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TPP 11 deal came down to convincing Canada

Exactly a year after President Donald Trump declared the United States would pull out of the Trans-Pacific Partnership (TPP) free trade pact, the remaining 11 countries agreed during Jan. 23 talks in Tokyo to sign the deal in March this year.

Shorn of the enormous U.S. market, this time last year the TPP was looking death in the face. However, the pact was brought back from the brink through months of Japan-led negotiation. All the parties to the treaty -- now officially called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) but often referred to as simply TPP 11 -- have at least one interest in common: fending off pressure from the Trump administration and its "America First" trade policy.

On Jan. 5 this year, Prime Minister Shinzo Abe spoke with Mexican President Ernesto Pena Nieto about the pact. The core of the phone conversation was that Canada needed convincing to sign onto the TPP 11, and Pena Nieto would do the talking. This was the moment that apparently got the negotiations back in motion, after being stuck in neutral since November last year.

The TPP 11 countries -- Japan, Canada, Mexico, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam -- struck a "core elements" agreement that month on the sidelines of the APEC summit in Danang, Vietnam. However, Canada, the second-largest economy in the nascent pact, had since become the biggest obstacle to finalizing the deal. For one, it was demanding strengthened restrictions on airing foreign films -- a measure to help protect French-Canadian culture.

This was an aberration from the negotiating principle the TPP 11 nations had followed until then, which was to make as few changes as possible to the original TPP pact until the U.S.'s hoped-for return to the deal. What Canada wanted was instead a fundamental alteration.

Canada had already refused to sign an agreement at Danang, presenting some eleventh-hour demands just before a leaders' summit originally called to announce a deal -- a meeting Canadian Prime Minister Justin Trudeau failed to show up for. Later, he stated that his country "will not be rushed into a deal that is not in the best interests of Canada and of Canadians."

With this in mind, one Japanese negotiator said that they "have no intention of entertaining selfish concerns," raising the prospect of a TPP 10, without a recalcitrant Canada. However, according to a senior Foreign Ministry official, inside the Japanese government there were deep fears the TPP would lose vital momentum if Canada dropped out. And so a plan was devised to get all the other pact participants on-side and "surround" Canada, hopefully forcing Trudeau to make concessions.

To build this consensus, resolution was sought on some of the four major areas still under negotiation after Danang. For one, a treaty section on reform of domestic preference for Malaysia's state oil firm and Brunei's state coal company was frozen. Furthermore, Japan's economic revitalization minister Toshimitsu Motegi shuttled between Mexico and Vietnam to help resolve Mexico's opposition to a "grace period" Hanoi had demanded for implementing labor dispute resolution rules.

However, the truly deciding factor was Mexico's cooperation in convincing Canada, according to one treaty negotiator.

The Trudeau government was concerned that if Canada appeared overly malleable in TPP 11 talks, then the U.S. would press its northern neighbor for extensive concessions in the ongoing renegotiation of the North American Free Trade Agreement (NAFTA) among Mexico, Canada and the U.S. The Pena Nieto administration reassured Canada that in the trilateral NAFTA talks, Mexico would not grant any concessions that went beyond the terms of the TPP 11. In other words, Mexico confirmed that it would confront U.S. trade pressure arm-in-arm with Ottawa, paving the way for Canadian compromise on the trans-Pacific pact.

If and when the TPP 11 goes into effect, Japan will reduce tariffs on 95 percent of imports, while the other TPP 11 members will do so on 99-100 percent of imports. Canada will eliminate its 6.1 percent tariff on automobiles in the fifth year of the pact, and a 6-percent tariff on just under 90 percent of auto parts immediately. This latter measure will help Japanese carmakers with large manufacturing bases in Canada and Mexico to reduce export costs.

The TPP 11 also contains provisions on intellectual property protections and loosening international investment rules, among other areas where developing nations lag behind their richer TPP partners.

The Japanese government projects the TPP 11 will energize the country's investment and service sectors, boosting Japan's GDP by about 8 trillion yen (approx. $72.8 billion) and creating some 460,000 jobs.

The trade agreement will be Japan's first with Canada and New Zealand.

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