Trade ministers from a dozen countries in the Americas and Asia-Pacific are in Hawaii for talks that could see the landmark Trans-Pacific Partnership (TPP) deal agreed on or before Friday (July 31st). The proposed treaty is one of the most important free trade agreements since the North America Free Trade Agreement (NAFTA) in 1994.
This is not just because the 12 markets ― the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam ― encompass around 40% of world GDP. In addition, TPP has an important rules-setting component and Obama administration officials have asserted that the new treaty will enable Washington, rather than Beijing, to write the "rules of the road" for important 21st Century economic issues, including intellectual property in the digital economy.
The key development that has enabled potential breakthrough, after around 5 years of negotiations, in Hawaii this week was the passage in late June in the US Congress of so-called Trade Promotion Authority (TPA). Australia's trade minister Andrew Robb went as far as to say that TPP negotiations could be concluded within a "fortnight [i.e. two weeks]" of passage of TPA, although that assessment was always likely to prove overoptimistic.
TPA is so important to the success of TPP and other pending US international trade agreements, such as the proposed Transatlantic Trade and Investment Partnership (TTIP) between the United States and the 28-member European Union, because it enables the White House to negotiate deals without significant Congressional interference after negotiations are complete. To be sure, the US House of Representatives and Senate must still approve or reject final agreements in straight ‘up or down' votes, but it cannot amend them.
Although some US free trade agreements have been passed without TPA, these included relatively small deals, such as a free trade agreement with Jordan. Given the complexity of TPP, renewal of TPA is widely seen as essential for a final agreement amongst the 12 countries as Washington's partners in the venture do not want to see hard fought items potentially unravelled by the US federal legislature.
While a TPP deal now appears probable, there could yet be obstacles that delay, or just possibly derail, a deal. Examples include long-standing disputes between Tokyo and Washington over automotive parts and rice imports, and the Canadian government's desire to secure significant protections for the country's dairy farmers and wider agricultural products. Moreover, Ottawa is also aware that, some two decades after the agreement of NAFTA, TPP would potentially give the United States a chance to review that 1994 agreement, with Washington already pointing to a desire to push Canada on greater market access.
This underlines that TPP is a very controversial agreement with many domestic constituencies, including labour organisations in the United States itself, who are concerned about the impact upon wages and jobs for ‘blue-collar' workers in the country of the free trade deal. While the precise overall economic impact of the proposed deal is hard to forecast with precision, the Petersen Institute for International Economics has indicated that it will provide an approximately 300 billion dollar boost to the dozen TPP countries (which might expand over time to include other countries, including China) by 2025.
However, far from being just a potential source of economic growth, TPP also is being promoted by the Obama administration to embed US influence internationally. For instance, the treaty will have a significant rule-setting component, perhaps more so than any other previous trade deal, in multiple areas including limiting subsidies to state-owned companies.
President Barack Obama made this explicit in May when he highlighted that "if we don't write the [new] rules for free trade around the world, guess what, China will. And they'll write those rules in a way that gives Chinese workers and Chinese businesses the upper hand".
More broadly, there is also a significant geopolitical component too to TPP inasmuch as it will help reorient and lock-in US international policy toward the Asia-Pacific region (the so-called "Asia pivot") and other strategic high-growth markets. In this sense, passage of the treaty would be a multiple major win for Obama as he seeks to define his presidential legacy about a year and a half before his tenure in the White House formally comes to an end.
The White House recognises that passage of TPP will serve the goal of re-assuring Asia-Pacific allies about enduring US security and political, not just economic, commitments to them, and US Defence Secretary Ashton Carton has underscored this point by asserting that "passing TPP is as important to me as another aircraft carrier". And, in turn, TPP will send a clear message to others, especially China, about US intent to continue to place greater strategic emphasis on the region, despite deep involvement in other regions of the world.
These are simple, but important messages at a time of significant geo-political turbulence and tension -- both in the region and beyond. This includes the once-in-a-generation transition of leadership in China in the last two and a half years, and the subsequent rise of a more assertive Beijing; plus the re-election last December of the conservative, nationalist Japanese Prime Minister Shinzo Abe.
And supplementing potential passage of TPP is the military element of the US's Asia-Pacific pivot. Here, the Pentagon is slowly but surely deploying additional forces and resources to the region at the same time it is protecting funding for programmes seen as needed for operations there, even as overall US defence budgets are squeezed and overall personnel levels cut.
Taken overall, agreement on TPP could come as soon as this week after some five years of hard fought negotiations. The White House will press as hard as possible to see the agreement wrapped up before 2016 US presidential and congressional election-year pressures potentially make it harder to secure final agreement in Washington.
Andrew Hammond is an Associate at LSE IDEAS (the Centre for International Affairs, Diplomacy and Strategy) at the London School of Economics, and a former Special Adviser in the UK Government.
This is not just because the 12 markets ― the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam ― encompass around 40% of world GDP. In addition, TPP has an important rules-setting component and Obama administration officials have asserted that the new treaty will enable Washington, rather than Beijing, to write the "rules of the road" for important 21st Century economic issues, including intellectual property in the digital economy.
The key development that has enabled potential breakthrough, after around 5 years of negotiations, in Hawaii this week was the passage in late June in the US Congress of so-called Trade Promotion Authority (TPA). Australia's trade minister Andrew Robb went as far as to say that TPP negotiations could be concluded within a "fortnight [i.e. two weeks]" of passage of TPA, although that assessment was always likely to prove overoptimistic.
TPA is so important to the success of TPP and other pending US international trade agreements, such as the proposed Transatlantic Trade and Investment Partnership (TTIP) between the United States and the 28-member European Union, because it enables the White House to negotiate deals without significant Congressional interference after negotiations are complete. To be sure, the US House of Representatives and Senate must still approve or reject final agreements in straight ‘up or down' votes, but it cannot amend them.
Although some US free trade agreements have been passed without TPA, these included relatively small deals, such as a free trade agreement with Jordan. Given the complexity of TPP, renewal of TPA is widely seen as essential for a final agreement amongst the 12 countries as Washington's partners in the venture do not want to see hard fought items potentially unravelled by the US federal legislature.
While a TPP deal now appears probable, there could yet be obstacles that delay, or just possibly derail, a deal. Examples include long-standing disputes between Tokyo and Washington over automotive parts and rice imports, and the Canadian government's desire to secure significant protections for the country's dairy farmers and wider agricultural products. Moreover, Ottawa is also aware that, some two decades after the agreement of NAFTA, TPP would potentially give the United States a chance to review that 1994 agreement, with Washington already pointing to a desire to push Canada on greater market access.
This underlines that TPP is a very controversial agreement with many domestic constituencies, including labour organisations in the United States itself, who are concerned about the impact upon wages and jobs for ‘blue-collar' workers in the country of the free trade deal. While the precise overall economic impact of the proposed deal is hard to forecast with precision, the Petersen Institute for International Economics has indicated that it will provide an approximately 300 billion dollar boost to the dozen TPP countries (which might expand over time to include other countries, including China) by 2025.
However, far from being just a potential source of economic growth, TPP also is being promoted by the Obama administration to embed US influence internationally. For instance, the treaty will have a significant rule-setting component, perhaps more so than any other previous trade deal, in multiple areas including limiting subsidies to state-owned companies.
President Barack Obama made this explicit in May when he highlighted that "if we don't write the [new] rules for free trade around the world, guess what, China will. And they'll write those rules in a way that gives Chinese workers and Chinese businesses the upper hand".
More broadly, there is also a significant geopolitical component too to TPP inasmuch as it will help reorient and lock-in US international policy toward the Asia-Pacific region (the so-called "Asia pivot") and other strategic high-growth markets. In this sense, passage of the treaty would be a multiple major win for Obama as he seeks to define his presidential legacy about a year and a half before his tenure in the White House formally comes to an end.
The White House recognises that passage of TPP will serve the goal of re-assuring Asia-Pacific allies about enduring US security and political, not just economic, commitments to them, and US Defence Secretary Ashton Carton has underscored this point by asserting that "passing TPP is as important to me as another aircraft carrier". And, in turn, TPP will send a clear message to others, especially China, about US intent to continue to place greater strategic emphasis on the region, despite deep involvement in other regions of the world.
These are simple, but important messages at a time of significant geo-political turbulence and tension -- both in the region and beyond. This includes the once-in-a-generation transition of leadership in China in the last two and a half years, and the subsequent rise of a more assertive Beijing; plus the re-election last December of the conservative, nationalist Japanese Prime Minister Shinzo Abe.
And supplementing potential passage of TPP is the military element of the US's Asia-Pacific pivot. Here, the Pentagon is slowly but surely deploying additional forces and resources to the region at the same time it is protecting funding for programmes seen as needed for operations there, even as overall US defence budgets are squeezed and overall personnel levels cut.
Taken overall, agreement on TPP could come as soon as this week after some five years of hard fought negotiations. The White House will press as hard as possible to see the agreement wrapped up before 2016 US presidential and congressional election-year pressures potentially make it harder to secure final agreement in Washington.
Andrew Hammond is an Associate at LSE IDEAS (the Centre for International Affairs, Diplomacy and Strategy) at the London School of Economics, and a former Special Adviser in the UK Government.
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