrast, is not just the tariff concessions or tariff rate quotas (even more complicated) for fresh milk.  The number of lines of dairy products runs into the hundreds or thousands.  It includes all sorts of varieties of milk—fresh, powdered, canned, UHT, etc.  It includes milk products of all sorts.  Plus butter and cheese.  Cheese is, of course, not just one kind of cheese, but cheddar and Swiss and creamed. 

In short, getting an agreement on dairy is not simple and, logistically, cannot be sorted in 3 days or even a week. 

It is not like this was a new or unexpected problem either.  Canada was originally prevented from joining the negotiations in 2010 over concerns by the other TPP members that Canada would not be willing to discuss dairy or anything related to their domestic supply management system.  However, Canadian officials insisted they were prepared to move ahead with meaningful changes. 

In Hawaii, Canada apparently offered a flat quota for liquid milk equivalents—ie, anything that could be made (including fresh milk) with a certain quantity of milk would qualify.  Once the quota was filled, no additional access at TPP tariff rates would be granted.

There is not enough room in this blog post to detail all the reasons this is a horrible plan for anyone hoping to obtain meaningful access the Canadian dairy market.  Perhaps a future post will go into dairy in greater detail.

For now, accept that once the Americans saw the Canadian plan, they promptly withdrew their own offers to partners for additional dairy access into the United States.  After all, American dairy farmers were presumed to be willing to support the TPP if—and only if—any potential losses could be offset by greater sales elsewhere and particularly into Canada.  If Canada was not going to be a new, important market, then it was not worthwhile to offer up concessions to others to access the American market either.

I can only imagine the reaction in New Zealand.  Their primary interest in the entire agreement has been to receive additional dairy access.  Although the Kiwi market is dynamic and competitive in many areas, more than 30 percent of their economy remains tied to milk and dairy exports.  With these markets effectively shutting before their eyes in Hawaii, officials must have watched in total disbelief. 

In addition, Australia also had troubles with the dairy offer (and American offers on sugar).  With the U.S. dairy deal off the table, the Aussies promptly withdrew any support for changing the patent length protections on biologics (a key deliverable for the Americans). 

Mexico, which has been defending its special access to the NAFTA markets all along in various sectors, suddenly came forward to object to rules of origin (ROOs) around autos.  The current NAFTA provisions call for 65 percent content from NAFTA countries.  These rules have helped make Mexico into an automotive powerhouse and the possibility of lowering the percentage of content required in the TPP led to strong Mexican objections.  

With the unraveling of autos and the contested dairy elements of the agreement, various other complaints from different TPP members must have risen to a crescendo.   Reconciling these interests has always been a heavy lift.  But once officials realized that key outcomes were being pulled off the table by others in the end, the stampede to protect your own markets and not be left exposed must have been unstoppable. 

I thought they would delay the finish for another 24 hours.  Instead, with everything in such flux, officials just called off the whole thing to fight another day.  I would bet that many said—with domestic elections in Canada finished in October—the dairy stuff could be addressed by the next meeting.

The key problem with such a strategy, as I just pointed out, is that this delay is not simply from July to November.  It could be a delay of 18 months or more.  People in the coming days will undoubtedly be pointing to the global trade talks that have dragged on for more than a decade with no agreement (despite their own deadline of July 31) to even get a plan in place to discuss a path forward. 

The TPP now finds itself in very uncertain territory.  The only salvation I can imagine is to finally invite the South Koreans to join the talks.  If you aren’t going to be done for ages, you might as well expand the party.  If Korea comes in, perhaps Taiwan will also make a renewed push for entry. 

At least then officials have new excuse for delays in closing a trade agreement that has been underway for what frankly feels like forever.

***Talking Trade is a blog post written by (a deeply depressed) Deborah Elms, Executive Director, Asian Trade Centre, Singapore***

Trans-Pacific Partnership (TPP): Predictions for The Last Round?

A professor of mine once suggested that I never write anything about ongoing events until after I had tenure.  This way, I would never find myself in the embarrassing (and potentially career-ending) position of being completely proven wrong by unfolding events.

I am going to ignore this excellent piece of advice and make a series of predictions about the Trans-Pacific Partnership (TPP), while the 12 trade ministers are currently meeting in Hawaii.   

We, of course, have no idea what will happen in these negotiations, but here are my predictions:

Officials will conclude the negotiations on Saturday.  The round is supposed to end on Friday, but these sort of down-to-the-wire negotiations rarely end on schedule. 

The World Trade Organization (WTO) found this out to its peril in Seattle in 1999.  Given the protests outside the convention center, delegates were unable to get to the meeting venues until a full day had passed.  This compressed the negotiations into an even shorter time period.

A convention of dentists was scheduled to arrive immediately after the WTO ministerial finished.  It was not possible to reschedule the dentists or move the trade meetings anywhere else.  This meant that trade delegates did not have enough time to reach agreement on their agenda and the negotiations ended in collapse.  It took two years before the WTO was able to try again in Doha, Qatar, to launch a new round of trade talks in 2001.

Negotiations will conclude.  This is a controversial prediction, but if I’m going to go out on a limb, I should go all the way.  Talks will end because, after more than 5 years, officials have cleared the path to conclusion.  The remaining issues are sensitive and politically (and potentially economically) hard to resolve, but everyone has been focused on outcomes for some time now.  The last bit requires a leap of faith and a willingness to commit. 

At this point, most of these compromises are not time consuming to resolve either.  They require a decision.  For example, how many tons (exactly) is Japan willing to grant in new market access for polished rice?  The text on issues like this is otherwise done and officials are just waiting for the final numbers to be inserted by political leaders.

The agreement will finish with all 12 parties—but entry into force may not include all 12.  As we head into the finish line, two countries (especially) are facing domestic political challenges that make closure particularly difficult:  Canada and Malaysia. 

Canada has been pursuing a high risk, hardball tactic of refusing to discuss dairy concessions of any kind.  As we get to the end, the government has to decide if it is willing to pull out of an agreement that should dramatically increase market opportunities for Canadian companies on behalf of roughly 13,000 dairy farmers.  These farmers—mind you—will not be facing the complete elimination of a system of protection that has been in place for decades, but likely a much more modest opening over very long time horizons.  I would like to think that cooler heads will prevail and Canada will be a partner in the closure announcement and enter the agreement with the rest.

Malaysia faces more difficult challenges.  The Prime Minister just fired key cabinet officials yesterday as part of a plan to contain a growing domestic scandal.  Some of the provisions in the TPP (such as opening central government procurement markets more transparently and allowing some state owned enterprises to be subject to market forces) may be difficult.  Hence, it is possible that Malaysia will be present for the photos this weekend, but may delay entry into force for the agreement.  (The economic consequences for Malaysia of delay will be important, but that is the subject of another blog in the future.)

More time would not have fixed all problems.  There is an argument making the rounds that officials should take “as long as it takes” to reach the perfect agreement.  This is false.  With 12 diverse countries negotiating in the TPP, timing will never be ideal for sorting out the myriad issues under discussion.  And, looking ahead at the political calendar in participating countries, more time is likely to lead to more problems maintaining momentum in negotiations rather than fewer hassles. 

The agreement will not be perfect.  This prediction is a painful admission for someone who helped write a book (literally) on what a high-quality, 21st century agreement ought to contain.  For example, I wish officials had the guts (or suicidal tendencies) to drop all tariffs on all goods to 0 as they originally seemed to promise. 

This will not happen in the TPP.  Nearly all goods will drop to 0.  The coverage will be far, far better than any other free trade agreement.  But the final result will not be perfect.  Instead of 100%, the deal is likely to land at something like 97-98% of what perfection might have required.  But even in tariffs, the last few percent are dropping (even if not quite to zero). 

Much of the 21st century rhetoric of regulatory coherence, for instance, has also been dropped from the final agreement.  Turns out, it is very hard to get regulators to cohere.  Regulators are protectors—of the public, of health, of the environment, and of various types of policies.  They are not overly keen on matching other people’s views of their appropriate roles. 

And, as I have highlighted in the past, without the right institutional arrangements, implementation and expansion will be especially challenging.  If a “virtual” Secretariat remains in the final document and is not replaced with an actual physical group of people in one place dedicated to the long-run management of the agreement, problems will ensue. 

Lots of businesses will breathe a sigh of relief.  After more than a decade of stumbling in global trade negotiations, businesses have been reluctant to believe that big, important trade agreements can still be concluded.  This has kept many firms from paying as much attention to the TPP as they should, since the benefits can be substantial.  But with the closure of the agreement, TPP businesses ought to be working out the best opportunities for themselves.  For firms in formerly protected sectors, especially, the benefits of the agreement could be substantial. 

Some people will not be happy.  We met an NGO at one of the TPP negotiating rounds who was bitterly complaining about TPP outcomes.  I asked, “Is there anything in this agreement that would make you happy?”  Without a moment of hesitation, the answer came back, “No.” 

I think this is likely to be true for many groups.  Some will never be satisfied.  Others are going to be unhappy that this agreement does not deliver sufficiently on issues like the environment or labor.  But I would argue that this is somewhat unfair—a regional trade agreement is not the best place for managing climate change, for example.  Hence anyone with expectations that the TPP will somehow fix climate change is bound to be disappointed.

We will be glad the deal is done.  After 6 years of following these talks, we are delighted to be moving to discussing content of the agreement with reference to actual commitments and texts and to getting on with the business of implementation.  The TPP contains substantial benefits and we are looking forward to the future of trade in Asia.

***Talking Trade is a blog post written by Deborah Elms, Executive Director, Asian Trade Centre, Singapore***

Getting to Yes—Negotiating Final Compromises

Any negotiator will tell you that reaching the last few points of an agreement are always the hardest part.  No matter how long talks have been underway, the last few days and hours usually devolve into intense, marathon sessions where people may have little sleep and barely eat. 

To appreciate the challenges of getting to yes in a complex, multiparty negotiation, think about trying to order pizza with a dozen people.  The rules of this particular meal require the purchase of only one kind of pizza.  Everyone must eat the final result. 

To make it more complicated (and a little closer to reality), imagine that the pizza is supposed to have 10 different toppings to be chosen from wide menu with different prices for each.  Finally, the dozen people planning to eat pizza have varying abilities to pay for the check.  

Some negotiations are likely to devolve rapidly.  The pizza might end up just having dough, tomato sauce and cheese (by, potentially, ordering “extra” servings of sauce and/or cheese to reach 10 items). 

The Regional Comprehensive Economic Partnership (RCEP) officials are at risk of eating a lot of cheese (or a mountain of dough) on their hypothetical pizza. 

The recent ministerial meeting in Malaysia appears to have resulted in a determination that the negotiations will not conclude this year as planned.  This is actually very good news, since it provides more time for officials to reach consensus and create higher quality final results.  

But the rest of the discussions with RCEP ministers were ominous.  For example, officials are trying to figure out how to order one pizza with different toppings on each side.  India, in particular, is trying to create market access commitments that vary across the 16 parties of the agreement.  South Korea or Singapore might get more liberalization (or pizza toppings) from India than China will receive. 

The discussions in RCEP remain largely stuck on goods, with limited discussions of how this pizza will be delivered to the table.  Unless services (like food and beverage operations) are included in RCEP, the end result will not satisfy.  Investment discussions remain shallow. 

Even an area like e-commerce where Asian economies should be looking for future growth has been relegated in RCEP to a “discussion group” with apparently no concrete outcomes expected.  Yet, in the real world, more and more people are using e-commerce to order and pay for their pizzas.  Having some consistent regulations in place to help reduce uncertainty for local and foreign firms would be extremely helpful in boosting growth prospects for companies.

Another trade “pizza” that has been in discussion for years is the World Trade Organization’s Information Technology Agreement (ITA).  Last week’s blogpost noted delays in reaching an agreement.  This week, however, officials appear to have (almost) gotten to yes.

A draft text is now under discussion in national capitols.  Final work is to be wrapped up on the agreement by the Nairobi ministerial at the end of the year.  (With the added benefit of giving the potentially beleaguered WTO something to talk about in their meetings.)  Implementation is tentatively scheduled for July 2016.

The final deal highlights the challenges of deciding on the last few items.  To get the ITA2 finished with more than 200 tariff lines included, officials had to jettison their aspirations of including some items.  For example, analogue car radios were dropped from the list at the last moment.  In exchange, a specific type of measuring instrument was also taken off the table.  A similar bargain was struck over optical lenses and some types of medical devices.  LCD displays remained off the list, leaving at least one party so deeply dissatisfied with the final result that it may leave the table entirely.

Arguing over analogue car radios is surely the equivalent of fighting over whether the pizza should contain a sprinkling of cinnamon.

Nevertheless, the final list of products to be covered in ITA2 represents an important step forward in updating this trade agreement.  In rapidly evolving industries like information technology, maintaining and updating the list is critically important.

The biggest “pizza” negotiation in the region is about to get underway in Maui.  Chief negotiators for the Trans-Pacific Partnership (TPP) are flying in and preparing for what most want to be their last meeting.  Officials will likely be engaged in furious negotiations over the last few items to be added (or subtracted) from the pizza in the hopes of presenting a completed product to their trade ministers at the end of the month.  Fingers crossed that everyone around the table will be satisfied with the final result.

***Talking Trade is a blog written by Deborah Elms, Executive Director, Asian Trade Centre, Singapore***