The TPP's Contribution to Public International Law

On November 5, 2015, the full text of the Trans-Pacific Partnership (TPP),[1] a trade and investment agreement among twelve Pacific nations, was, after a long wait, officially released to the public. The TPP is expected to have a significant impact on global trade and investment, as it brings greater economic integration to a  diverse set of countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam), who together account for almost 40% of global GDP. The TPP will also play an important role in political and international relations terms, as negotiations continue towards similarly ambitious agreements, such as the Transatlantic Trade and Investment Partnership between the United States and the European Union, and the Regional Comprehensive Economic Partnership being developed by the Association of Southeast Asian Nations (ASEAN) and its partners, including China, Korea, and India.

It will take many months, if not years, to fully digest all of the TPP’s trade liberalizing and global governance features. This Insight offers a quick reaction to a narrow aspect of the TPP: how it interacts with, and further develops, public international law in general and international economic law in particular. The Insight first sets out the broader context of the TPP by considering two of its substantive aspects: liberalization of trade in goods and services, and governance. The Insight then examines the TPP's relationship with existing treaties, both trade and nontrade, in general terms and in relation to its dispute settlement provisions.

Liberalization

Despite their recent expansion in scope, trade agreements are still, at their core, about trade liberalization. Therefore, when thinking about the TPP, the first feature to discuss is its liberalization of trade in goods and services. In this regard, the TPP will reduce tariffs on a wide range of goods and open many services markets to foreign competition. Of course, many “sensitive” products have been excluded from liberalization or liberalized only slightly.[2] Overall, though, the TPP will reduce protectionist trade barriers considerably.

Importantly, the TPP continues a trend, now more than a decade old, of liberalizing on a preferential basis. Liberalization in the TPP is only for the other TPP countries. In terms of economics, this approach is less than ideal; in terms of politics, though, it may be the best available option at this time.

Governance

Beyond liberalization, the TPP advances global governance in a number of ways. It establishes new international law disciplines on state-owned enterprises; it extends prior international economic law obligations in the area of intellectual property, labor, and the environment; it contains the first stand-alone chapter on regulatory coherence; and its e-commerce provisions go beyond those of previous trade agreements. These substantive rules are very complex, and it may take some time for their impact on domestic policymaking to be revealed.

Relationship to Other Treaties

The TPP's relationship with existing international law is complicated. The TPP is part of an extensive ecosystem of hundreds of trade agreements, thousands of investment treaties, and international institutions and agreements that govern a wide and varied range of issues, including intellectual property, protection of the environment, and labor rights. New treaties may be “born into” existing international law,[3] but they grow up quickly and can replace their ancestors. The interaction of the TPP with other international agreements will be interesting to watch.

Starting at perhaps the closest level of connection between the TPP and existing treaties, the twelve countries of the TPP already have a number of free trade agreements (FTAs) with each other. The most prominent of these is the North American Free Trade Agreement (NAFTA), made up of the U.S., Canada, and Mexico, but there are many others as well. Japan has Economic Partnership Agreements (EPAs) with Australia, Brunei, Chile, Malaysia, Mexico, Peru, Singapore, and Vietnam;[4] Australia has bilateral FTAs with Chile, Japan, Malaysia, New Zealand, Singapore, and the U.S.;[5] Canada has FTAs in force with—in addition to its NAFTA partners—Chile and Peru.[6]

Recalling the two main features—liberalization and governance—how does the TPP relate to these sub-FTAs it now encompasses? With regard to liberalization, if the previous FTA had gaps, the TPP may fill them with additional liberalization. The governance rules are more complicated. At times, they may simply extend existing rules, e.g., the TPP will require a copyright term of life of the author plus seventy years,[7] whereas existing treaties that are based on the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) of the World Trade Organization (WTO) require life of the author plus only fifty years.[8] But other situations are more difficult. What happens to the labor and environment commissions developed in NAFTA? At the time they were created, they pushed the boundaries of governance in these areas. Now they look out of date.

In addition to the TPP’s relationship with these subagreements, its relationship to the supra trade agreement, the WTO, raises questions. The TPP, like all FTAs, is subject to WTO conditions on FTAs in Article XXIV of the General Agreement on Tariffs and Trade 1994 (GATT) and Article V of the General Agreement on Trade in Services (GATS). Technically, all FTAs must meet these conditions and be reviewed by the WTO’s Committee on Regional Trade Agreements. In practice, however, this committee has not been able to reach conclusions on most FTAs that have come before it, and WTO members rarely challenge each other’s compliance with the FTA exceptions.

The TPP offers some (limited) guidance on the issue of relationships in Article 1.2, entitled “Relation to Other Agreements.” The first paragraph states:

1. Recognizing the Parties’ intention for this Agreement to coexist with their existing international agreements, each Party affirms,

(a) in relation to existing international agreements to which all Parties are party, including the WTO Agreement, its existing rights and obligations with respect to each other; and

(b) in relation to existing international agreements to which that Party and at least one other Party are party, its existing rights and obligations with respect to such other Party or Parties, as the case may be.

The idea of “coexistence” seems to presume that actual conflicts with existing treaties have generally been avoided in the TPP's drafting. Just in case, however, the second paragraph then says:

2. If a Party believes that a provision of this Agreement is inconsistent with a provision of another agreement to which it and at least one other Party are party, upon request, the relevant Parties to the other agreement shall consult with a view to reaching a mutually satisfactory solution. This paragraph is without prejudice to a Party’s rights and obligations under Chapter 28 (Dispute Settlement).[9]

Dispute Settlement in the TPP

Another area of potential overlap between the TPP and international law is enforcement. With its negotiating function having such difficulties in recent years, the WTO is probably best known for its dispute settlement mechanism. Most FTAs have seen little dispute settlement activity; the TPP might offer a better functioning route for non-WTO dispute settlement.

But the TPP is missing an important feature of the WTO’s Dispute Settlement Understanding (DSU): an appellate mechanism to offer clear and consistent guidance on legal interpretations. Can TPP dispute settlement function with only a panel process? Would it be preferable to rely on WTO dispute settlement for any TPP litigation, as some have suggested for FTAs in general?[10]

If the TPP rules are to be enforced, and therefore meaningful, a problem may arise if the interpretations differ from those of the WTO Dispute Settlement Body. There will be some overlap between procedural and systemic TPP and WTO rules. If separate dispute settlement processes give rise to fragmented jurisprudence, trade enforcement will become more complex and difficult. The TPP instructs its panels to take into account WTO panel and Appellate Body interpretations,[11] but that can be a difficult task.

In addition, NAFTA and certain other FTAs (and bilateral investment treaties) between TPP parties include a mechanism for investor state dispute settlement (ISDS). But the TPP includes its own ISDS provisions. Does this mean certain investors may have access to two avenues for ISDS?[12] Some side letters shed light on this question as it relates to some countries: for example, excluding ISDS under the TPP as between Australia and New Zealand and providing for the termination of three Australian investment treaties in conjunction with the entry into force of the TPP. But questions remain regarding overlapping ISDS mechanisms for many other TPP countries.

Conclusion

The TPP now has its own place as a part of public international law. While some GATT/WTO drafters may have thought they were creating a “self-contained” regime within international law,[13] we now know that the WTO is firmly embedded in international law. Numerous arguments based on international law have been raised in WTO dispute settlement. While the proper role and influence of international law on WTO obligations is, and probably always will be, subject to debate, the WTO’s nature as international law is not. The TPP is no different. Of course, as with the WTO, real interaction between the TPP and international law may need to await some disputes where the boundaries can be explored.

The TPP's role as an international law innovator can already be seen: new provisions on minimum wage requirements, state-owned enterprises, and protection for biologic drugs are all examples. In this regard, the TPP may be something of a usurper of international law. Just as the TRIPS Agreement made older intellectual property conventions enforceable, the TPP is giving teeth to existing labor and environmental rules. Previous FTAs started this trend; the TPP is expanding the scope to more countries and more issues.

The TPP’s investment chapter also brings new developments to the field of international investment law, tweaking procedural and substantive provisions from previous investment treaties. It also allows host states to exclude specific kinds of measures from ISDS, including those related to tobacco control.[14] It remains to be seen whether these changes will set a new standard for future ISDS provisions or be an anomaly.

Ultimately, the TPP's place in the world trading system, and in public international law, may be determined by its future composition. Right now, many countries are lining up for accession.[15] If they all join and it becomes the Free Trade Area of the Asia Pacific[16] that some imagine, with China as a member, its role and influence will be very large indeed.

About the Author: Simon Lester is a trade policy analyst with the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, founder of WorldTradeLaw.net, and former Legal Affairs Officer with the Appellate Body Secretariat of the World Trade Organization.