By Alfred DiLisso
Introduction
To any outside observer, it is clear that tensions in the Asian Pacific are rising. Four years of American retreat from the region has emboldened regional powers to exert greater influence over their neighbors. The decision of the Trump administration to withdraw from the Trans-Pacific Partnership (TPP) in 2017 has presented an opportunity for China to take the reins of the future of economic growth in the absence of the United States. The TPP, which sought to liberalize trade and investment for 12 nations around the Pacific, was the centerpiece of President Barack Obama’s “pivot to Asia '' policy, which saw the refocusing of American foreign policy to the Asian Pacific. Comprising 40% of the world’s economy, it was the world’s largest trade deal at the time of negotiation and, if implemented, would have seen the U.S. set the rules of future economic growth and trade in the region. Instead, the U.S. withdrawal weakened the deal and its renegotiation among the remaining members struck many clauses combating unfair economic practices. President Joe Biden has expressed his hesitancy to rejoin the agreement, citing labor and environmental concerns as preventing him from fully endorsing the TPP as is. Rejoining the Trans-Pacific Partnership should be the focus of the Biden administration’s assertion of American economic influence in the Asian Pacific, if not for the agreement’s economic benefits, then simply for its geopolitical implications.
Background
When President Obama announced the U.S.’ intention to reframe its foreign policy to the Pacific, the Trans-Pacific Partnership formed the backbone of this transition. Heralding the U.S.’ commitment to the region, this mega-FTA covered an ambitiously wide range of goods and services under its plan to liberalize trade and investment. Its negotiation overcame a wide range of political hurdles in each nation, reducing barriers to Japanese auto-markets, Canadian dairy markets and reforming labor laws in nations like Brunei and Vietnam. The ultimate goal of the Obama administration was to reassert the U.S.’ economic influence in the region through an institution that would spread American-style free market capitalism and edge out Beijing’s ability to control the economics of the region through any international platforms it might create. Recognizing that Asian nations began to treat Chinese hegemony as essential to their growth, the idea within the Obama administration was that the U.S. could establish its hold on the region with an agreement that promoted pro-American capitalism as the accepted avenue of economic integration. Ratifying the TPP would provide the foundation for American-led economic growth in the Asian Pacific region.
This outline of President Obama’s purpose in negotiating the TPP tells us two very important things about the agreement. First, the focus of the deal for the U.S. was never the economic growth that would result from trade liberalization. Second, the focus of ratifying a trade deal in the East was geopolitical, an attempt to counter Chinese influence rather than secure more favorable terms for U.S. industries and workers. This dissonance here, that the trade deal was never truly intended for U.S. industries, is what created the political turmoil domestically that prevented Congress from ever ratifying the agreement. The effort to pass the TPP through Congress faced immense pressure from domestic lobbying groups representing American auto and agricultural industries. Additionally, their cause was championed by the progressives of the Democratic party, who saw the deal as a “Trojan Horse” for corporate interest that would profit big businesses at the expense of American workers. And to a degree, these objections were correct. The largest winners of the FTA would be large, multinational corporations able to take advantage of cheap labor and reduced trade barriers abroad. To reiterate though, the point of the agreement never was to increase prosperity back home.
The clash of these interests domestically prevented the TPP from ever being ratified by Congress during President Obama’s term and it became a target of both Democratic and Republican candidates in the 2016 election. When President Donald Trump was inaugurated in January 2017, he withdrew from the agreement on his first day in office.
Policy Proposal
Let me first start off by addressing the criticisms of the Trans-Pacific Partnership in the United States. As I stated earlier, the concerns surrounding the agreement came from two main areas. Labor unions and progressive representatives who found the deal unacceptable because they believed it to hurt American workers and groups who saw the deal as environmentally damaging. Like I mentioned earlier, there is some validity to these challenges. The main beneficiaries to TPP would be corporations able to take advantage of cheap labor abroad and low trade barriers. The gains for these parties would be significant and obvious. What is less obvious however, is the benefit to Americans that would diffuse among consumers, able to buy foreign products at cheaper prices, and exporting industries, that would see an increase in demand for their goods and services. Doubtlessly the agreement affects American workers, imposing some adjustment cost as jobs are lost in unproductive sectors of the economy. These losses are mitigated, however, by significant job gains in exporting industries that gain from increased trade. In fact, this “job churn” that occurs as labor moves from less productive to more productive sectors of the economy only represents a 0.1 percent increase over what would typically take place in a normal market year. Now this isn’t to diminish the toll job loss can have on an individual, but rather to note that the gains available from the TPP are larger than the losses. President Biden could and should compensate those who suffer from creative destruction of a trade deal. The question isn’t whether we gain from trade, it’s how do we make those gains more equitable? Addressing the environmental concerns about the agreement could be accomplished in a renegotiation on the part of the United States.
When President Trump left the TPP in 2017, the remaining members closed the trade deal without the U.S., creating the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), yikes I know. What’s important to note about this reclassification is that it suspends several of the unpopular clauses introduced by the U.S. into the original document. The key word here is “suspends''. The reimplementation of these clauses is contingent upon the return of the U.S. to the agreement, enabling the smooth reintegration of the U.S. if it ever happens. If this reintegration is the ultimate goal, then a strategy for the U.S. presents itself. Seeing as the dissenting opinions on the TPP are rooted in a concern for the environment and labor, President Biden can begin the process of reintegration by launching limited talks on the environment with the CPTPP countries. As environmental policy is important to every country and especially important for domestic support for the deal, it provides a perfect opportunity for the U.S. to begin a step-by-step process of joining the CPTPP while managing the requisite renegotiations. Beginning limited talks with the countries of the CPTPP would signal that the U.S. is ready to resume its commitment to the Asian Pacific region, but still needs some level of assurance before beginning comprehensive renegotiation. Additionally, this step-by-step approach would provide an opportunity for countries hoping to join the deal to begin the process of negotiation. Taking the reintegration process slowly would allow President Biden to build up domestic support for the action and provide the U.S. the chance to expand the deal while making progress on the necessary revisions.
Remember, the economics of the TPP were never the main focus of the U.S., something even the economists studying the trade agreement recognized. This is a fact that is reflected in the clauses championed by the U.S. during the agreement’s negotiation as well. The most important of these sought to dissuade the use of state-owned enterprises (SOEs) that form the backbone of the Chinese economic model. These SOEs receive preferential government treatment and end up distorting market competition at the expense of private enterprise. Rejoining the agreement is essential to pushing these sorts of reforms through the economies of Asia, without them it's likely that a Chinese economic model of development will become the norm in the region. This process has already begun, as the trade deal spear-headed by China, the Regional Comprehensive Economic Partnership (RCEP), was signed into effect in November 2020. This deal, which has been characterized as a rival to the TPP, has essentially cemented Chinese trade influence in the region in the absence of the U.S. and counts Japan and Australia among its members, close U.S. partners. Whether or not the U.S. is ready to push back against it, Chinese economic influence is continually becoming more dominant.
Conclusion
If America is back as President Biden says it is, then he should firmly establish that with a dedicated show of support to the Asian Pacific. Signaling to the region that the U.S. is ready and willing to rework the existing agreement and begin the process of rejoining would not only demonstrate America’s readiness to challenge the expansion of the Chinese model of economic growth, but also reaffirm the U.S.’ support for its traditional role of leadership in the region. Though the renegotiation of the TPP faces challenges domestically and internationally, taking the process slowly by opening with limited environmental talks would allow the U.S. the time needed to build domestic support and reach aggregable conclusions abroad to rejoin the deal. Being a part of such an agreement would reassert American economic relevance in the Asian Pacific region.
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