Trans-Pacific Partnership Poised to Move on Without the US
By John Bostwick, Managing Editor, Radius
Last month the White House released a statement about US Trade Representative Robert Lighthizer’s May 20-21 trip to Vietnam to attend a meeting of trade ministers of the Asia-Pacific Economic Cooperation (APEC). While the recently-appointed Lighthizer is known for his work negotiating trade deals in the Reagan administration, it was his first trip abroad as US Trade Representative.
The White House statement is brief but revealing. It notes that “in the margins” of the trade minster meetings, Lighthizer had “formal bilateral meetings with the following economies: Canada, Japan, Mexico, Vietnam, China and Australia.” Lighthizer is quoted as saying: “It was important to me to come to APEC first and foremost to reaffirm the President’s strong commitment to promoting bilateral free and fair trade throughout the Asia-Pacific region.”
Lighthizer also notes that the APEC goal of free trade “cannot be met without tackling trade-distorting measures that have led to massive US trade imbalances in the region.” He concludes by saying that he wants to work with the other member nations “to expand US export market access and address persistent unfair trade practices.” The statement concludes by noting that while the Asia Pacific region is economically “dynamic,” the US’s trade deficit there was $576 million in 2016.
The White House statement runs to just 312 words, but the word “unfair” — used to describe the practices of the US’s trade partners — appears twice. The notion that the US economy has been wronged by other economies is consistent with President Trump’s campaign rhetoric. On the trail and in his inaugural address he promised to put America first, in part by pursuing bilateral trade agreements and avoiding multilateral ones like NAFTA and the Trans-Pacific Partnership (TPP). Trump began making good on that last promise almost immediately after taking office by extracting the US from the TPP.
The TPP had been a cornerstone of the Obama administration’s economic initiatives, and originally the agreement involved 12 nations, including Japan, Australia, New Zealand and Canada, but not including China. Then-president Obama laid out his case for the TPP in a May 2016 editorial for The Washington Post, claiming that, among other benefits, the TPP would promote a free and open internet, strengthen intellectual property protections, remove local trade barriers and enhance national security by strengthening economic ties with important trading partners. He concluded by writing that “the United States, not countries like China” should write the trade rules that govern the large and growing Asia Pacific region.
During his recent Vietnam visit, Lighthizer made clear that Obama’s views are no longer relevant in Washington, and that President Trump is now calling the shots. Lighthizer told reporters in Hanoi: “The United States pulled out of the TPP and it’s not going to change that decision. … The president made a decision, that I certainly agree with, that bilateral negotiations are better for the United States than multilateral negotiations.”
Trump’s emissary proved to be a polarizing force at the Hanoi meeting. Reuters reports that the meeting was “stormy,” as Lighthizer “disagreed over protectionism with … [twenty other APEC member countries] that look skeptically at the Trump administration's ‘fair trade’ agenda.” The draft of a planned joint statement was abandoned because, according to Reuters, US officials objected to a statement that implied protectionism would hamper global economic recovery. At the same time, those US officials “wanted to include a reference to ‘unfair trade practices that result in unbalanced trade’ and another calling for the removal of barriers that distort trade to ensure that it is ‘both free and fair.’”
The battle over what language to include in the doomed joint statement continued until 1:00 a.m., at which point the representatives decided to discard it and instead draft an action statement and a statement from Tran Tuan Anh, the Vietnamese trade minister who chaired the meeting. The Reuters article says that the chairman’s statement “largely ignored changes proposed by the United States and instead included a reference to a ‘fight against all forms of protectionism.’”
Amid this drama, representatives from the remaining 11 nations in the Trans-Pacific Partnership — known as the TPP 11 — met to discuss the fate of the agreement. The Associated Press reports that the ministers have decided to pursue the agreement without the United States. This will require amendments to the agreement, as the current draft requires both the US and Japan to sign on for it to go into effect.
The Hanoi meeting, then, is the first step on the new path to a TPP without United States participation. A next step will be to document options for moving forward without the US, and to present those options at this year’s annual APEC summit in November, also to be held in Hanoi.
New Zealand’s trade minister Todd McClay chaired the recent TPP “sideline” meeting and made clear that the US would be welcomed back if Trump and his advisors change their minds. He told the AP: “It’s clear that each country is having to consider both economic values and strategic importance of this agreement, but in the end there [is] a lot of unity among all of the countries and a great desire to work together to come up with an agreement among 11 that not only delivers for all of our economies and the people of our countries, it’s also open to [other] countries in the world to join if they can meet the high standards in the TPP agreement.”
The Wall Street Journal notes that much of the original TTP’s appeal lay in the participation of the US, with its enormous market. Japan and New Zealand are eager to move forward without the US, and those countries and other supporters, according to the Journal, hope that “moving ahead will prevent more than five years of work hammering out the trade rules from being wasted, and keep the agreement on life support in case political conditions eventually change in the US.”
Meanwhile, Beijing is engaged in another multilateral trade agreement known as the Regional Comprehensive Economic Partnership (RCEP). According the Journal, some countries are concerned (as Obama was) that “China will become the sole power determining the terms of trade in Asia, while also establishing the principle of linking labor and intellectual-property protection standards to market access.”
Some have noted that even if the US maintains its stance on the TPP, Beijing will not be pleased if the TPP is ratified by the TPP 11. An article in Forbes notes for example that the proposed China-backed RCEP “lacks the depth and quality of the TPP” and is “seen as a policy tool to promote Beijing’s geopolitical agenda.” If the TPP goes into effect with any combination of partners, then, “Beijing may be forced to accept higher, more demanding trade standards, with the revived TPP serving as a benchmark.”