Update On TPP Negotiations

by King & Spalding

The countries negotiating the Trans-Pacific Partnership ("TPP") concluded the 18th round of negotiations on July 25 and left Kota Kinabalu, Malaysia with a full schedule of TPP-related activity in the run up to the 19th round of negotiations in Brunei on August 22-30. Much of the activity (including ministerial level meetings, inter-sessional negotiations, bilateral discussions, and domestic consultations) is precipitated by Japan's having joined the negotiations for the first time in the last two days of the 18th round and by the current commitment of the TPP countries to complete the negotiations by the end of this year. The TPP countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam.

Going into the 18th round, negotiators reportedly had indicated that 14 of 29 chapters were "substantially concluded." Some working groups did not meet in Malaysia and were awaiting political-level guidance to finalize the text. In order to meet the commitment to conclude the agreement by the end of the year, negotiators have been directed to attempt to substantially close all technical-level work on the remaining chapters before or at the next round in Brunei. The TPP countries will then seek to resolve the remaining issues through political-level involvement. To that end, several working groups have held inter-sessional meetings to advance technical agreement on their respective chapter texts. Additionally, all TPP countries are expected to complete their offers on market access for goods before or during the 19th round.

Given that the 19th round overlaps with the August 20-24 Association of Southeast Asian Nations ("ASEAN") ministerial meeting in Brunei, the 19th round represents an excellent opportunity for trade ministers to provide needed political input to aid progress toward completion of the text. One U.S. proposal that has been facing increasing opposition from other TPP countries and will likely require political guidance is a proposal to require that countries provide for effective and stiff criminal penalties as a sanction for cyber theft and other forms of trade secret misappropriation. The U.S. Chamber of Commerce is coordinating the push for stronger sanctions, but acknowledges the difficulty of securing commitments on criminal law enforcement in the context of a trade agreement.

Japan got its first look at the full negotiating text on July 23. Consequently, Japan's participation in the 18th round was largely limited to listening in on the discussions in those negotiating groups still meeting during the last two days of the round and receiving updates on the status of negotiations. Japanese negotiators and staff reportedly held two "retreats" (August 3-6 and 13-15) in order to formulate the Japanese negotiating positions for the 19th round.

On a separate track, the United States and Japan held their first round of bilateral discussions aimed at resolving several longstanding trade issues, including automotive trade barriers and non-tariff measures relating to standards, intellectual property rights, government procurement, transparency, and competition policy, in parallel to the TPP talks. These discussions were preliminary in nature, discussing a framework for addressing the issues and exchanging views on issues covered by the terms of reference. The United States and Japan expect the outcome of the discussions on automotive trade barriers to be incorporated into TPP agreement itself as part of Japan's market access commitments. The outcome of the discussions on non-tariff measures will likely take the form of separate commitments to be implemented before the TPP enters into force.

With respect to the U.S.-Japan bilateral discussions on automotive trade barriers, U.S. Rep. Sander Levin, Ranking Member of the House Ways and Means Committee, proposed that the United States should condition any further opening of the U.S. auto and auto parts markets on the opening of Japan's markets. The proposal ties any reductions in U.S. automotive tariffs to certain benchmarks in import penetration rates into Japan. Levin's proposal also seeks disciplines on exchange rates aimed at addressing currency manipulation as a barrier to trade.

Joseph Laroski

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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