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Pacific Rim Countries Move Closer to TPP Deal Without U.S.

11 Nov 2017 9:05 am
By Ben Otto in Da Nang, Vietnam and Paul Vieira in Ottawa, Canada 

DA NANG, Vietnam--Eleven Pacific-Rim nations said on Saturday that they had made significant progress toward reaching a major trade pact 10 months after President Donald Trump withdrew the U.S., but disagreements from Canada prevented a final deal.

Trade ministers said they had agreed on "core elements" of a revised version of the Trans-Pacific Partnership without America, a deal that still brings together Japan, Mexico and Australia and a host of other countries with a combined GDP of more than $10 trillion.

An agreement would be a win for countries advocating a multilateral trading order at a time when Mr. Trump is pushing for bilateral deals and protectionism is rising globally. It would also provide a counterweight to rising Chinese influence in Asia and give the participants greater bargaining power in seeking other trade deals. Trade experts say that even without the U.S., the income gains could total more than $150 billion annually for members. Negotiators say they have left the door open for the U.S. to re-enter the pact at a later date, if desired.

The effort to salvage the TPP has been the most-watched event at this year's Asia-Pacific Economic Cooperation summit, an annual gathering of leaders from 21 nations including the U.S., China and Japan. The announcement comes a day after Mr. Trump gave a speech outlining U.S. rejection of a multilateral trade order and pushing for bilateral deals.

The inability to complete the deal at the weekend's APEC summit was a lesser outcome than nations such as Japan had hoped after months of talks. Japan had taken over as a driving force behind the negotiations after Mr. Trump pulled the U.S. out of the pact in his first days in office.

Ministers gathered in the seaside city of Da Nang said they agreed to suspend 20 provisions of the original deal reached with the U.S. under the Obama administration, which had championed it, in February 2016. Disagreements among the remaining 11 countries continue over rules for state-owned enterprises, dispute settlement and cultural exceptions, among others. Ministers didn't set a timetable for completion.

Canadian Trade Minister François-Philippe Champagne confirmed Saturday that the automotive sector and cultural exemptions were among the sticking points. "What we have achieved is progress, but we also identified what work needs to be done," he said.

Canada surprised negotiators twice during the closing stages of the talks this week. Ministers said they had a deal late Thursday night, only for Mr. Champagne to object shortly afterward in a tweet.

The next day, Japan gathered leaders at a hotel with hopes of reaching a deal. Instead, Canadian Prime Minister Justin Trudeau was a no-show, leaving Japanese Prime Minister Shinzo Abe to break up a meeting where leaders had been waiting around a table, participants said. Canada attributed Mr. Trudeau's absence to a scheduling misunderstanding.

A person briefed on the discussions said Canada was concerned that the new TPP would disrupt the North American supply-chain apparatus, in particular as it applies to automotives. The Canadian Vehicle Manufacturers' Association on Friday lauded Ottawa for not rushing into a deal, with the group's president, Mark Nantais, saying the TPP first needed to "address export market access issues to the Asia-Pacific marketplace."

The TPP, as originally designed with the U.S., would have become the world's largest trading bloc, accounting for more than a quarter of global trade.

Without the U.S., trade experts say, the pact remains significant and offers a counterweight to China's growing influence through its "One Belt, One Road" initiative.

Researchers from the Peterson Institute for International Economics, a Washington-based think tank that favors free trade, said the pact could generate income gains of $157 billion annually for its members by 2030, "mainly by increasing trade in machinery and agricultural products as well as through higher levels of investment."

If the pact were to expand to include five nations that have expressed interest in joining--Indonesia, South Korea, the Philippines, Thailand and Taiwan--those gains could rise to $486 billion annually, Peterson researchers said, exceeding the potential value of the original deal with the U.S.

"The TPP-11 will be good for the multilateral trading system, for the incomes of member countries and for their bargaining positions against China and the United States," said Peter Petri, a professor of international finance at Brandeis University and a visiting fellow at Peterson.

Trade experts pointed to the deal as a hopeful sign to thwart a rising tide of global protectionism. On Friday, Mr. Trump gave a speech in Da Nang that laid out a vision of redefined American economic engagement with Asia built on bilateral trade deals.

APEC has long pushed for increasing regional integration through a host of multilateral trade deals, but U.S. trade officials have recently sought to change the forum's focus, people with knowledge of meetings said. In meetings this week, the U.S. objected to customary references to opposing protectionism and supporting a multilateral trading system, they said.

Such objections delayed a normally routine statement by ministers here for two days. When it was released early Saturday, it was devoid of support for a multilateral trading order and had watered-down language against protectionism.

Natasha Khan in Da Nang contributed to this article.

Write to Ben Otto at ben.otto@wsj.com and Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

November 11, 2017 04:05 ET (09:05 GMT)

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