Economics and finance, Trade and industry, International relations | Australia, Asia, East Asia, South Asia, Southeast Asia, The Pacific, The World

20 October 2016

The economic consequences of failing to secure the benefits of regional integration through the Trans-Pacific Partnership will be costly for the US and its partners, Claude Barfield writes.

US Secretary of Defense Ashton Carter has called the Trans-Pacific Partnership (TPP) the equivalent of a “second aircraft carrier.” And Secretary of State John Kerry has warned: “We cannot withdraw from TPP and still be viewed as a central player in the Pacific Rim and an undisputed force for peace and prosperity across the globe.” The remarks of these Obama Administration officials were seconded by Republican Senator John McCain (AZ) who said: “If TPP fails, American leadership in the Asia-Pacific may very well fail with it.”

These statements underscore the reality of trade policy stance at the intersection of a nation’s diplomatic and security strategies and its broad economic goals. With the exception of multilateral negotiations in the World Trade Organization—which deal exclusively with trade issues—bilateral, subregional, and regional trade agreements inevitably are influenced and guided by collateral, competing national priorities. A review of the history of US decision-making from the 1980s, when it first embarked on bilateral and regional trade projects, demonstrates this geopolitical overlay to trade policy.

Famously, it was Secretary of State James Baker, in response to a Japanese plan to create an exclusive Asian trade architecture, who proclaimed that the US would oppose any “plan that drew a line down the middle of the Pacific” with the US on one side and the nations of Asia on the other. Baker stated later that while there were no immediate challenges to US hegemony, he wanted to put down a marker tying US economic interests closely to US political and security goals. Similarly, the Clinton administration, in defending the North American Free Trade Agreement and a proposed regional trade pact with Latin America, strongly linked the trade initiatives with the political goal of advancing democratic norms and institutions in Central and South America.

More on this: Will the US remain a Pacific power? The TPP can tip the scales

Under President George W Bush the US negotiated trade agreements with 17 nations and the administration publicly set forth the criteria for US trading partners. In a number of speeches and congressional hearings US Trade Representative, Robert Zoellick, bluntly affirmed that in choosing free trade agreement partners, the US would expect “cooperation—or better—on foreign and security policy.” (And the US placed Australia at the front of the line in return for supporting the Iraq invasion).

Though President Barack Obama publicly eschewed many of the foreign policy tenets of the Bush administration, he ultimately accepted the inextricable entwining of US international trade policy with US diplomatic and security policy. Indeed, his decision to back TPP negotiations in late 2009 was rooted both in the sage advice of his economic advisers and in urgent pleas by his State and Defense departments for a US response to the deteriorating situation in Asia—China’s reversal of its ‘peaceful rise’ mantra and the increasingly erratic and dangerous provocations by North Korea under Kim Jong-un.

With great fanfare, Obama and Secretary of State Hillary Clinton announced the US “pivot” (later “rebalance”) to Asia. In a number of speeches and statements in Asian fora, the president repeatedly reaffirmed that: “The United States is a Pacific power and we are here to stay.” From the outset, the nations of East Asia and observers around the world have identified the TPP as the central symbol of current and future US leadership in the region.

TPP negotiations are now concluded and the intricate and voluminous terms of the agreement are in the public arena. While not perfect, the results are generally quite positive—certainly from the perspective of US priorities and goals. Yet anti-globalist and anti-trade voices in the US have mounted a sustained and vitriolic campaign against the TPP. Its fate in Congress is highly uncertain, and possibly dire.

More on this: The TPP: win, loss or draw?

Meanwhile, the diplomatic and security environment in East Asia is becoming increasingly fraught. North Korea seems to be moving inexorably toward greater nuclear arms power and acquiring the means to deliver its weapons. At the same time, Chinese obduracy and belligerency over the South and East China Seas grows ever more challenging under President Xi Jinping. Further, The Chinese are far along in constructing an economic architecture that excludes the US: in trade, the Regional Comprehensive Economic Partnership; and in development, the Asian Infrastructure Investment Bank.

Over the long-term there can be no doubt that the economic consequences of failing to secure the benefits of regional integration in the world’s fastest growing region will be costly for the US—and its 11 TPP partners.  But even more costly for the US will be the failure to pass the TPP and fulfil President Obama’s vow that: “In the Asia Pacific in the 21st century, the United States of America is all in.” As Singaporean Prime Minister Hsien Loong has warned: “If you don’t finish TPP, you are giving the game away [to China].”

One can only hope that the observation allegedly made by Winston Churchill that, “You can always count on the Americans to do the right thing, after they have exhausted all other possibilities”, comes true.

Much of this essay is taken from themes developed in a recent paper: “The Trans-Pacific Partnership and America’s Strategic Role in Asia,” in Peter C.Y. Chow (ed.), The Trans-Pacific Partnership and the Path to Free Trade in the Asia Pacific (Edward Elgar, Cheltenham, England, 2016).

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Barfield, Claude. 2016. "The Trans-Pacific Partnership: More Than A Trade Agreement - Policy Forum". Policy Forum.