What is the TPP?

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World Economy

What is the TPP?

The TPP 11, or the CPTPP, is the world's newest trade deal. It was signed by 11 countries in Chile on March 8 this year.

CPTPP stands for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and its 11 members are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

The deal was previously known as the Trans-Pacific Partnership and had been signed by 12 countries, including the United States, in February 2016. Donald Trump, however, made American withdrawal from the deal a key part of his presidential election. Within his first week in office last year, he signed an executive order dumping the pact.

With Trump's decision, the U.S. was leaving behind a deal that would have resulted in annual income gains of $131 billion for the United States and $492 billion for the world to 2030, according to economists Peter A. Petri and Michael G. Plummer.

What happened after the US withdrawal?

Without the U.S., the TPP 11's share of global gross domestic product went from 38 percent to 13.5 percent. Many experts thought that meant the end of the deal.

Japan, however, played a strong role in ensuring that the agreement came through, according to Deborah Elms, executive director of Singapore-based advisory group Asian Trade Centre.

Trump holds up an executive order withdrawing the U.S. from the Trans-Pacific Partnership after signing it in the Oval Office of the White House in Washington, DC, January 23, 2017.
Saul Loeb | AFP | Getty Images
Trump holds up an executive order withdrawing the U.S. from the Trans-Pacific Partnership after signing it in the Oval Office of the White House in Washington, DC, January 23, 2017.

"The deal was assumed to be dead because the U.S. was the largest partner — by far — and because it really drove the negotiations. Absent U.S. pressure, the talks would likely not have concluded," she said.

Many are positive about the CPTPP because it is seen as a high-quality trade deal: It includes many areas not typically covered in such agreements, such as agricultural produce and service sectors.

Even without the U.S., the deal is expected to increase the GDP of Vietnam, the TPP country with the lowest GDP per capita, by at least 1.1 percent to 2030, the World Bank said in a 2018 report.

The road ahead for the CPTPP

The trade deal requires the ratification of at least six countries to come into force. While this had been expected to be completed by the end of the year, the timeline is beginning to look doubtful partly because of a widening scandal linked to Japanese Prime Minister Shinzo Abe.

Abe was a leading force in lobbying for the CPTPP, and although Japan is likely to ratify the agreement, the schedule may be scuttled. Elections are also due this year for two other TPP countries — Malaysia and Mexico.

Meanwhile, a year after he threw a wrench into the deal, Trump opened the door for the first time to the possibility of the U.S. re-joining the agreement.

On the sidelines of the World Economic Forum in Davos, Switzerland this year, he said in an interview with CNBC that he would reconsider his decision.

"The deal was terrible, the way it was structured was terrible. If we did a substantially better deal, I would be open to TPP," he claimed in January.

While most countries and officials say the U.S. would be welcome, Japan indicated it would not be open to re-negotiating the deal.