The US, Japan and 10 other Pacific Rim nations have struck the largest trade pact in two decades, in a huge strategic and political victory for US president Barack Obama and Japanese prime minister Shinzo Abe.
The Trans-Pacific Partnership covers 40 per cent of the global economy and will create a Pacific economic bloc with reduced trade barriers to the flow of everything from beef and dairy products to textiles and data, and with new standards and rules for investment, the environment and labour.
The deal represents the economic backbone of the Obama administration’s “pivot” to Asia, which is designed to counter the rise of China in the Pacific and beyond. It is also a key component of the “third arrow” of economic reforms that Mr Abe has been trying to push in Japan since taking office in 2012.
But the TPP must still be signed formally by the leaders of each country and ratified by their legislatures – where support for the deal is not universal.
In the US, Mr Obama will face a tough fight to get it through congress next year, especially as presidential candidates such as the Republican frontrunner Donald Trump have argued against it.
It is also likely to face opposition in Australia and Canada, where the TPP has been one of the main points of debate ahead of an October 19th election.
Critics around the world see it as a deal negotiated in secret and biased towards corporations.
But Mr Obama spoke forcefully yesterday for the benefits he said it would bring. “When more than 95 per cent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy. We should write those rules,” the president said.
The deal represents another big win for Mr Obama, coming just one month after the US and its European negotiating partners reached an accord to prevent Iran developing a nuclear weapon.
Mr Abe said the deal was a “major outcome not just for Japan but also for the future of the Asia-Pacific”.
After five years of negotiations, the final talks in Atlanta went round the clock for six days as officials thrashed out the remaining sticking points. The final breakthrough on dairy products did not come until 5am on Monday.
Many of the negotiations, particularly in the final stage, have been focused on traditional trade issues and the flows of products such as butter and car parts. In Japan, for example, it will cause the eventual reduction of tariffs on beef imports to about 9 per cent from more than 30 per cent currently.
But much of the TPP is intended to break new ground and establish rules for 21st century commerce.
The conclusion of the TPP puts pressure on the EU to conclude its own negotiations for a Transatlantic Trade and Investment Partnership with the US before Mr Obama leaves office in 15 months.
Copyright The Financial Times Limited 2015
