Doesn’t Always Take Two to Tango: Unilateral Trade Policies and Indonesia

The current obsession with trade negotiations (okay, maybe it’s mostly our obsession) may have obscured the fastest, often easiest way for governments to make their domestic economies more competitive:  governments can act on their own to create more favorable trade environments. 

In the past, many Asian governments were at the forefront of making unilateral changes to their domestic economies.  Singapore and Hong Kong, for example, slashed applied tariffs to zero absent external demands for them do so.  Others opened or liberalized sector after sector to promote inward investment or spur domestic competition.

But much of this unilateral spirit of reform appears to have dissipated.  Governments now prefer to wait to make changes until some foreign partner requests reform.  It may appear to be easier to make politically and economically hard choices with a foreign party to absorb some of the “blame” for any short-term pain. 

One government official said me a few years ago, “Yes, we know that a 2% tariff is really just a nuisance.  It probably costs us more to collect the tariff than the revenue it generates.  It is an administrative hassle for firms.  But if we get rid of it, what will we use as a bargaining chip when we engage in trade negotiations?”

I tried to argue that eliminating nuisance tariffs does not automatically mean that no one will do a free trade “dance” with you in the future.  Singapore did not get more than 20 active FTAs by stripping away 2% tariff levels for preferred partners in an FTA.  There is more to a trade deal than tariff reductions, after all, and win-win outcomes can be achieved in a whole range of sectors and issue areas.

One particularly promising area for unilateral reforms can be found in regulations.  For most companies today, the biggest headaches are not tariff levels or official customs procedures or registering for protection of intellectual property rights.  Instead, the hassle factors that are most pertinent to firms tend to be regulatory in nature.

Such regulations may include rules for licensing of all sorts.  Such rules may mean that you can import this item, but only if you first hold a valid permit for doing so or you may invest in a sector but only after appropriate licenses for operation are in place.   Other regulatory barriers could be rules that require goods be transshipped through only one port or only after inspection of paperwork or goods by specific ministries.

This is not to argue that regulations are not needed or necessary.  Government, as always, retains the right to regulate in the public interest and to safeguard the interests of human, animal and plant life and health. 

However, the thicket of regulations in many markets clearly extends well beyond what is strictly necessary in many countries around the region.

For example, nearly every firm that speaks to us can relate some good stories about nightmare regulations in Indonesia.  These range from the large to the small hassles, time and cost needed to try to comply with the rules.  The forest of regulations ensnares firms in nearly every sector and applies to both big and small companies.

The Indonesian government of Joko Widodo (Jokowi) has recognized some of the problems.  The National Development Planning Minister Sofyan Djalil just highlighted more than 2700 regulations and presidential and ministerial decrees that were “inimical to economic activity.” 

That is surely an impressive number of identified obstacles to trade and economic growth. 

Partly in response, Jokowi has begun rolling out a three-part package of unilateral economic reforms to tackle the problems of excessive regulation.  The first package was revealed with great fanfare last week.

It includes the drafting of 91 new regulations and 89 regulations to be amended. 

It could be argued that the creation of nearly 100 new regulations is not a particularly promising way to start clearing away 2700 existing, identified problematic rules.  But, of course, much depends on which rules are being tackled and whether or not the first set of reforms gets at some of the key obstacles to growth or simply nibble around the edges.

Indonesia has ample room for improvement.  It ranks 114 of 189 on the World Bank’s ease of doing business (well below most other ASEAN members) and has been hit by a sharp decline in the value of the rupiah and reduction in the amount of inward foreign direct investment.  Arianto Patunru and Sjamsu Rahardja highlight some selected non-tariff measures and local content requirement rules imposed in Indonesia since 2009.

Last week’s announced policy changes are largely intended to push up demand and not, as Chris Manning has argued, to increase competitiveness of domestic companies.  Changes include greater collaboration between central and local governments around price controls for products like beef, changes in banking to allow easier foreign currency account creation, and the provision of funds to citizens by raising the tax-free thresholds for the poorest citizens as well as newly expanded cash-for-work schemes.  The reform policies are not completely worked out yet, so it is not entirely clear what will be on the table, nor the level of implementation to be expected.

This package of reforms are meant to be overseen by a new economic policy deregulation center set up at the Office of the Coordinating Economic Minister.  The office will also assist with the roll out of two additional packages of reforms due in the next few months. 

The Jakarta Post responded with an editorial to urge the government to take the new deregulation center seriously.  It could implement reforms urged by the OECD in 2012 to evaluate regulations across ministries and to improve regulatory outcomes.

The consequences of successful reform could be quite substantial.  Indonesia’s large, youthful population and ample natural resources provides a platform for significant rewards.  McKinsey and Company has suggested that the country might become a Group of Seven economy by 2030.

As our conversations with companies have revealed, getting there will require unilateral reforms.   The announced regulatory changes are important, but must go substantially deeper and further for the real payoff to occur. 

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

Bargaining Over Services in TiSA

This week, President Tabare Vazquez agreed to withdraw his country from ongoing negotiations over services.  Uruguay will now notify the other 24 members[1] of the Trade in Services (TiSA).

This presents a good opportunity to examine TiSA.  Negotiations got underway in 2013 out of a shared frustration with a lack of progress in global trade talks for services coupled with a desire to push forward new, better suited rules for today’s interconnected, globalized economy and to give services an improved platform for growth. 

Services are an increasingly vital part of international trade.  The Asian Trade Centre has been part of an ongoing research project to track how much of the content of manufactured items like auto parts, aircraft engines, printer dyes, outdoor jackets, watches, whiskey, or making a table comes from services.  The full project will be out soon, but what has been particularly striking from this case study research is how much value is tied up in services content.

We often think of goods as physical items only—something you can drop on your foot and have to transport across borders in trucks, trains or ships.  But it turns out that for many value or supply chains today, at least half and perhaps as much as 80 percent of the value of a good is actually derived from services.

Such services can include research and product development, managing human resources, cleaning, security, distribution, logistics, warehousing, retail, and even after sales service and repair. 

TiSA members together contribute more than 70% of global trade in services.  For most, services also constitute a significant portion of domestic output contributing substantial numbers of jobs and generating important revenue for companies both large and small.   

Despite the critical importance of services, global rules for services remain underdeveloped and often lacking.  In part this is because services are devilishly hard to see and measure. 

Take examples from the Asian Trade Centre.  Our brochure was designed by a graphic artist in Pakistan, connected to us through an Australian online platform (www.freelancer.com).  Our website is hosted by an American company (Squarespace) and this blog is distributed by a different US company (MailChimp).  [All are receiving unsolicited endorsements.]  The blog content is written by me sitting in my lovely office today in Singapore and distributed to readers all across the globe. 

So how would available data capture all these services?  The short answer is not very well at all. 

In the mid-1980s when government officials were trying to design the first batch of global rules to govern trade in services,[2] most of what I just described would have been unimaginable.  Or, rather, some of the services might have been possible but the methods of delivery, the scale and the scope would not.

Consider Freelancer.  This company currently brings together more than 16 million people in 247 countries to provide a wide range of services from software writing and data development to engineering and accounting.  Connections can happen instantly and millions of files, pages, images, and data points are moving around and across borders daily.

At the time of the Uruguay Round negotiations, however, officials could mostly imagine delivering services via post, land line telephones or, perhaps, fax machines.  Otherwise, the primary methods of getting services to travel across borders meant the movement of people—I might travel to another country for medical treatment or to deliver a stakeholder workshop in Korea for the next RCEP round (currently planned for October 14 in Busan, by the way!  Stay tuned for details).  Or I might invest directly in a company, or travel temporarily as a business employee of a big firm to set up a project.

In short, officials were struggling with how to categorize services and to understand how they might be delivered across borders.  Hence the rules they created in the 1980s and early 1990s were rather crude.  Whenever I have to explain to businesses how services are broken up in the rulebook, I am usually met with blank stares.  In addition, services commitments suffered because governments were reluctant to commit to much, as no one was entirely certain about what might happen.

This is a long way round to explaining why services were part of the “built in” agenda for the start of a new round of global trade negotiations.  These talks started in Doha, Qatar, in November 2001, and have been moribund for a very long time.

Countries that are active in services trade became increasingly unsatisfied with old rules and limited market access commitments.  Unable to push forward the broader global negotiations, a handful of key countries decided to start parallel talks outside the WTO in Geneva.  These parallel talks, now called TiSA, might eventually be brought back into the WTO.

I don’t have room here to delve into trade geek obsessions with how TiSA can be reconnected with the WTO, but suffice to say that officials are trying to craft an agreement that unleashes more economic growth for services for the members while remaining conscious of likely issues and interests from the broader community. 

After 13 rounds of TiSA, the jury remains out on how successful officials are likely to be in meeting their ambitions.  The basic idea is to continue to build on existing commitments at the WTO but expand market access and to try to reduce domestic level regulations that make it hard for services to be competitive.  For example, one goal is to try to get foreign service providers to receive the same treatment as domestic service firms as much as possible.  Many similar rules do exist in various free trade agreements.

Yet TiSA talks are challenging.  Uruguay just became the first country to withdraw from negotiations, citing concerns about its ability to regulate sectors like financial services and telecommunications.  Frankly, this is likely to be overblown, as officials do not give up their right to regulate easily and these sectors are seen as highly sensitive in most countries.  TiSA will not violate a government's right to regulate for health, safety, and environmental outcomes, nor will it alter all qualifications for service providers or allow for unfettered access to job markets.

In a rapidly changing environment, designing appropriate services rules are both necessary and difficult to do well.  We will have to watch and see how successfully TiSA manages the task.

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

[1] Remaining TiSA members include: Australia, Canada, Chile, Chinese Taipei (Taiwan), Colombia, Costa Rica, the European Union, Hong Kong, Iceland, Israel, Japan, Lichtenstein, Mauritius, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, Republic of Korea, Switzerland, Turkey, and the United States.

[2] As part of the Uruguay Round negotiations in what was then the Global Agreement on Tariffs and Trade (GATT) and is now the World Trade Organization (WTO).

Cutting Tariffs in RCEP

In the past, governments mostly protected local markets by using tariff barriers.  Tariffs, which act like a tax on imports, can raise the cost of foreign goods.  If the tariff level is set high enough, foreign companies will simply avoid shipping goods across a customs border since it can be impossible to remain competitive with domestic goods in the face of high tariff levels.

Countries have reduced tariffs after multiple rounds of reductions at the global level.  In fact, many people argue that tariffs are no longer an especially big issue.  In ongoing free trade agreements (FTAs), the focus has largely shifted from goods to other chapters and different kinds of “sexier” market commitments like services, investment, e-commerce, or intellectual property rights. 

Yet tariffs continue to matter.  For some sectors—like agriculture—tariff rates charged at the border can be 100%, 330% (some dairy into Canada) or as high as 1400% (for a particular kind of potato into Japan). 

Even in sectors where tariffs are generally low or set to zero, such as electronic goods, tariffs can still be important.  For example, while global commitments in the Information Technology Agreement (ITA) have eliminated tariffs entirely on some classes of goods, many of the raw materials, parts and components used in the manufacture of more complex electronic goods may continue to be charged tariffs at the border. 

Research shows, in fact, that the cumulative effect of even very low tariffs can be quite high—as semi-finished parts and components go back and forth across borders in supply chains, a 2, 5 or 10% tariff can add up quickly. 

Tariffs are leveled on the gross value of the good and not on the value-added amount.  Firms with long international chains can face significant costs from very low tariffs.  Ferrantino showed that a 10 percent tariff across a five stage chain results in a tariff equivalent of 34 percent—and doubling the chain again drives tariff levels up to the equivalent of 75 percent.  

Robert Koopman, now chief economist at the WTO, and his colleagues have reported that the effective tariff rate for the United States is 17 percent higher than the nominal rate, 71 percent higher in Hong Kong and 171 percent higher in Mexico.  Developing countries, overall, include more intermediate goods into final products, making the impact of tariffs more significant. 

Free trade agreements do not entirely solve this problem either.  Sebastien Miroudot and colleagues have shown how the amplification of tariffs still takes place under free trade agreements.

The continuing importance of tariffs makes some of the news coming out of regional talks in the Regional Comprehensive Economic Partnership (RCEP) particularly worrying.  At the ministerial meeting last month, leaders agreed to cut tariffs on 65% of goods at the launch of the agreement and raise this level to 80% by the time the deal is fully implemented in 10 years.

This news could also be presented another way—RCEP officials have agreed to leave 35% of tariffs untouched at the introduction of the agreement and not address 20% of tariffs even when the agreement is finished. 

I am trying to get research underway to determine the actual impact of such policies.  I suspect that trade between many RCEP members is currently limited to a small set of tariff lines.  If these lines are part of the “excluded” groups of tariff lines, the net impact of RCEP cuts will be modest indeed. 

The example I frequently give is to say that snow removal equipment will undoubtedly be “fully liberalized” across RCEP.  Given the tropical nature of many RCEP countries, such a concession is basically meaningless—they do not produce, sell, buy, export or import many snow shovels, snowplows, or even snow boots.  However, things that are actually traded, including many key agricultural items, will surely be left off, or “carved out,” of the final agreement.

More disturbing still, India has apparently won permission to continue with a “3 tier” offer in tariff cuts.  Under the tiered approach, ASEAN countries will receive the 65/80 offer (start at 65% coverage and increase to 80%).  South Korea and Japan, in tier two, will be stuck at 65%.  Finally, China, Australia and New Zealand will receive tariff cuts on only 42.5% of tariff lines at the outset into India.

Think about that for a moment.  India is promising to cut tariffs on less than half of tariff lines.  Snow shovels and boots are in.  Most commercially meaningful goods are not. 

New Zealand, in particular, is trying to fight back and require that India's offer include goods tariff lines that account for 55% of the value of goods traded between the two members.  This is more helpful, but still complicated and of less value to businesses than greater liberalization across the board.

Note that India’s coverage levels are not automatically reciprocal.  Apparently, China will offer India 42.5% of its domestic market, but Australia is going to be more generous at 80% coverage and New Zealand will start at 65% coverage. 

Tariff cuts have to be viewed in tandem with rules of origin (ROOs).  It is possible to have relatively modest cuts, but easy-to-use rules of origin and broad cumulation.  This makes it more likely that firms will take advantage of RCEP in the future since items produced with content from across the 16 member countries can be more easily included and often receive reduced tariff benefits into RCEP members.  A future post will consider where officials seem to be heading in the ROO chapter.

On the bright side, if these provisions remain for trade in goods, the Asian Trade Centre and a host of other consulting firms across the region are likely to have enormous demand in the coming years as companies come to grips with the potential benefits arising from RCEP commitments.  To successfully use an RCEP agreement with modest tariff cuts, different levels of commitment, and at least a 10 year phase in period, firms will need very savvy advice and support. 

We are standing by to help.

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

Scoring Success in ASEAN

Kuala Lumpur—ASEAN officials are wrapping up another long and comprehensive set of meetings in Malaysia.  The more countries become involved in interlocking and overlapping groupings, the more complicated the meeting schedules attached to ASEAN have become. 

The primary purpose of the ASEAN meetings, of course, is to help guide ASEAN member states.  Here in Kuala Lumpur, economic ministers met to discuss progress towards meeting the ASEAN Economic Community (AEC) and other elements of the ASEAN integration agenda.

Officials also met with a variety of counterparts from other countries that are dialogue partners with ASEAN.  Some of the counterparts that are also Trans-Pacific Partnership (TPP) members, including Australia, Canada, Japan, New Zealand, and the United States, held informal bilaterals between themselves and the ASEAN TPP members (Brunei, Malaysia, Singapore and Vietnam) to try to break through remaining issues in the TPP negotiations. 

Minsters from the 16 member countries of the Regional Comprehensive Economic Partnership (RCEP) also met to discuss progress after 9 rounds of talks.

Finally, various industry groups and associations, like the EU-ASEAN Business Council and the East Asia Business Council, snagged a few minutes of the time and attention of trade ministers during assorted sideline events. 

Many of the ASEAN discussions underway are likely to include at least one comment such as, “ASEAN is on track to achieve that AEC at the end of the year, with 80% (or 90%) of the objectives already finished.”  Or, “As the ASEAN Blueprint (or scorecard) shows, we have already accomplished 80 (or 90) percent of our objectives.”

What makes these statements puzzling is that ASEAN dropped the scorecard some time ago.  The last time ASEAN published the results, the scorecard only covered the period through 2011.  There is really no way to know how close or how far ASEAN might currently be from meeting the targets attached to the AEC.

Yet the idea of a scorecard seems rather firmly anchored.  Where did the original impetus for the scorecard come from?

ASEAN faces at least two distinct challenges in implementing commitments.  First, ASEAN’s methods of negotiation are unusual.  The grouping uses something called the “ASEAN – X” (ASEAN minus X) approach.  Under this approach, somewhere between all 10 members and no members actually implement any given commitment. 

This soft, persuasive approach means that members have sufficient flexibility and policy space to move ahead with commitments when they believe the time is right for their specific developmental status and domestic conditions.  The expectation is that all 10 members will eventually arrive at the same set of outcomes, since members that disagreed with the original objective could have rejected the approach or the commitment outright from the beginning. 

The ASEAN-X system, however, means that enforcement of commitments may always be a problem. 

Second, the member states do not like confrontation.  The region has been peaceful for all these decades in part, most argue, from the “ASEAN Way” of handling disagreements.  Such an approach requires discretion and careful dialogue over long periods of time to help build up trust and communication. 

The lack of confrontation means that the usual path of dispute settlement, taken by states in economic partnerships and free trade agreements, is not an option for ASEAN.  Member states are unlikely to agree to allow one another to actually be taken to arbitration by another member over failure to implement ASEAN commitments.  (Note, however, that ASEAN members have, on rare occasions, moved trade disputes over to the World Trade Organization system if the violation of ASEAN commitments can also be viewed as a WTO violation.) 

So, imagine that you are tasked with getting 10 member states to get to the same outcomes if the pathway is flexible and you cannot count on any sort of dispute settlement system to be actually used by members to ensure enforcement of commitments.  What system would you recommend?

One solution is to use some sort of “naming and shaming” approach to call out laggards.  However, if such a system were seen as too harsh and critical, it would never get past the member states. 

Hence, ASEAN defaulted to the creation of a blueprint.  The original blueprint was a fixed number of commitments that ASEAN members had agreed to implement on the path to the AEC.  These commitments were broken down into four broad areas. 

Of most interest to the business community were promises made in the first pillar, “Single Market and Production Base.”  This included commitments towards free flows of goods, services, investment, skilled labor and freer movement of capital.  The blueprint for achieving these objectives was broken down into phases, starting in 2007-2009 and concluding in 2015 with the launch of the AEC.

The commitments would be tracked by the use of an ASEAN Scorecard that could measure progress towards achieving each of the items in the blueprint.  Critically, to get approval of the members, the report card had several interesting features.  The report is an aggregated account of progress—no single member is ever praised or punished specifically for implementing or failing to implement any given commitment. 

The scorecard is a binary system.  Members are given “credit” for progress made towards the objective or are not.  There is no attempt to measure actual implementation.  The member states themselves must provide the information to the Secretariat for tabulation.

At the Secretariat, officials add up (behind the scenes) the check marks for progress and report out either “fully implemented” or “not fully implemented.”  As an example, the first scorecard for free flow of goods showed 9 items fully implemented and 0 items not implemented between 2007-2009.  The record reported in Phase 2, 2010-2011, was more mixed with 23 items implemented and 24 items not fully implemented.  It is not clear what items are even being measured.

This highlights more challenges with the blueprint/scorecard system.  Over time, members added additional items.  This made the scorecard more of a moving target.  A member state might have thought it would receive credit for 80% of commitments in phase 2, only to discover that with new, unmet commitments added to the scorecard, it (and ASEAN) might receive a score closer to 70% or worse. 

The easiest commitments are always likely to go first.  The tougher parts of integration dealing with the more sensitive items are most likely to appear in the blueprint at the end of the process.  Hence, under whatever system members might have devised to address implementation challenges for the AEC, progress towards the end was likely to slow down.

In the years since the last publication of scorecard results, officials and other stakeholders have had discussions about revising the system.  But given the extreme unwillingness of participants to have anything that might appear to be bad news or backsliding on commitments, members appear to have decided to abandon the entire scorecard exercise.  The lack of an actual scorecard now makes repeated references in 2015 to the scorecard and blueprints so strange to hear this week in Malaysia. 

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

Dairy Highlights Challenges to TPP Closure

The Trans-Pacific Partnership (TPP) negotiations did not close in Hawaii last month partly due to disagreements over dairy access.  Why did bargaining across 12 countries get so bogged down over milk and cheese market access?  What does the dairy dispute tell us about problems ahead?

Agriculture has historically been protected more than industrial goods, since nearly every country has particularly sensitivities around farming, farmers, and food.  The global trade regime under the GATT/WTO has made only modest inroads into agricultural trade so far, mostly by limiting tariffs in some sectors. 

The protection of agriculture has continued in various free trade agreements (FTAs) signed between WTO members, as Jo-Ann Crawford demonstrated by looking at 162 tariff schedules.  The countries in the sample varied in the extent of market liberalization for agricultural goods; however, overall, agricultural commitments made in trade agreements regularly omitted or excluded tariff lines.  The most frequent products carved out of FTAs include sugar (HS Chapter 17), miscellaneous edible preparations like coffee and tea (Chapter 21), beverages (Chapter 22), cereals (Chapter 10), dairy (Chapter 4), and meat (Chapter 2). 

This strategy for handling sensitive agricultural sectors—by simply excluding the items from market liberalization at all—was not supposed to take place in the TPP.  From the earliest days of discussions, officials took pains to announce that the TPP would contain “no exceptions.” 

Hence, even tough issues like dairy, sugar, meat and cereals (like rice and wheat) have had to be on the table for negotiations.  It will perhaps not surprise anyone to learn that these sectors, however, have been some of the very last items to be dealt with in the TPP. 

Canada apparently did not put forward an offer on dairy until just days ahead of Hawaii.  The original offer appears to have been a liquid milk equivalent tariff quota for all dairy products.  This gets rather complicated, but in short it meant that the partners could have access to a certain portion of Canada’s dairy market at lower tariff rates.  Once the quantitative cap was filled, everything after that would be charged (much) higher tariff rates.

Under a liquid milk equivalent scheme, all products made with milk, including cheeses, butter and all sorts of milk items would be interchangeable—in other words, partners could ship whatever form of dairy added up to the equivalent amount of liquid milk at lower tariffs up to the filling of the cap.  It could be that the entire cap could be filled with butter, leaving no room for cheese exporters, or the reverse. 

This is a deeply problematic outcome, however, for dairy exporters, as it is extremely difficult to determine what sort of outcomes farmers might receive in practice.  Quota systems are widely used in dairy and can sometimes be completely filled within a matter of weeks.  A sort of “blanket” quota would be even harder to judge since there could be no way to determine what portion of the quota other member countries might be able to fill or when.

Canada’s revised offer appears to have split up quotas for major subsectors of dairy.  This is an improvement, but still remains problematic.

The reason for Canadian delay in offering anything at all on dairy relates to specific domestic challenges.  Canada has a long-standing set of policies in place for dairy (and poultry) to protect the market against encroachment by (mostly) American dairy farmers. 

Under supply-management, the government has sheltered the dairy sector behind extremely high tariff walls (more than 300 percent, in some cases) and limited import quotas.  The system also includes complicated marketing boards that determine domestic prices, and controls on supply through the use of quotas per farmer for production. 

The net results of this system are a lucrative source of revenue for dairy farmers and extremely high dairy prices for Canadian consumers.  Efforts to dismantle or dramatically revise the system in the past have been complicated by the fact that the bulk of the 13,000 dairy farms in Canada are geographically concentrated in two important voting provinces.  While consumers would presumably benefit from cheaper products, like consumers worldwide, the average Canadian is not likely to rise up and lobby hard in favor of reduced dairy and poultry prices. 

Despite the soaring rhetoric of the TPP as a new kind of trade agreement better suited to the 21st century, dairy reforms in Canada will likely remain grounded firmly in the past.  Whatever happens, reform is likely to be limited, with changes to dairy phased in slowly over long time horizons.

Canada is not the only country, of course, with complex systems of support in place for dairy production.  Japan’s butter market follows a similar pattern—the government controls import volumes and prices and uses high tariff walls.  The result is that Japanese consumers pay more than triple the international price for butter and even experience shortages.

Like in Canada, however, consumers are not carrying protest signs around the trade ministry begging for lower butter prices. 

In the absence of visible support from consumers, officials are mostly getting an earful now from potentially disadvantaged firms.  It might be expected that industries that rely on dairy as an input, including all sorts of food manufacturers, bakeries, restaurants, and so forth would be working hard to convince governments that cheaper products could also be beneficial.  While some of this is undoubtedly taking place, their efforts are likely modest. 

Even firms that could be clear winners can be withholding visible support.  Many argue that, in the absence of a text that clearly lays out the extent and scope of changes that are coming, they cannot say anything at all. 

But once the agreement is finished and revealed, whatever (likely modest) changes are included for dairy are likely to provoke backlash from entrenched interests that benefit from current schemes.  Expect to hear loud calls for maintaining systems that “benefit small, family farms” and “produce high quality, safe food products” and “ensure adequate domestic supplies of dairy and dairy products.” 

Such complaints will be made even though: domestic farms remain set to continue to dominate markets; many farms could carve out an advantage in exporting; TPP products are of similar or equal quality; and supplies of products like butter, milk powder and cheeses are likely to increase.

Groups that feel under threat will not likely sit quietly.  Simply having the text available will not settle the issues.  

In the face of what can appear to be overwhelming support for the status quo, officials and political leaders can go wobbly.  They can backtrack on commitments for market opening and threaten to undo or torpedo the entire deal. 

A similar scenario will happen in various other sectors of agriculture and elsewhere.  Revealing the specifics of the compromises made in each of the 12 member countries is likely to set off vigorous debates.  Firms and industries that have decided to sit on the sidelines until the text is released may be joining the battle much too late. 

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