On October 16, just a few days before the Scott Morrison government lost the Wentworth by-election and its majority in the House of Representatives, the Australian Senate quietly approved Australia’s participation in what is now known as the Comprehensive and Progressive Agreement for Trans Pacific Partnership (TPP-11).

The government subsequently ratified the agreement.

" October 16 is likely to accrue its own renown, a key date in the continuing evolution of a liberalising trading environment in the Indo-Pacific.”

The event received less attention than it deserved due to distractions provided by drama surrounding the prospect of the government losing one of its safest seats, one held by former Prime Minister Malcolm Turnbull.

However, in Australian economic history October 16 is likely to accrue its own renown, a key date in the continuing evolution of a liberalising trading environment in the Indo-Pacific in which Australia is playing a leading role.

We can trace the negotiation of TPP-11 back to the Bogor summit  in Indonesia of November 1994 in which Canberra, in the era of Paul Keating’s prime ministership, drove what became known as the ‘Bogor goals’ as part of the Asia-Pacific Economic Cooperation (APEC) forum process.

These laid down broad aspirations for lowering trade barriers, both tariff and non-tariff, in order to promote regional economic growth. A quarter century later those aspirations have resulted in significant advances in regional trading architecture. The TPP-11 may turn out to be the most prospective.

A reasonable expectation is for the trade pact to be expanded gradually to include more countries - including the United States under a future president.

Way open

The way is open for the US to return. However that could be on terms that may prove more stringent than when President Donald Trump abruptly withdrew.

No tangible benefit would seem to accrue to Washington for having pulled out of a trading agreement that had taken something like six years to negotiate - and would have given expression to an American ‘pivot’ to the Asia-Pacific adopted during the Barack Obama administration.

Quite apart from anything else, the original agreement - including the US - would have enabled the development of a trading bloc in the Asia-Pacific as a robust competitor to China. With America a TPP-12 would have accounted for 37per cent of global GDP and one-quarter of global trade

Now, a TPP-11 without the US will account for 13.3 per cent of GDP and 14.4 per cent of trade. Japan’s participation as the world’s fourth-largest economy after the US, China and the European Union, gives TPP-11 heft but much less than might otherwise have been the case.

Notwithstanding a US absence, the TPP-11 will account for $US10.6 trillion in GDP and population of 500 million, or 6.7 per cent of the total. Australia’s annual two-way trade with fellow members stands at around $A170 billion, or getting on for a quarter of all Australian trade.

The Trump administration’s decision to withdraw made little sense given the TPP-11 incorporated many of the elements of what American trade experts regard as a ‘gold standard’ Korea-US Free Trade Agreement, including protection for copyright and trademark holders beyond the WTO’s intellectual property provisions.

“Contrary to the Trump Administration critique, the TPP provisions produced a noteworthy agreement and one that was favorable to US trading interest,’’ Peterson Institute of International Economic trade expert, Jeffrey Schott writes.

“The deal largely reflected US standards and practices, and would not have required Congress to legislate significant changes in US laws and regulations.’’

Passage through the Australian Senate of TPP-11 - with Labor support after some internal party bickering over provisions governing labor markets and dispute resolutions - opens the way for the agreement to come into effect by the end of this year now six of 11 signatory countries have ratified.

Under TPP-11 rules six countries, or a majority, need to ratify the agreement before it becomes operable. Australia became the sixth, joining Canada, Japan, Mexico, New Zealand and Singapore as part of the first group. Those countries that have not yet ratified include Brunei Darussalam, Chile, Malaysia, Peru and Vietnam. The five are expected to fall into line over the next several months.

Waiting in the wings are Thailand and possibly South Korea. The United Kingdom is another prospective entrant if, and when, it casts off its European shackles.

TPP-11 will help further bolster existing trading alignments in the region, including the Regional Comprehensive Economic Partnership (RCEP). This draws together the 10 Association of South East Asian Nations-bloc countries plus China, Australia, India, Japan, South Korea and New Zealand.

An aspirational goal for APEC participants is the conclusion of a Free Trade Agreement of the Asia-Pacific (FTAAP). This would be a hugely ambitious undertaking and one unlikely to see the light of day in the near-term given trade and other tensions between the US and China.

In the meantime TPP-11 will stand as an important initiative involving developed and developing countries in a single trading agreement in which participants commit themselves to trade liberalisation and policy reform.

New access

From an Australian perspective TPP-11 will have a number of immediate benefits. These will include significant reductions in tariffs on imports of Australian beef into the Japanese market; new access for dairy products and sugar to Japan, Canada and Mexico; tariff reductions for cereals and grain exporters to Japan, including rice; elimination of all tariffs on sheep-meat, cotton and wool; elimination of tariffs on seafood, horticulture and wine; and the elimination of all tariffs on industrial products (manufactured goods).

The Australian services sector will also benefit more or less across the board in the provision of such areas of specialisation as mining engineering and services, financial services, including accounting, education services and healthcare.

Australian investors will also be helped by the liberalisation of screening thresholds for investment in Canada and in Mexico. Australia will reciprocate for its TPP-11 partners.

Not all will go smoothly. In countries like Vietnam where state owned enterprises dominate there will inevitably be teething issues. Under the terms of the agreement foreign equity limits on investments in the Vietnamese telecommunications sector will be phased out over five years, for example.

Other such provisions will apply in countries where state-owned enterprises dominate for historical reasons. In Australia’s case providers of public services like Australia Post will not be affected.

Critics of the TPP-11 deal have raised questions about the impact on Australia’s ability to regulate, in the public interest, national security; food standards and labelling; quarantine measures to protect human, animal and plant health; consumer protection; public health and the environment.

Officials have been at pains to point out TPP-11 will not restrict Australia’s capacity to regulate.

Most controversial has been the Investor-State Dispute Settlement (ISDS) provisions that will allow private corporations to by-pass national courts and seek compensation from extraterritorial tribunals if they believe a change in the law or policy has harmed their investments.

In recent years there has been an explosion in the ISDS cases. This raises worries in some quarters that a TPP-11 will be misused by corporations seeking access to the Australian market.

In Canada for example concerns about ISDS cases have produced a regulatory chill where regulators apply ‘light-touch’ measures to avoid potential challenge. This is notably in the area of environment regulation.

Finally, there’s the question of benefits from a TPP-11. According to some estimates, Australia is looking at an income gain of 0.6 per cent on baselines projections, around $A15 billion by 2030. These are projections that are difficult to model under best-case, or worst-case, scenarios.

In the end, it may be the intangibles of an agreement drawing Australia’s and its neighbors closer together that provides the biggest benefit in an uncertain geopolitical environment.