President-elect Joe Biden has been highly critical of Trump’s approach, emphasising the importance of alliances. He was vice president for an administration that took pride in its ‘pivot to Asia’. As Biden looks to reverse objectionable Trump policies, might he not start by reviving the US commitment to the TPP?
In 2016, there were suspicions that Hillary Clinton, had she won the presidency, would have called for minor renegotiations of the TPP and used the resulting changes as a pretext for reversing her campaign position. This was a model pioneered by former president Bill Clinton with NAFTA in 1992–1993. But a quick embrace of the TPP will be difficult for Biden.
In 2015, Hillary Clinton had an incentive to turn against the agreement she had helped negotiate: trade was becoming the scapegoat for public discontent about economic conditions, particularly within key groups backing her Democratic Party. While US public opinion surveys show the popularity of trade rising sharply from 2016, it sagged in 2020. Perhaps aware of continued blue-collar concerns, Biden ran a trade-sceptical campaign. He embraced ‘buy American’, not ‘rejoin TPP’, and promised to address workers’ domestic concerns before he turned to new trade agreements.
The popular aversion to TPP had more to do with its symbolic nature than its actual content. Along with NAFTA, it came to symbolise the foreign forces that were seen as destroying US factory jobs. The disconnect between symbol and reality were on display when Trump’s reworked NAFTA, the United States–Mexico–Canada Agreement, borrowed liberally from TPP approaches. This month, Democratic Senator Tammy Duckworth spoke about how the United States needs a ‘TPP-like agreement in the Asia-Pacific’. Neither she nor other leading Democrats have seemed content with CPTPP as a sufficient rebranding.
US trade policy relies upon Trade Promotion Authority (TPA), or similar legislation delegating to the executive branch Congress’ constitutional right to set trade policy. The lack of TPA for most of Obama’s presidency was a critical factor in delaying the conclusion and consideration of the TPP in the United States. The current version of TPA is set to expire on 1 July 2021.
For Biden to engage in serious negotiations over accession to CPTPP or a TPP-2, he would need to expend political capital on trade agreements at a critical, early stage of his presidency — exactly what he vowed not to do. Given the President-elect’s age, it is unclear whether he would run for a second term, so he would have half the time former president Obama had to negotiate and conclude a significant deal.
By now, the world has moved on. In 2020, not only has the TPP been locked in as the CPTPP, but many of the participants have recently joined the Regional Comprehensive Economic Partnership (RCEP). While there might be a willingness to bring the United States back into the TPP, there may be limited appetite for new negotiations.
It also remains to be seen how nations will react to the new precedent whereby years of trade negotiations can be reversed with a November election, which was not previously true with NAFTA, the Uruguay Round or China’s WTO accession. Given past criticisms of the TPP, the Biden administration will want more leverage than before, but will likely have less.
Lest the situation sound too grim for advocates of US commercial engagement in the region, there will be countervailing forces as well. US business groups will be eager for the benefits of an open, rules-based trading system. National Security Advisor-designate for Biden’s administration Jake Sullivan has written about the importance of US involvement in setting trade rules.
On the geopolitical front, there will be a desire to assert US relevance — especially in the Asia Pacific — and to re-establish the United States as a reliable ally. Above all, there will be a US desire to find a more effective means to shape Chinese economic behaviour, after the unfortunate and ineffective experiment with unilateral Section 301 tariffs. The TPP always held promise in that regard.
So how will these various forces be reconciled in a Biden administration? The best evidence comes from the administration in which Biden served eight years as vice president. The lesson then was to temporise. Pick up easy wins, like dropping action against Vietnam on currency grounds. Take symbolic actions that suggest commitment to the region, such as launching new talks or appointing an ‘Asia tsar’ to the National Security Council. And postpone politically treacherous actions such as re-joining the TPP.
Unfortunately, the other lesson from the Obama administration was that this policy of postponement carried its own risks. A tough negotiation in Hawaii, a few political stumbles, and the United States was on the outside of the TPP looking in. It remains to be seen whether President-elect Biden puts the United States on the same path.
Phil Levy is Chief Economist at Flexport.