The Real Importance of the Trans-Pacific Partnership: What’s at Stake and What’s Most Likely To Sink It

By: Travis Cady

“Leaders of TPP member states” by Gobierno de Chile

The Trans Pacific Partnership (TPP) is back in the news again after Congress finally unveiled plans to vote on fast track authority for President Obama.  The massive free trade agreement (FTA) is scheduled to be completed this summer, but that isn’t terribly reassuring given that the deal has already been delayed numerous times.  Originally slated to be finished in 2012, the TPP has proved to be nothing if not tedious, and for good reason.  As it stands, the TPP negotiations involves 12 countries; The United States, Chile, Canada, Mexico and Peru on the American side of the Pacific and Australia, Brunei, Japan, Malaysia, New Zealand, and Singapore in the Asia-Pacific.  The sheer amount of players is enough to make trade negotiations cumbersome, but the inclusion of proposals above and beyond traditional customs and tariff negotiations makes the TPP an even higher hurdle.  However, the unprecedented size and scope are what make the TPP such an important potential deal.  Amid all the publicity about copyright infringement and private companies suing foreign governments, there seems to be little discussion of what the TPP really means for the United States; namely a cornerstone to cement US influence and rule-making authority in the Asia Pacific.

The first thing to understand about the TPP is that it isn’t an isolated deal. Part of its appeal is that it involves such a diverse group of countries geographically, economically, developmentally, and culturally.  Many of the members have very different economies, and consequently they have very different concerns about the TPP.  While this ambitious scale makes negotiations highly complex, it also has the potential to create an agreement that could become the norm for a wider free trade zone.  Asia Pacific Economic Cooperation (APEC) countries have long considered the idea of a region-wide FTA dubbed the Free Trade Area of the Asia-Pacific (FTAAP).  The relative inefficacy of APEC in creating real and lasting agreements has prevented any serious headway on such a plan.  The TPP deals with a smaller pool of countries, with the notable absence of China, but it still involves only APEC members and has the chance to lay the groundwork for expanded membership. The deal could be a model for future trade agreements and even set conditions for aspiring APEC membership such as India.

However, the size and potential expansion of the TPP is not the only reason the U.S. is putting so much political capital behind the deal.  It represents one of the two primary legs of the ongoing Pivot to Asia.  Simply increasing military assets in the region is only part of the strategy to cement U.S. influence in the Asia Pacific.  The TPP seeks to implement a rules regime geared towards liberalization of both economic and political structures.  As such, the TPP is a plan that stretches far beyond eliminating tariffs and promoting greater trade among members.  President Obama frames the deal as a 21st century agreement that addresses the global, cross-cutting issues that have risen in recent decades.  In order to create a functional and impactful free trade zone the TPP addresses labor reform, state owned enterprise, environmental protections, and intellectual property laws among hundreds of other issues. The inclusion of such “behind the borders” rules is not new to trade negotiations, but the combined size and scope of the TPP has the potential to shape the region into a favorable, long-term partner for the U.S.

Given the potential of the TPP, it isn’t hard to see why President Obama has thrown his weight behind the deal in a very public fashion.   However, if the deal fails it will put the President in a precarious position.  Despite the optimistic language coming from both the White House and the State Department, failure is a very real possibility, and not because of the more public controversies regarding intellectual property rights and enforcement mechanisms.  IPRs are a growing concern globally, and although there is strong criticism on the technical language revealed in a previous Wikileaks dump, it is an issue that developing countries will have to tackle soon or risk the loss of investment and access to high-end medical and technology products.  The Investor-State Dispute Settlement Mechanism (ISDS) might be more of an issue given the ambiguous language revealed in the latest leak, but such measures are nothing new in FTAs.  According to the Department of Commerce the US is already party to 50 trade agreements involving ISDS and has never lost a case.   Instead, the deal could fall apart because of the unwillingness of certain countries to compromise on market access and protectionist policies, which are among the most basic issues addressed by FTAs.

Of the countries that could potentially sink the deal, Japan is likely the most reluctant to open its markets.   Japan has always been notoriously protectionist regarding its automotive and agricultural sectors, and both are areas that the U.S. wants to break into.  Despite vociferous public support for the deal from Prime Minister Shinzo Abe, there is skepticism that Japan can bring itself to crack open two of its most historically inflexible sectors.  The issue is so sensitive that upon Japan’s entry into the TPP framework in 2013 a separate bilateral negotiation was created just for auto industry access.  As of March 31st of this year it was reported that the U.S. and Japan still have “significant gaps” on auto market access, which is worrying news for deal that is supposedly mere months from completion.  Prime Minister Abe will be visiting Washington at the end of April, and the level of progress before that time will likely color his address to Congress.  Failure to pass the TPP would reflect poorly on Abe, who is attempting to incorporate the deal as part his larger plans for structural reform in Japan.  In such an event, it is likely to strain U.S.-Japanese relations as blame for the deal’s collapse would likely be thrown both ways.

Image Credit: White House/Lawrence Jackson

There is also a very real possibility that the U.S. could sink the TPP itself.  On the surface it seems that America is on board with the deal, but the political reality is not so simple.  Congress could easily doom the proceedings by failing to grant Obama Trade Promotion Authority (TPA), more commonly known as Fast Track, which requires a straight yes or no vote on the trade agreement as a whole.  Despite Congressional leaders agreeing to allow a TPA vote, there is still the possibility of rejection.   Now should be the ideal time to pass TPA because the current political makeup of the country is historically favorable to passing large-scale trade deals.  Traditionally, FTAs get passed with a Democrat in the White House and a Republican-controlled Congress, as was the case during Clinton’s signing of NAFTA.  Many of the TPP countries have already expressed that the failure to obtain TPA could be a deal breaker.  No country wants to be dragged back to the negotiation room because Congress voted down a portion of the agreement.  With Obama’s fast-approaching exit from Office, now is possibly the best chance of passing TPP.  The longer the deal sits in limbo, the more likely a break-down of the agreement, and as the U.S. gets deeper into an election cycle there is a greater chance of the TPP becoming a more public issue.

Finally, the issue of rising Chinese influence in the region is spelling trouble for the TPP.  Tacit in the U.S. push for the TPP is the notion of keeping China contained.  During the State of the Union Address only two months past, Obama framed the issue as follows;

“…as we speak, China wants to write the rules for the world’s fastest-growing region. That would put our workers and our businesses at a disadvantage. Why would we let that happen? We should write those rules. We should level the playing field. That’s why I’m asking both parties to give me trade promotion authority…”

Using a direct indictment of China to foster support for the deal is a bold gambit, and one that becomes riskier the longer the TPP awaits a signature.  China is already making moves that undercut the appeal of the TPP for many APEC members.  The rise of the Asian Infrastructure Investment Bank (AIIB), China’s answer to the World Bank, has attracted contributions from Japan and other APEC members, as well as European allies Britain, France, Germany, and Italy despite American opposition.  In light of Obama’s comments, this clear victory for China could limit the appeal of the TPP for many Asian members as it is decreasingly seen as the primary economic booster.  Using the China card to drum up support for the TPP created a new consequence for failure; a public victory for China at the expense of the U.S.

Ultimately, the ongoing TPP negotiations are a mixed bag.  Given the necessarily secretive nature of trade agreements, the true prospects for success are still uncertain.  The TPP has the potential be a game changer in the Asia-Pacific, but it is impeded by all the typical hurdles that come with large-scale FTAs, and the addition of recent leaks certainly doesn’t help.  It is clear that Obama’s international prestige, and by extension the reputation of the U.S., is tied to the TPPs success.  At this point, the U.S. is hoping that the stars align to allow the beleaguered deal to finally pass.

IMG_6264 (1)Travis Cady is the managing editor of ExPatt Magazine and a master’s candidate at the Patterson School specializing in International Commerce. He previously graduated from the University of Louisville studying political science and philosophy and has traveled in both Europe and Asia. His interests include international trade networks and diplomatic relations with a focus on Asia.


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