TPP: Overview and Current Status

TPP: Overview and Current Status

Updated March 9, 2018
TPP: Overview and Current Status
What is it? The Trans-Pacific Partnership (TPP) was a
initiative that includes China and seven TPP countries, but
proposed free trade agreement (FTA), signed by 12 Asia-
not the United States. The European Union is also
Pacific countries on February 4, 2016, after 8 years of
negotiating FTAs with a number of Asian countries,
negotiation. In January 2017, the United States notified the
including Japan and Vietnam. To the extent these
other TPP signatories that it would not ratify the agreement,
agreements take a different approach on issues such as the
effectively ending TPP’s potential entry into force as
level of liberalization, intellectual property rights, labor and
written. On March 8, 2018, the remaining 11 TPP parties
environment commitments, and new rules like state-owned
signed the new Comprehensive and Progressive Agreement
enterprises and e-commerce, they could result in provisions
on Trans-Pacific Partnership (CPTPP). CPTPP would
favoring the parties involved and not the United States.
essentially bring a slightly modified TPP into effect among
They could also put U.S. exporters at a competitive
the 11 remaining TPP signatories. The new agreement
disadvantage as these agreements lower market access
would freeze a limited number of provisions (20) that were
barriers among the participants.
included in the TPP, in part, at U.S. insistence. These
Stakeholders Views on U.S. Withdrawal. Supporters of
suspended provisions, which include commitments on
withdrawal opposed TPP over concerns it would increase
investment and intellectual property rights, could
U.S. imports, lead to job losses, and cede U.S. sovereignty.
potentially be reinstated were the United States to consider
Opponents argue that U.S. withdrawal has lessened U.S.
rejoining the agreement.
influence and U.S. firms’ competitiveness in the region,
TPP aimed to reduce and eliminate tariff and nontariff
given other countries, particularly China, greater influence
barriers on goods, services, and agriculture. It would have
in establishing regional trade rules, and removed incentives
established trade rules and disciplines that expanded on
for reforms in TPP countries, such as Vietnam, as well as
commitments at the World Trade Organization (WTO) and
possible future participants. Many also argue withdrawal
addressed new issues. The U.S. withdrawal has economic
signals declining U.S. political and economic engagement
and foreign policy implications for the United States, and
in the region in the face of China’s rise and increasing
raises potential strategic issues regarding U.S. trade policy
challenges to the U.S.-led, rules-based trading system.
and broader regional engagement.
Figure 1. 2016 TPP and U.S. Country Demographics
Withdrawal and U.S. Next Steps. President Trump’s
withdrawal from TPP upheld a pledge of his presidential
campaign and reflects his Administration’s view that
previously negotiated U.S. FTAs have had poor outcomes.
In August 2017, the Administration began renegotiation of
NAFTA, the largest U.S. FTA, with Canada and Mexico,
and in January 2018 started official talks with South Korea
on potential modifications to the U.S.-South Korea
(KORUS) FTA. Both NAFTA countries were signatories to
the TPP, which would have essentially modified the
decades-old agreement. The Administration’s stated
objectives for the NAFTA renegotiation, especially on
issues such as digital trade, intellectual property rights,
labor, and environment, significantly draw on TPP
provisions. Moving forward, the Administration intends to
negotiate bilaterally on new FTAs, and has suggested TPP
countries, particularly Japan, as among the top candidates,
in addition to the United Kingdom. More recently,
President Trump announced willingness to negotiate
collectively with the five TPP countries that are not
currently U.S. FTA partners (Figure 1) and to consider
rejoining a revised TPP agreement. To date, no TPP
countries have formally expressed interest in a bilateral
negotiation with the United States, possibly a reflection of
the contentious tenor of the NAFTA and KORUS talks.
Other Countries’ FTA Negotiations. The remaining TPP

signatories are pursuing various trade initiatives beyond the
Source: IMF World Economic Outlook, April 2017. CRS graphic.
CPTPP, including both bilateral trade agreements and other
Key Provisions
regional pacts. Key among the regional agreements is the
The TPP, as originally signed by the United States,
Regional Comprehensive Economic Partnership (RCEP), an
included 30 separate chapters. Some of its provisions could
Association of Southeast Asian Nations (ASEAN)-led
https://crsreports.congress.gov

TPP: Overview and Current Status
serve as a starting point for future U.S. trade negotiations.
Worker Rights. Would require countries to adopt and not
TPP without the CPTPP modifications, would have had the
derogate from laws consistent with core ILO Principles on
following potential outcomes:
freedom of association and elimination of forced labor,
child labor and employment discrimination in matters
Agriculture. Would reduce and eliminate tariff and
related to trade and investment. Includes specific
nontariff barriers on agriculture products and address the
implementation plans for Brunei, Malaysia, and Vietnam.
resolution of disputes regarding sanitary and phytosanitary
standards (SPS). Tariff and quota protections would remain
Environment. Would require countries to enforce and not
on some sensitive products.
derogate from their environmental laws to attract trade and
investment, implement specified multilateral environmental
Autos. Would require eventual elimination of auto and auto
agreements (MEA) they have joined, and prohibit certain
parts tariffs, including U.S. 2.5% auto and 25% truck tariffs
fishing subsidies, among other provisions.
over 25 and 30 years. Special provisions would target U.S.-
Japan trade, requiring Japan to address nontariff barriers
Rules of Origin (ROOs). Would determine whether goods
relating to transparency and distribution, among others.
originate within TPP and are eligible for TPP benefits.
Would establish a yarn-forward ROO for textile and apparel
Currency. Would affirm commitments to transparency and
products with exemptions based on a short-supply list, and
against competitive devaluations through a joint
45%-55% regional value content ROO for autos and 35%-
declaration, not subject to dispute settlement.
45% for auto parts, depending on the calculation method.
E-Commerce/Digital Trade. Would require free flow of
Services. Would provide core obligations of national
data across borders, with exceptions for public policy
treatment, most-favored nation treatment, market access,
interest regulations and (like all provisions) national
and local presence on a negative list basis applicable to all
security considerations. Would prohibit requirements to
cross-border services sectors, except those explicitly
localize computing facilities or share source code to gain
excepted as NCMs. Includes separate provisions for
market entry, prohibit duties on digital products, and
financial services, with added sector-specific exemptions.
require privacy regimes. Financial services are excluded
from the e-commerce chapter, including forced localization
State-Owned Enterprises (SOEs). Includes, with
commitments, but are covered by a separate sector-specific
exceptions, enforceable disciplines on SOEs principally
data flows provision.
engaged in commercial activities. Provisions would require
purchases and sales be made on the basis of commercial
Government Procurement. Would require transparent,
considerations, impartial enforcement of regulations, and
nondiscriminatory treatment toward domestic and foreign
restriction of noncommercial assistance (subsidies).
firms in purchasing decisions by the U.S. government at the
federal level above certain thresholds. Would open
“[T]he United States is prepared to negotiate...trade
procurement markets of Brunei, Malaysia, and Vietnam to
agreements...[including] the countries in
TPP countries for the first time.
TPP...individually, or perhaps as a group.”
Goods Tariffs. Would immediately eliminate most tariffs
President Trump, January 26, 2018
among TPP countries. U.S. tariff commitments were made
on a bilateral basis, and are most significant for countries
Issues for Congress
without an existing U.S. FTA (Brunei, Japan, Malaysia,
U.S. TPP withdrawal signals a shift in U.S. trade policy and
New Zealand, and Vietnam). Once fully implemented, on
raises questions for Congress as it works with the Trump
average, 98% and 99% of tariff lines would be duty free for
Administration on trade agreement negotiations and trade
U.S. exports and imports, respectively, with these countries.
policy priorities. The notification and consultation
Intellectual Property Rights (IPR). Would protect patents,
requirements and U.S. negotiating objectives in the 2015
copyrights, trademarks, and include new disciplines on
Trade Promotion Authority (TPA) legislation continue to
trade secrets to combat cyber-theft. Would phase in
guide this process. Key questions for consideration include:
additional patent protections for medicines for developing
 What role should FTAs have in U.S. trade policy and
countries and include for biologics an eight-year data
how should the United States prioritize potential future
exclusivity, or alternatively, at least five years with possible
bilateral partners?
additional measures that could “deliver a comparable
market outcome.”

Would prohibit circumvention of
What aspects of TPP should be incorporated in new or
technological protection measures and require adoption of
renegotiated U.S. FTAs? What needs changing?
“notice and takedown” provisions to address Internet
 How do other countries’ FTAs affect U.S. firms’
service provider liability.
competitiveness abroad, and what is the best response?
 How important is U.S. leadership in establishing trade
Investment. Would remove barriers and provide protections
rules in the Asia-Pacific and globally?
for foreign investors in TPP countries, including non-

discriminatory and minimum standards of treatment, though
What are the costs and benefits of a bilateral versus
each country has exempted some sectors or practices
multi-party approach to U.S. trade negotiations?
through non-conforming measures (NCMs). Includes an
investor-state dispute settlement (ISDS) mechanism with
Brock R. Williams,
modifications aimed at ensuring each country’s right to
Ian F. Fergusson,
regulate, and would allow countries to block challenges of
IF10000
tobacco control measures under ISDS.

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TPP: Overview and Current Status

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