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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 252 May 20, 2019
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Marion A. Creach ([log in to unmask])
*Will the United States **join the Trans-Pacific Partnership, the
Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or
neither**?*
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* <#m_1396484195786858194__edn1>
by
Adam Douglas** <#m_1396484195786858194__edn2>
The Trans-Pacific Partnership (TPP) was signed by all twelve negotiating
parties[1] <#m_1396484195786858194__edn3> on February 4, 2016. To come into
force, it requires ratification by at least six of the original
signatories, which together account for at least 85% of the combined GDP of
the original signatories in 2013. To date, only two countries have ratified
the TPP: Japan and New Zealand. Because of the GDP requirement, the TPP
cannot come into force without US ratification.
On January 30, 2017, the US informed TPP signatories that it “does not
intend to become a party to the Trans-Pacific Partnership Agreement” and
that “it has no legal obligations arising from its signature.”[2]
<#m_1396484195786858194__edn4> This did not, however, doom the agreement;
the eleven remaining signatories agreed on the Comprehensive and
Progressive Agreement for Trans-Pacific Partnership (CPTPP), which came
into force on December 30, 2018. The CPTPP incorporates by reference the
entire TPP agreement, with the exception of twenty-two provisions, many of
which US negotiators had insisted on but were unpopular with the other TPP
signatories, including provisions that would allow US investors to initiate
claims for breaches of investment agreements and authorizations. These
provisions would have established a high degree of protection for US
investors, but they were opposed by states that would be subject to
additional legal risk.
On April 13, 2018, President Trump unexpectedly instructed administration
officials to examine the possibility of “re-joining” the TPP.[3]
<#m_1396484195786858194__edn5> This is unlikely in the near future, given
the Trump administration’s opposition to the agreement in its current form.
But if the US ratified the existing text, the TPP would need only three
additional ratifications to come into force, including one from either
Australia, Canada or Mexico, due to the GDP requirement. Other signatories
would be incentivized to follow the US and ratify the TPP to secure better
access to the US market. Moreover, under the TPP’s terms, the first six
original ratifying signatories receive certain benefits, such as the
authority to determine whether other countries can join TPP.[4]
<#m_1396484195786858194__edn6> US ratification could thus instigate a race
among signatories to ratify TPP to qualify as one of the six.
Alternatively, the US could seek to join the CPTPP. This option becomes
more likely the longer CPTPP is in force as it will progressively
liberalize trade flows among countries, while TPP commitments become dated.
However, CPTPP accession is “subject to such terms and conditions as may be
agreed between the Parties and that State,”[5]
<#m_1396484195786858194__edn7> and the TPP provisions that are suspended in
the CPTPP, including those that establish a high degree of protection for
US investors, can only subsequently be unsuspended with unanimous consent.
[6] <#m_1396484195786858194__edn8> Therefore, the CPTPP parties may allow
the US to accede, but not without negotiation—and the US is unlikely to get
any special treatment if it wanted to join, including with respect to the
suspended provisions. Thus, to re-engage in negotiations, the US would have
to weigh the value of the suspended TPP provisions against access to
liberalized trade flows under CPTPP. If the US places a high value on the
suspended provisions, it could ratify the TPP in the hope of incentivizing
others to follow suit. Otherwise, it will be required to negotiate with the
CPTPP parties.
Given the Trump administration’s opposition to multilateral, rather than
bilateral, trade agreements, ratification of either the TPP or the CPTPP is
unlikely in the near future. However, the administration has been
criticized for forfeiting US influence in the Pacific Rim and for allowing
China to fill in the void with its plans for a Regional Comprehensive
Economic Partnership and its Belt and Road initiative. Moreover, while the
CPTPP is leaner than the original accord (without the US, it covers roughly
15% of the global economy, rather than 40% under the TPP), the revised pact
is open to new members; economies such as Indonesia, the Philippines, the
Republic of Korea, Taiwan, Thailand, and the UK have stated publicly that
they are considering joining the CPTPP. An open agreement has the potential
to create trade benefits higher than a TPP with the US on board. The US
may, therefore, seek to re-enter negotiations down the road to access these
benefits and secure influence in the region.
------------------------------
* <#m_1396484195786858194__ednref1> *The Columbia FDI Perspectives are a
forum for public debate. The views expressed by the author(s) do not
reflect the opinions of CCSI or Columbia University or our partners and
supporters. Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed
series.*
** <#m_1396484195786858194__ednref2> Adam Douglas (
[log in to unmask]) is counsel at Global Affairs Canada in
its Trade Law office. The opinions contained in this *Perspective *are
those of the author, not those of the Government of Canada. The author is
grateful to Orlando Cabrera, Shotaro Hamamoto and Mark Kantor for their
helpful peer reviews.
[1] <#m_1396484195786858194__ednref3> Australia, Brunei, Canada, Chile,
Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam.
[2] <#m_1396484195786858194__ednref4> USTR, Letter to the Trans-Pacific
Partnership Depositary, January 30, 2017.
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[3] <#m_1396484195786858194__ednref5> Jennifer Rubin, “Some people say it
would be the greatest flip-flop ever,” *The Washington Post*, Apr. 13, 2018.
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As the current Trade Promotion Act has been extended to 2021, this remains
a possibility.
[4] <#m_1396484195786858194__ednref6> TPP, Article 30.5.4.
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[5] <#m_1396484195786858194__ednref7> CPTPP, Article 6.
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[6] <#m_1396484195786858194__ednref8> CPTPP, Article 2.
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*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Adam Douglas, ‘Will the United States join the
Trans-Pacific Partnership, the Comprehensive and Progressive Agreement for
Trans-Pacific Partnership, or neither?,’ Columbia FDI Perspectives,
No. 252, May 20, 2019. Reprinted with permission from the Columbia Center
on Sustainable Investment (**www.ccsi.columbia.edu*
<https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=6374fe7c6d&e=dd153d6a25>*).”
A copy should kindly be sent to the Columbia Center on Sustainable
Investment at **[log in to unmask]* <[log in to unmask]>*..*
For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Marion A. Creach, [log in to unmask]
*Most recent Columbia FDI Perspectives*
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- No. 251, Karl P. Sauvant, “Promoting sustainable FDI through
international investment agreements,” May 6, 2019
- No. 250, Qianwen Zhang, “The next generation of Chinese investment
treaties: A balanced paradigm in an era of change,” April 22, 2019
- No. 249, Andrew Kerner, “How to analyze the impact of bilateral
investment treaties on FDI,” April 8, 2019
*All previous FDI Perspectives are available at *
*http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/*
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*. *
*Other relevant CCSI news and announcements*
- CCSI is hiring two Researchers on SDG-aligned Practice in Energy and
Agribusiness Sectors. *Please see our website here
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for
more information and to apply.*
- *On May 6, 2019*, CCSI began the new semester of its free, popular
massive open online course (MOOC) on Natural Resources for Sustainable
Development: The Fundamentals of Oil, Gas and Mining Governance
<https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=eb05f1f466&e=dd153d6a25>.
Now in its sixth edition, this joint course was developed by CCSI, the
Natural Resource Governance Institute, the World Bank, and the United
Nations Sustainable Development Solutions Network and has enrolled
thousands of participants from all over the world. Click here
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enroll. Watch the trailer here
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.
- *In April 2019*, CCSI released two new Working Papers: Alternatives to
Investor-State Dispute Settlement
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and Investment Treaties, Investor-State Dispute Settlement and
Inequality
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.
Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
Ph: (212) 854-0689
Fax: (212) 854-7946
*Copyright © 2019 Columbia Center on Sustainable Investment (CCSI), All
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*Karl P. Sauvant, PhD*
*Resident Senior Fellow*
*Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
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"Promoting sustainable FDI through international investment agreements",
"Determining Quality FDI", "The State of the International Investment Law
and Policy Regime", "Towards G20 Guiding Principles on Investment
Facilitation for Sustainable Development", "Five Key Considerations for the
WTO Investment-facilitation Discussions, Going Forward", "Arriving at
Sustainable FDI Characteristics", "Putting FDI on the G20 Agenda",
"International Investment Facilitation: By Whom and for What?", "Moving the
G20's Investment Agenda Forward", "Emerging Markets and the International
Investment Law and Policy Regime", "Sustainable FDI for Sustainable
Development", "Towards an Investment Facilitation Framework: Why? What?
When?", "Beware of FDI Statistics!", "Towards an Indicative List of FDI
Sustainability Characteristics", and "The Evolving International Investment
Law and Policy Regime: Ways Forward" *are* available at
https://ssrn.com/author=2461782 and
http://www.works.bepress.com/karl_sauvant/.
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