What Does the Trans-Pacific Partnership Mean for Lawyers?
One of the casualties of the U.S. government’s two-week shutdown was President Barack Obama’s long-planned trip earlier this month to participate in the annual Asia-Pacific Economic Cooperation forum in Bali, Indonesia.
The president’s cancellation was a potential setback to his efforts to move ahead with the Trans-Pacific Partnership trade pact that is a key part of his so-called pivot toward Asia. The White House has said it would like to see a final deal on the table by the end of the year or early 2014—a very aggressive timetable for an agreement that would create a free trade zone encompassing a third of the world’s economy.
The TPP is not without controversy, and groups like farmers and autoworkers have all raised objections to part or all of the proposed agreement. Unsurprisingly, however, lawyers are not among the groups opposed to the TPP.
“Anything that encourages cross-border economic activity is good for lawyers,” Mori Hamada & Matsumoto Singapore senior of counsel Tony Grundy says.
Negotiations began in 2010, with the United States, Australia, New Zealand, Singapore, Vietnam, Malaysia, Brunei, Canada, Mexico, Chile and Peru participating, but buzz around the TPP increased enormously this past spring when Japan, the world’s third-largest economy, came on board. Japanese Prime Minister Shinzo Abe has since made the pact a major part of his economic platform.
Noticeably absent, of course, is China, and many observers, including the Chinese government, perceive a U.S. effort to isolate its biggest geopolitical rival. But China has also recently suggested it was open to eventually joining the TPP itself, and the current potential member states are drafting the agreement with an eye to that possibility, says Steptoe & Johnson Beijing partner Eric Emerson. But, in order to become a member, China would likely need to sign on to provisions guaranteeing it would not favor state-owned enterprises over foreign competitors competing for the same business.
“And I think today they’re just not totally going to be willing to do that,” says Emerson, though he thinks there are signs that China is revising some of its regulatory structures to be more compatible with free trade agreements.
The final contours of the TPP have yet to emerge, as the talks are ongoing and behind closed doors. But Joseph Laroski, a counsel in Washington, D.C., with King & Spalding, says there’s already been an uptick in advisory and lobbying work in anticipation of the agreement. There’ll be more when the actual document becomes available.
“That’s where you can add value [as a lawyer] as to how the agreement works and how you can advance your clients’ interests within the framework of the agreement,” says Laroski.
And that’s even before the TPP is actually adopted by the participating nations.
“The biggest phase [where lawyers will get work] is after the agreement goes into effect,” says Steptoe’s Emerson. “Once it’s gone through ratification, you’ll find there are a couple areas where law firms can be involved, particularly in compliance.”
According to Emerson, that’s when lawyers will walk companies through the implementation of the agreement, further advising them on how the different rules affect their businesses and how to make sure their operations stay within the framework of the agreement. That latter piece will be ongoing, he notes, as long as the TPP is in force.
Herbert Smith Freehills Asia corporate head Austin Sweeney thinks it’s less certain that expanded trade will bring benefits to firms.
“The liberalization of trade and the increased levels [of commercial activity] that flow from that don’t always flow through to an awful lot of more work for lawyers,” he says. Sweeney makes one exception though: disputes.
Akira Kawamura, the former chairman of Tokyo’s Anderson Mori & Tomotsune, thinks most companies investing within the TPP will want to avoid getting bogged down in member nations’ national courts and will increasingly turn to alternatives.
“Then international commercial arbitration will be much more important than before,” he says.
Specifically, Kawamura and other lawyers expect a so-called Investor State Dispute Settlement clause to be a part of the TPP. The clause, which is a part of most of the United States’ free trade agreements, allows corporations to seek arbitration of claims against sovereigns they say are violating provisions of an FTA.
ISDS clauses have been controversial, though, as many see them as a way for multinational corporations to bypass individual country’s laws, especially with the regard to labor or the environment. Australia refused to include an ISDS clause in its FTA with the United States in 2004, and the Labor Party government that was in power when TPP negotiations began had said it would not sign on if it meant accepting ISDS. The government of Liberal Party Prime Minister Tony Abbott, which took power last month, has so far maintained that position with regard to the TPP, though it has said it may take a softer line on ISDS clauses in the context of bilateral free trade deals with China, Japan and Korea.
Laroski says countries are generally willing to accept provisions such as ISDS because they believe they will bring increased market access for their companies and their exports.
“In my view, this isn't a loss of sovereignty,” he says. “They've made a decision and are willing to submit to arbitration in the event that they breach their obligations.”
One issue that has been important for lawyers in previous trade deals may be less so when it comes to the TPP. In Korea’s FTAs with both the U.S. and the European Union, opening that market to foreign law firms was a major goal.
But most of the prospective TPP countries currently have at least somewhat open legal markets. Malaysia, the largest country among them that still bars foreign law firms from having offices, is currently looking at legislation that would permit international lawyers access there as well.