The return of geopolitics is all around us. Civil wars in the Middle East and Russian aggression in Ukraine properly dominate the headlines. But more quietly, a potentially more consequential strategic defeat looms for the United States: the Trans-Pacific Partnership (TPP) may fail. Why should we care that some trade pact we have barely heard of collapses into ignominy? Quite simply: the negotiation’s failure would have devastating consequences for U.S. leadership, for the deepening of key partnerships in strategic regions, for the promotion of market reforms in emerging economies, and for the future of the trade agenda. Consider the following:
The United States would lose the ability to make the rules in international trade. The World Trade Organization (WTO) has been unable to update the multilateral rules on trade and investment for the past 20 years. In the meantime, global supply chains have profoundly altered patterns of international production and trade. Deep free trade agreements (FTAs) like TPP seek to provide new rules that match the realities of 21st century trade. They focus on the liberalization of services that are critical to the efficient management of dispersed production chains (telecommunications, transportation, etc.), the protection of foreign investments and intellectual property rights, and avoiding predatory market behavior of state-owned enterprises. With the stagnation of the WTO, we have moved to a system of decentralized competition where different clusters of countries seek to define the standards for economic integration. As President Obama has warned, if we don’t write the rules on trade, China will. Moreover, we will have no way to encourage China to move away from its mercantilistic practices.
The rebalance to Asia will stall. TPP is the second leg (after a reorientation of military resources) of the policy of rebalancing to Asia. As such, its fate will determine whether this strategy advances or just limps along. If TPP fails, doubts about the staying power of the United States will once again rear their ugly head. The signature U.S. policy to remain vitally connected to the world’s most dynamic economic region will come to naught. Let’s not forget that prior to the advent of TPP, the United States appeared poised to be marginalized from the process of regionalism in Asia.
The U.S.-Japan alliance will lose a critical pillar. Trade has in the past been a divisive issue for the two allies. If TPP fails, it will demonstrate that the United States and Japan cannot move past frictions over market access in agriculture and automobiles to work in areas such as internationalization of financial services, protection of intellectual property, and governance of the internet economy that are central to the 21st century economy.
The international trade agenda will hit a dead end. If TPP fails, the most significant trade agenda in a generation will come to a grinding halt. At that point, how can the trade agenda move forward? The WTO is not institutionally fit to advance a deep integration agenda. If a group of 12 countries that have self-selected are unable to wrap up an agreement, what other alternatives are there? The collapse of the TPP talks will greatly undermine the chances of success of the transatlantic trade negotiations and the East Asian trade deals are unlikely to generate deep integration commitments.
The time for a TPP deal is now
The window of opportunity to cinch a TPP deal is closing fast. With the 2016 U.S. presidential election on the horizon, a number of important milestones must be achieved this year in a very tight sequence: adoption of Trade Promotion Authority (TPA) legislation, a breakthrough in U.S.-Japan market access deal, an agreement in principle among all TPP partners, and a vote on the final trade deal.
First and foremost, we need to pass TPA in the Congress. Every week that goes by without movement on TPA reduces the prospect that trade policy could be the one area immune to the dysfunctional political climate in Washington. And, quite simply, without TPA, there is no TPP. It is a commonplace observation that passage of TPA is not required to see a vote on a trade agreement. But this is a technical argument, when we need to understand the essential role of TPA as a political device to give complex trade agreements a chance at successful negotiation and ratification.
At home, TPA reassures Congress of having a meaningful role in setting the trajectory and objectives of U.S. policy. Far from an abdication of authority, TPA allows Congress to retain responsibility for laying out trade policy objectives, remain appraised of the progress in the negotiations, and act as the ultimate arbiter in deciding the fate of a trade deal.
Internationally, TPA reassures negotiating parties that the carefully calibrated package of reciprocal concessions will not unravel at the ratification stage. Granted, TPA is an imperfect credibility mechanism since it has in the past not stopped Congress from demanding renegotiations. But without the modicum of credibility that TPA provides, it will not be possible for the United States to obtain a good deal, either because TPP countries are genuinely concerned about future “asks” or because they have the perfect cover to avoid politically painful concessions on sensitive issues. Either way, the lack of TPA weakens the hands of American trade negotiators.
If TPP fails, who is to blame?
Passing TPP would be a geopolitical and economic boon for America. These benefits need not and will not come at the expense of workers or the regulatory sovereignty of countries. On the contrary, under deep FTAs, countries retain their right to regulate. Rather, the aim of the agreement is to increase international competitiveness in order to create better quality jobs.
If TPP nonetheless fails, the next question will naturally be who is to blame? Congress should be mindful that by failing to deliver on TPA, it risks becoming the weak link in the U.S.-led endeavor to craft a liberal economic order.
Rather than serving as a unifying diplomatic exercise to highlight Iran’s troubling regional activities, the [Warsaw] summit primarily highlighted America’s diplomatic isolation from its European allies.