The Trans-Pacific Partnership (TPP) currently under negotiation in the Asia Pacific region may drastically change the structure and function of the governance of global trade and investment. Below, Junji Nakagawa argues that the 21st century global economy needs fundamental reform of its governance structure, and suggests that what is needed is an insight into the changing patterns of global economy, and an innovative and evolutionary approach to reinvigorate the existing institutions for global economic governance.
The TPP (Trans-Pacific Partnership), a free trade agreement (FTA) currently under negotiation among 12 countries in the Asia Pacific region, may drastically change the structure and function of the governance of global trade and investment, for the following two reasons.
First, the negotiating countries of the TPP, notably the US, are aiming at concluding a “21st century model of an FTA”, with a high level of trade and investment liberalisation and a set of high level standards on a broad range of economic regulations, thus establishing an optimal regulatory/institutional framework for servicing the pressing needs of firms expanding their business through global value chains (GVCs). Secondly, as several mega-FTAs are under negotiation, and the TPP is most likely the first one to be concluded, the rules and liberalisation commitments of the TPP may become de facto global standards, by its reference in the negotiation of other mega-FTAs, such as TTIP (Transatlantic Trade and Investment Partnership), Japan-EU EPA (Economic Partnership Agreement) and RCEP (East Asian Regional Comprehensive Agreement). Let me elaborate further on these.
When the US decided to join the negotiation of the TPP in December 2009, the then US Trade Representative Ronald Kirk, in his letters to the leaders of the US Congress notifying that decision, stated that US’s goal was “to shape an eventual Trans-Pacific Partnership Agreement that is a new kind of trade agreement for the 21st century”, with ambitious trade and investment liberalisation and high-level rules on a broad range of economic regulation. Why, then, was the TPP meant to become a 21st century model of an FTA?