FAQ: What is the process for ratification and entry into force after the TPP signing on Feb 4, 2016?

Question: My question is about the TPP going forward: now that all basic agreements are done in October, and the TPP agreement signed, the TPP has to be passed by each congress/parliament/national assembly in order to go into effect. What is the process?

Tiếng Việt

Answer:  Thanks for your great question. The TPP was signed in New Zealandon Feb 4, 2016. TPP Chapter 30,  Final Provisions, explains the process for entry into force. The members’ legislatures must complete the “applicable legal procedures” and then notify the “Depositary” [New Zealand, TPP Art. 30.7] that the “applicable legal procedures” have been completed. When this is confirmed by a sufficient number of the TPP Members, then the agreement will enter into force.

TPP Chapter 30 provides for three different scenarios, which could take from two years to an indefinite time before TPP enters into force.

The TPP will enter into force (1) 60 days after all 12 original TPP governments have completed their “applicable legal procedures,” and notified the Depositary; (2) if all 12 haven’t notified within two years after signing, then the TPP will enter into force two years and 60 days after signing if at least six TPP governments, accounting for 85% of the combined 2013 GDP of the 12 original signatories, have notified; or (3) if neither of the preceding are applicable, then the TPP will enter into force 60 days after at least six TPP governments, accounting for 85% of the combined 2013 GDP of the 12 original signatories, have notified.

Let’s look at four different cases of the U.S. “applicable legal procedures” : (1) the Vietnam – U.S. Bilateral Trade Agreement (signed July 2000: entry into force Dec 2001; 17 months); (2) Vietnam’s WTO Accession (Nov 2006; Jan 2007; two months) (3) Korea – U.S. Free Trade Agreement (Jun 2007;  Mar 2012; four years and nine months) and (4) TPP, based on TPP Chapter 30 and the U.S. “Trade Promotion Authority,” Section 6.

Vietnam – U.S. Bilateral Trade Agreement (BTA)

The Vietnam – U.S. BTA, signed July 13, 2000, contained the following language:
BTA Entry into Force

Although the agreement was signed in July 2000, it was not submitted to the U.S. Congress for approval until June 2001. Part of the reason was that 2000 was a presidential election year, and there was not enough time (“session days”) in the Congressional calendar that year to consider and vote on the agreement and the implementing legislation. Another reason was that the newly elected administration that took office in January 2001 needed time to get Cabinet and other senior officials confirmed by the U.S. Senate, and, in addition, there was some consideration of linking the BTA with Trade Promotion Authority in a package bill. After an AmCham letter to the President, the BTA agreement implementing bill was submitted to Congress, approved, signed by the President, and entered into force on Dec 10, 2001, or 17 months after the BTA was signed.

Vietnam WTO Accession Agreement 

Vietnam National Assembly 4The WTO Accession Agreement required that Vietnam’s National Assembly ratify Vietnam’s WTO Accession Agreement, that the U.S. provide “Permanent Normal Trade Relations,” Vietnam then notified the WTO of ratification, and 30 days after that, Vietnam became a member of WTO. The WTO Accession process from WTO General Council approval until entry into force only took about two months, from Nov 2006 to Jan 2007.

Key dates were

Nov 07  WTO General Council approves Vietnam’s accession
Nov 23  Government submits WTO Agreement to National Assembly
Nov 29  National Assembly approves Resolution 71 to ratify Vietnam’s WTO accession
•  “To apply directly Vietnam’s commitments stated in the Annex to this Resolution and other WTO commitments that are adequately detailed and clear in the Protocol, attached annexes and the Report of the Working Party on the Accession of Vietnam to the Agreement Establishing the WTO.
•  “If the provisions of Vietnamese law are inconsistent with the provisions of the Agreement Establishing the WTO, the Protocol and attached documents, the provisions of the Agreement, the Protocol and attached documents prevail. ”
Dec 8  U.S. Congress approved PNTR (House: 212-184, Senate: 79-9), bill goes to President
The U.S. Congress approved Vietnam’s WTO Accession Agreement and PNTR (Permanent Normal Trade Relations) in votes by the House of Representatives on Friday, Dec 8 (212-184) and the Senate early Saturday morning, Dec 9 (79-9). The legislation now goes to the President for signature before finally becoming law.
Dec 20, 29 President Bush signed PNTR Bill, Dec 20, 2006
President George W. Bush signed into law a bill that extends normal trade relations with Vietnam and provides trade benefits to nations of sub-Sahara Africa, Haiti and four Andean countries. He pushed hard for approval of the legislation before Democrats took control of Congress in January 2007. Presidential Proclamation, Dec 29, 2006
Dec 12 Vietnam notified the WTO of ratification
Jan 11 30 days after notifying WTO, Vietnam became a WTO member

Korea – U.S. Free Trade Agreement

The Korea – U.S. Free Trade Agreement was signed on June 30, 2007. However, it did not enter into force until March 15, 2012, nearly five years later. Why did it take so long?

The November 2006 U.S. elections resulted in a sweeping victory for the Democratic Party which captured control of the House of Representatives (233 – 202), the Senate (51-49). For the first time since 1994, the Democratic Party controlled both houses of Congress. In the November 2008 elections, the Democratic Party increased its majority in the House to 257 – 178, and in the Senate to 60 – 40. And in the November 2010 elections the Democratic Party lost control of the House, where the Republican Party won a majority 242 – 193, but Democrats maintained control 53 – 47 in the Senate.

On December 3, 2010, the United States and Korea concluded new agreements, reflected in letters signed on February 10, 2011, that provide new market access and “level the playing field” for U.S. auto manufacturers and workers.  Congress approved the agreement on October 12, 2011, and Korea’s National Assembly approved it on November 22, 2011. The United States and Korea completed their review of the measures both sides had taken to implement the FTA and exchanged diplomatic notes on February 21 agreeing to bring the agreement into force on March 15, 2012.

Trans-Pacific Partnership

TPP Chapter 30, “Final Provisions” explains the “Entry into Force” provisions, in article 30.5, as follows:

“1. This Agreement shall enter into force 60 days after the date on which all original signatories have notified the Depositary in writing of the completion of their applicable legal procedures.

“2. In the event that not all original signatories have notified the Depositary in writing of the completion of their applicable legal procedures within a period of two years [04/02/2018] of the date of the signature [04/02/2016] of this Agreement, it shall enter into force 60 days after [01’06/2018] the expiry of this period if at least six of the original signatories, which together account for at least 85 per cent of the combined gross domestic product of the original signatories in 2013, have notified the Depositary in writing of the completion of their applicable legal procedures within this period.

“3. In the event that this Agreement does not enter into force under paragraph 1 or 2, it shall enter into force 60 days after the date on which at least six of the original signatories, which together account for at least 85 per cent of the combined gross domestic product of the original signatories in 2013, have notified the Depositary in writing of the completion of their applicable legal procedures.”

TPP Ratification 85%So, in summary, the TPP will enter into force (1) 60 days after all 12 original TPP governments have completed their “applicable legal procedures,” and notified the “Depository;” (2) if all 12 haven’t notified within two years after signing [Feb 4, 2016], then the TPP will enter into force two years and 60 days after [Jun 1, 2018] signing, if at least six TPP governments, accounting for 85% of the combined GDP of the 12 original signatories, have notified; or (3) if neither of the preceding are applicable, the the TPP will enter into force 60 days after at least six TPP governments, accounting for 85% of the combined GDP of the 12 original signatories, have notified. As the data in the table shows, both the U.S. and Japan must ratify for the TPP to enter into force, since the required 85% can’t be reached without both of them. Two of the three “5%” countries,  Canada, Australia, and Mexico, must ratify, for the same reason. And at least two of the other TPP countries “1%” countries must also ratify to reach the required six TPP governments and 85% of the combined GDP in 2013.

The “applicable legal procedures” for the Unites States are in the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, informally called “Trade Promotion Authority 2015,” which explains when and under what conditions the U.S. will apply the TPP agreement to “other Parties,” that is the TPP member countries, including Vietnam.

CRS LogoClick the below link for a summary “explained in three slides” of a recent U.S. Congressional Research Service publication, “Trade Promotion Authority and the Role of Congress in Trade Policy.” [See Note 1 below].

The Role of U.S. Congress in Trade Policy and TPP Approval explained in 3 slides

(1)  The first slide explains the basis of Congressional and Presidential respective constitutional authority over trade policy;

(2)  the second slide provides a history (list) of “trade promotion authority” granted by Congress to the President starting with the 1934 “Reciprocal Trade Agreements Act” up to the 2015 “Bipartisan Congressional Trade Priorities and Accountability Act” (“Trade Promotion Authority”); and

(3) the third slide is a timeline showing the process of concluding, reporting, submitting an implementing bill to Congress, the 60-day public notice period before signing an agreement, the reporting requirements before submitting the implement bill to Congress, the 90-day period for Congressional consideration of and votes on the implementing bill, and the 30-day notice period required before the TPP enters into effect with respect to a member country, which is provided for in Section 6(a)(1)(G). Senator Hatch explained the process very clearly in a Feb 3, 2016 speech on the Senate Floor.

The vote by the Congress to approve TPP is likely to be close in the House of Reprentatives. When the House approved the Trade Promotion Authority (TPA) legislation in June 2015, the vote was 218 in favor, and 208 opposed. Only 28 Demcrats voted for the TPA. And 50 Republicans voted against it.

150618 House Vote on TPA 218 - 208

The final step in the process is that not later than 30 days prior to entry into effect with respect to a Party, written notice to Congress that the President has determined that the Party has taken legal and administrative measures to comply with the agreement, in accordance with Section 6(a)(1)(G), which states:

“SEC. 6. IMPLEMENTATION OF TRADE AGREEMENTS (a) IN GENERAL  (1) NOTIFICATION AND SUBMISSION — Anyagreement entered into under section 3(b) shallenter into force with respect to the United States if(and only if) — (G) the President, not later than 30 days before the date on which the agreement enters into force with respect to a party to the agreement, submits written notice to Congress that the President has determined that the party has taken measures necessary to comply with those provisions of the agreement that are to take effect on the date on which the agreement enters into force.” pp 83, 85 [2]

In the case of the Korea – U.S. Free Trade Agreement (see above), originally signed on June 30, 2007, key elements were renegotiated and, on December 3, 2010, the United States and Korea concluded new agreements, reflected in letters signed on February 10, 2011, that provided new market access for U.S. auto manufacturers and workers.  Congress approved the agreement nine months later, on October 12, 2011, and Korea’s National Assembly approved it on November 22, 2011. The United States and Korea completed their review of the measures both sides had taken to implement the FTA and exchanged diplomatic notes on February 21 agreeing to bring the agreement into force on March 15, 2012, nearly four years and nine months after the FTA was signed.

So it seems likely that Vietnam and U.S. will similarly review the “implementing legislation” and other measures that both sides will have taken to implement the TPP, and exchange diplomatic notes agreeing to bring the TPP into force.

According to Vietnam’s lead TPP negotiator, Deputy Minister of Industry and Trade Tran Quoc Khanh, Vietnam’s TPP ratification will take up to 2 years, starting in mid-2016. Vietnam will need adequate time to complete the “applicable legal procedures.” The Party, Government, and the National Assembly will consider very carefully, and consult with TPP partners to confirm that the implementing legislation and regulations meet the TPP commitments.

TPP Chapter 21, Cooperation and Capacity Building, provides for technical assistance will help ensure that all of partners can fulfill their obligations, draw their maximum potential benefit from the agreement, and emerge as strong and sustainable markets. It creates a framework to identify needs and resources for capacity building assistance, on a voluntary basis, to ensure full implementation of the TPP Agreement and to maximize its benefits.

As of Jan 25, 2016, both Senate Majority Leader McConnell and Senate Finance Committee Chairman Hatch have said that the TPP implementing legislation should not be submitted to the U.S. Congress until after the November 2016 U.S. elections.

Senator Hatch said, ““it will be difficult for Congress to take [TPP] up during an election year.” He added that prospects for consideration immediately after the elections were also dim, saying “a lot of people on something this important don’t want it passed or rejected by a lame-duck Congress.”

Many leading U.S. business associations have agreed. And most Democrats and their supporters, including labour unions, oppose the TPP.

House Calendar 2016As of Jun 13, 2016, with both parties having selected candidates that oppose the TPP, there seem to be only two paths open to TPP approval in 2016: Tackling TPP in the thick of election season or pushing TPP through during the lame duck period.  The administration must submit the final text of the agreement and the implementation plan AT LEAST 30 days before submitting the implementing legislation. And the administration will have to consult with Congress to develop the implementing legislation. And the House Ways and Means Committee and the Senate Finance Committee will need to hold hearings to examine the TPP and the draft implementing legislation. In addition, both committees will need to hold informal markup sessions and perhaps an informal conference to determine the prospects for a majority vote for approval.

“Each has serious difficulties.

“The “summer of trade” approach would ignore the wishes of most Democrats and be exceedingly awkward for former Secretary of State Hillary Clinton, who has reversed her earlier support for the TPP.

“What of the lame duck strategy? Only 16 legislative days remain on the calendar after the Nov 8, 2016  elections and they are “subject to change.” Even if there were solid majorities, both Republican and Democratic, House and Senate, committed to TPP passage, that would not be much time to move the agreement through.”

Sources:

Trade Promotion Authority and the Role of Congress in Trade Policy, Congressional Research Service, Jun 15, 2015.

http://www.amchamvietnam.com/30447597/trade-promotion-authority-legislation-introduced-in-u-s-congres/ and Trade Promotion Authority 2015, click here  , page 83, 85 Section 6 (a)(1)(G) pp 83, and 85.

Vietnam’s TPP ratification to take up to 2 years: lead negotiator, Tuoi Tre, Oct 10, 2015.

http://www.themalaysianinsider.com/malaysia/article/post-tpp-26-state-federal-laws-will-be-amended-says-mustapa

Senator Hatch explains the process for Congressional consideration of the TPP, Feb 3, 2016

TPP signed on Feb 4, 2016: … the beginning of the next phase for TPP, Feb 4, 2016 Statement by the TPP Ministers, video clip of the signing ceremony, comments by BBC, Reuters, Washington Post, and other media.

Is it too late for the U.S. Congress to vote on TPP in 2016? Feb 8, 2016

 

Posted: Oct 8, 2015; Updated: Oct 11, 2015, Jan 25, Jan 31, Feb 8, Jun 13, 2016

About the author  ⁄ AmCham Vietnam

AmCham is an independent association of companies with the objective of promoting trade and investment between Vietnam and the U.S. With two chapters, one in Ho Chi Minh City and one in Hanoi, our membership of 700 companies and 1,500 representatives is unified by a commitment to promote trade and investment between Vietnam and the United States.

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