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1 September 2016

The US election result could decide the fate of the TPP and alter the economic, political and security future of the Asia-Pacific, but the presidential nominees are not asking the right questions, Peter Chow writes.

While Obama may use his visit to Asia, which will be his last as President, to advocate for the ratification of the Trans-Pacific Partnership (TPP) by the agreement’s 11 other member nations, his real audience will be at home rather than abroad.

The reasons for the current low ebb in support for the TPP in the US are two-fold: Donald Trump’s campaign to impose a high tariff on imports, as well as his opposition to the trade deal; and Hillary Clinton’s reservations about the TPP on the basis that it does not provide sufficient protection for American workers. As Secretary of State, Clinton advocated for the TPP as part of the US pivot to Asia. As a presidential candidate however, prodded by a Bernie Sanders and Elizabeth Warren-led leftist protectionist push during the Democratic primary and Donald Trump’s rightist sentiments, Clinton has been wedged over what she could say on the TPP. But, neither of these two presidential candidates has asked the right questions about the TPP.

Under every American President, from Roosevelt to Obama, the US has maintained a free trade policy through various rounds of multilateral trade negotiations. The US benefits from a ‘freer’ trade regime than most of its trading partners. So far, the US has signed free trade agreements (FTAs) with 20 countries. US exports to those 20 countries have grown much faster than its overall global exports and its cumulative trade surplus with these FTA partner countries exceeded US$230 million in the last five years.

For those who are concerned about labour rights and environmental standards the TPP, which itself is a WTO plus and WTO extra agreement, sets a high standard by requiring that all signatories observe the principles of the International Labor Organisation and comply with an environmental standard much higher than any of the existing trade pacts.

More on this: 'The TPP may not be an ideal outcome, but it is still the most important multilateral free trade agreement since 1994'

The TPP also includes the liberalisation of service trade, in which the US has a strong comparative advantage. Since service trade data first became available in the mid-to-late 1980s, the US has been enjoying service trade surpluses with its trade surplus sitting above $700 billion per annum for the past decade. The TPP, if implemented, will create more jobs for American workers with higher pay than any possible consequential loss of low wage jobs in the traditional, labour-intensive manufacturing industries.

What else can the US expect from the TPP?

In terms of geopolitics, the TPP is an important pillar of the US pivot to Asia. As US Defense Secretary Ash Carter said, “in terms of our rebalance in the broadest sense, passing TPP is as important to me as another aircraft carrier. It would deepen our alliances and partnerships abroad and underscore our lasting commitment to the Asia-Pacific.” Moreover, the TPP was designed to be the path to a region-wide free trade arrangement in the future, as prescribed by APEC. With the collapse of the Doha Round, one can reasonably argue that the TPP is now the most feasible way to pursue a free trade system in the region.

It is hoped that the populist, anti-trade sentimentalism will be corrected after the US election in November and that the US Congress will ratify the trade pacts soon after that. Otherwise, many US allies in the region will become weary with the uncertainty surrounding American leadership in the Asia-Pacific.

More on this: Will China’s rising economic power really equate to global political power rivalling that of the United States?

If isolationism prevails in US foreign policy under the next administration, then the US will not only face the dilemma of leaving China to write the rules of trade in the Asia-Pacific, but also cause Japan and other Asian countries to lose their confidence in it. Many TPP members are willing to trade with China but are concerned by the prospect of China’s assertiveness in the absence of US support. If the TPP deal collapses, then many of these countries may be forced into greater economic integration with China, precipitating a strategic power shift in the region. This is evidenced by the recent visit of Singapore’s Prime Minister to Washington in early August during which Prime Minister Lee asked President Obama to push Congress to ratify the TPP, despite the fact that Singapore already has an FTA with the US.

It goes without saying that many other Asian countries share the same desire for Washington to take a more aggressive approach to ratifying the TPP soon. Republican presidential candidate Donald Trump advocated for America to become great again. But, the US will not be great and won’t be a Pacific power if it loses all its allies in the Asia-Pacific.

Trade agreements are a two-tiered political game, with external and internal dimensions. While the successful manipulation of the TPP’s “lock-in” effect externally helped the Abe Administration in Japan engage in economic restructuring and win a great majority in the Upper House election in July, former British Prime Minister David Cameron’s miscalculation on the Brexit referendum internally led to the current chaos and uncertain future relationship between the European Union and the United Kingdom. Anti-TPP populists in the US need to learn the lessons of such politically-charged trade successes and failures.

Unless a single issue around the TPP dominates the US election, which is not evident so far, the hope is that American trade policy will continue its long tradition of upholding a free trade regime. The future of the TPP will in large part determine not only the future of economic integration, peace and prosperity in the Asia-Pacific, but also the standing of the US as a Pacific power.

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Chow, Peter C Y. 2016. "Will The US Remain A Pacific Power? - Policy Forum". Policy Forum.