Auto Rules of Origin Could Be Obstacle to US Rejoining TPP

Asia Society Policy Institute Vice President Wendy Cutler wrote, “The case for U.S. participation in the TPP has only become more compelling as the political and economic importance of the Asia-Pacific region has grown and concerns about Beijing’s economic model have mounted. East Asia is bouncing back from the COVID-19 pandemic before the rest of the world, and deepening economic ties with the engines of global growth will be an even more valuable proposition in the midst of a deep recession.”

Joe Biden's presidential campaign has said he's not interested in negotiating any trade agreements until more work has been done to invest in the health of the domestic economy.

Rep. Rick Larsen, D-Wash., a leading advocate of free trade in the Democratic caucus, told Cutler “I’m totally the wrong guy to ask” if there is appetite for rejoining the TPP. Larsen was in a minority that supported ratifying the TPP. He said that the U.S. will not be able to get all 22 provisions that were in the TPP but other countries dropped once the U.S. withdrew in 2017. He said the U.S. might be able to get five or 11 of those provisions.

Chan Heng Chee, ambassador-at-large with the Singapore Foreign Ministry, suggested that the countries in the CPTPP -- only seven of the 11 have ratified it -- are not open to any of those provisions returning. Chan said, “The countries would like to see the United States come back, but not at any price.” She said they don't want the U.S. to make “very substantial demands again.”

“It’s really quite a big lift if you ask us to take on new provisions,” she added during the webinar.

Australia, Canada, Japan, Mexico, New Zealand, Singapore and Vietnam are the countries that have ratified CPTPP. Chan said of Chile, Peru, Malaysia and Brunei, the members that have not ratified, that their politicians' attitudes could be: “If the United States is not in, what’s the hurry?”

Cutler wrote that, “Returning to the original TPP by signing on to a five-year-old agreement that faced considerable opposition at home is not a realistic proposition in 2021. The approach with the best odds of success would likely fall between formal CPTPP accession and a more extensive renegotiation.”

She suggested that if the politics at home or abroad don't line up for fewer demands from the U.S. and more willingness for CPTPP members to make changes, perhaps narrower sectoral deals could be made with Japan, Vietnam, Australia and other member countries. She suggested that digital trade (where Japan, Canada, Mexico and the U.S. already have agreements), trade in medical products or trade in environmental goods could be areas to negotiate.

Australian Ambassador to the U.S. Arthur Sinodinos said during the webinar that the more demands the U.S. has, the harder it will be to get a deal done, and said that the Japanese may not want the U.S. back in if the U.S. wants tighter auto rules of origin than were in the TPP.

Cutler said that even negotiating the auto rules of origin that made it into TPP -- which were weaker than NAFTA and substantially weaker than the USMCA -- was “a tough slog,” and she said they would clearly need to be revisited for the U.S. to join.

Cutler interviewed a dozen officials in CPTPP countries about how they view a return of the U.S., and whether they would accept elements of the USMCA in a revised TPP. They said they didn't like the stronger auto rules of origin, the tougher labor enforcement standards and the prohibition on trade agreements with nonmarket economies.

Larsen said he laughed when he saw that TPP countries wanted the trade liberalization aspects of the USMCA but not the labor standards and auto rules of origin planks, which were what got Democratic votes for the treaty.

“I always say trade is not religion, it’s politics,” he said. The votes were not there in Congress for the TPP, he reminded listeners.