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President Obama, the TPP and U.S. leadership in Asia

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In Brief

After prolonged ambivalence about trade, President Obama finally found an agreement he could embrace – the Trans-Pacific Partnership (TPP). But what is the object of the President’s new found passion? Why has the South Pacific caught his fancy when pending agreements in Latin America and Northeast Asia could not? And will this amount to anything more than the Administration’s rather empty promises to wrap up the Doha Round of WTO global trade talks?

In fact, the TPP is potentially a significant addition to U.S. trade policy. It could be a model for trade liberalisation and a means to address long-standing U.S. interests in Asia.

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Two decades ago, James Baker, then Secretary of State, warned it would be a strategic mistake for the United States to allow ‘a line to be drawn down the middle of the Pacific’ with the U.S. on one side and the nations of Asia on the other. This vision of a trans-Pacific regionalism was embodied in the Asia-Pacific Economic Cooperation forum (APEC).

In recent years, however, a narrower, more exclusive vision of regionalism, limited to Asian nations, in the form of the ‘ASEAN Plus Three’ and the East Asian Summit, has emerged to challenge trans-Pacific regionalism. Each configuration differs from the others in an important way, usually by which countries are excluded.

Asian leaders and friends of the United States, such as former Singapore Prime Minister Lee Kwan Yew, have urgently warned that unless the U.S. becomes more engaged in Asia, through reassuming leadership for APEC and other trans-Pacific institutions, the Peoples Republic of China will inexorably emerge as the regional hegemon to the detriment of U.S.—and the rest of Asia’s—national interests.

Thus, the struggle over which forum is to be empowered – sometimes referred to as ‘East Asian architecture’ – is really a struggle over political influence in the region. Since there is little eagerness for joint security action among the major players in Asia, the shaping of commercial ties emerges as the key battleground.

Where, then, does this leave the United States in Asian trade policy? There are a number of options.

The United States could over the next several years continue on the bilateral path it started down after the disappointment with APEC as a vehicle for East Asian trade liberalisation – a path that resulted in FTAs with Singapore and Australia.

At the other end of the policy option spectrum, the U.S. could get behind calls for a Free Trade Area of the Asia Pacific and push for an APEC-wide FTA within some determined time frame—perhaps ten years. But given the memories of 1997-98, when the U.S. overplayed its hand and caused a backlash, U.S. trade negotiators would now have to tread carefully if they hope to revive APEC as a regional vehicle for trade liberalisation.

Alternatively, utilising APEC as the institutional forum, the United States could attempt to negotiate with those APEC members that are ready to move beyond bilateral FTAs toward a subregional agreement. In order to avoid anger and resentment over future discrimination, the APEC-minus FTA would need to provide a clear docking arrangement so that, when ready, other APEC nations could more easily join the agreement.

And thus we return to the promise of the TPP.

The first distinguishing feature of the TPP is that it is a relatively comprehensive agreement. The second distinguishing feature of the TPP is its explicit intent to welcome new members. The TPP was meant to serve as a model agreement that new members might join.

The TPP’s current configuration includes two U.S. FTA partners, Chile and Singapore. Two more U.S. FTA partners have expressed an interest in joining talks: Australia and Peru. Japan and Vietnam have also indicated they could attend. An agreement with the United States, Japan, Australia, New Zealand, and Chile at its core would have the economic heft to set a new standard for Asian integration. If it were open to new members, it could serve as the foundation for a Pacific Ocean-spanning free trade area.

While the TPP is important in the context of Asian regional maneuvering, it also emerges as a potentially important component of debates about U.S. trade policy. Trade has been a politically difficult issue for the Obama administration, one it has generally sought to avoid. This posed a problem for the President as he headed off to November’s Asia meetings.

In that context, it is easy to see how the TPP could appeal. It was too little-known to be very contentious and it had the general air of a visionary and creative new approach to trade, despite its provenance in the Bush administration. The President seemed to avoid some difficult technical obstacles by promising to ‘engage’ in discussions, rather than commit to reach an agreement. In recent weeks, the administration has indicated that it will handle the absence of trade negotiating authority by pretending that the authority still exists.

On its own, the TPP represents a very modest advance in global trade liberalisation. Its importance lies in its potential.

If successfully negotiated, it could potentially trigger a wholesale reconfiguration of Asian commercial alliances in a way that would meet important and long-held U.S. goals. It could potentially offer a way to overcome the global impasse between nations seeking deeper integration and those resisting such extensive commitments. And it could potentially offer a model of open regionalism that would address concerns about the world breaking up into distinct trading blocs.

Beyond the economic consequences, there are major strategic imperatives for the Obama administration to move with dispatch. As Lee Kwan Yew has argued, the pace of Asian regionalism is quickening.  Within the last year, Australian Prime Minister Kevin Rudd has put forward and vigorously pushed a new proposal for an inclusive Asia Pacific Community that would include the United States and India.

Conversely, the quirky, erratic new Japanese Prime Minister, Yukio Hatoyama, has espoused a narrower vision of an East Asian Community, implicitly excluding the United States. The future of Asian regionalism is in extreme flux—presenting President Obama with both opportunities and dangers. It is time to move beyond vague promises of ‘engagement’ to results. A serious approach to TPP negotiations would present an opportunity to do so.

This essay is part of a series of articles on the Trans-Pacific Partnership, and is an abbreviated version of an AEI International Economic Outlook that can be found at http://www.aei.org/outlook/100927.

Dr. Claude Barfield and Dr. Phillip I. Levy are resident scholars at the American Enterprise Institute for Public Policy Research.

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