President Obama’s trip to India, Indonesia, the G20 in Korea and APEC in Japan was all about America’s new engagement with Asia. As he said in his address at APEC in Yokohama, America wants to gain its share in the growth of Asian markets as they become a more and more important part of the global economic opportunity. But what does America need to do to achieve that objective?

There are some who see the idea of a Trans Pacific Partnership (TPP) as the instrument that will forge a new US economic relationship with Asia as well as broader economic integration across the region. Although there wasn’t much talk of TPP from the President over the past week, TPP remains an important sub-text in the dialogue about how to take trans-Pacific economic ties to a new level.

Sound a bit improbable? TPP is currently organised around a small group of economies (Singapore, Brunei, New Zealand, Chile (the P4) together with Australia, Peru, Vietnam, Malaysia and the United States) seeking to build on a free trade agreement between the P4. Is a trade agreement with Brunei, as it is sometimes disparagingly called in Washington, likely to deal with the big questions of US engagement in Asia when the US can’t even consummate KORUS, the free trade agreement it has negotiated with Korea? Is TPP a serious option for trans-Pacific integration when clearly China is not an early, perhaps even eventual, target for membership, Indonesia doesn’t want a bar of it and Japan is still fiddling about grasping the nettle on the agricultural reforms necessary to engage in TPP or any other trade liberalisation strategy?

On the positive side, the TPP has a number of attractions as a vehicle for the United States to advance its interests in Asia. The United States has already negotiated bilateral free trade agreements (FTAs) with two original members, Chile and Singapore, and with Australia which has been promoting its extension. The TPP itself is a comprehensive FTA that includes nearly complete free trade in goods within a short time-span, plus substantial advances in services, investment, health and safety regulations, competition and government procurement policy, and dispute settlement. And it contains explicit provisions for expansion to include new members from the Asian region and could serve as the foundation for trans-Pacific regionalism built upon the existing Asia Pacific Economic Cooperation (APEC) idea for a Free Trade Area in Asia and the Pacific (FTAAP) .

And the TPP sounds like a good thing. It promises a broad-ranging economic partnership beyond open trade in goods and services to national regulatory reform. It sounds like it will reach out to all economies in the region, not discriminate against major players with preferential treatment. And it might be depending on what it finally involves. The problem is that what it sounds like is not exactly what it is likely to be, as Christopher Findlay’s analysis suggests in this week’s feature essay.

‘The incentives will be strong for the foundation group to, first, close off accession until they get an agreement then, second, negotiate with new members one by one rather than have open entry on the basis of accession on the same rules. They may also differentiate among each other and new members, by making exceptions in respect of the way they are treated, for example.

‘This outcome is most likely because of the constraint on US negotiators to have approval by Congress in order to deal with new members. This approval rests on arguments for the negotiation, such as the creation of ‘high quality jobs’. This is clear in the letter from USTR Ron Kirk to the Speaker [pdf] of the House of Representatives advising of his intention to include Malaysia in the negotiations.’

In a period of immense risk in international trade diplomacy, and fragile recovery within industrial countries from the global financial crisis, it would be immensely dangerous to send a signal that trans-Pacific trade relations are about to bifurcate into fractious camps.

There is of course an alternative. It is the global system that has created the Asian opportunity and will continue to make or break it.

President Obama might well heed the advice of former USTR and now World Bank President, Robert Zoellick, who points out that the 6 per cent growth rate of the world’s developing countries means they will need ‘precisely the kind of high-value goods that generate well-paying jobs’. Doing the Doha deal is the quickest route to these markets. And, as Findlay argues, progress with TPP can, and needs to, be tied to the global system by taking regional liberalisation and reform commitments for multilateralisation through the WTO.

As the US hosts APEC next year, it will be critical to take a grand-slam, forward-looking agenda like this to the table, not go along slavishly and naively with pursuit of an old-fashioned US-style series of FTAs disguised as a grand-sounding Trans Pacific Partnership.

November 15th, 2010

Author: Peter Drysdale, ANU

Source: http://www.eastasiaforum.org/tag/trans-pacific-partnership/

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