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Obama’s Critical Moment on the Trans-Pacific Partnership (TPP)

by Edward Alden
April 22, 2014

Japan's Prime Minister Shinzo Abe talks to U.S. President Barack Obama during the opening session of the Nuclear Security Summit in The Hague March 24, 2014 (Yves Herman/Courtesy Reuters). Japan's Prime Minister Shinzo Abe talks to U.S. President Barack Obama during the opening session of the Nuclear Security Summit in The Hague March 24, 2014 (Yves Herman/Courtesy Reuters).

What does President Obama actually want from the Trans-Pacific Partnership (TPP), his administration’s signature trade negotiation with 11 Asia-Pacific countries? During his visit to four countries in the region this week, we may finally get an answer to that question. And it says something about how closely he has played his cards on the issue that it’s rather hard to predict the outcome.

Wait, I hear some objecting. Of course we know what the president wants. He wants, as his National Security Advisor Susan Rice put it in a briefing Friday, a “comprehensive, high-standards regional trade agreement.” But hard as that is to say, it’s even harder to achieve. And the negotiations have reached the point where some difficult decisions–of the sort that only a president can make–are looming. Yet Obama has given few hints about how he might handle those decisions.

Consider just a few of the possibilities. An agreement with Japan, which is the first country Obama will visit, is the linchpin of the TPP. Japan’s participation is what takes the TPP from being a modest addition to the existing U.S. network of bilateral trade agreements in the region to a truly new animal, an ambitious regional deal that China may one day have no choice but to join. The United States and Japan together account for 80 percent of the economic output of the 12 TPP member countries. U.S. Trade Representative Mike Froman has been working tirelessly to try to conclude a deal with Japan, but huge issues remain. Japan wants to exclude agricultural products like beef, rice, pork, and dairy, and wants the United States to quickly eliminate its 2.5 percent tariff on car imports and its 25 percent tariff on light trucks, which keeps many Japanese-made SUVs out of the U.S market. The United States also wants Japan to eliminate an array of non-tariff barriers that block sales of U.S.-made cars and trucks.

President Obama faces some choices. He could demand an end to import barriers in Japan’s agricultural market, insisting that Tokyo go well beyond what Japan gave to Australia in their “economic partnership” agreement reached earlier this month. That would please farm state senators and congressmen, but could well force the Japanese government to quit the negotiations rather than face a domestic backlash. Or he could make a priority of the auto talks, demanding that Japan increase access for U.S. vehicles while insisting on a very slow phaseout of U.S. tariffs, much as he did to win the support of the United Auto Workers union for the U.S.-Korea Free Trade Agreement.

But the options are far more complex still. President Obama has repeatedly said, for example, that future trade agreements should set the highest possible standards on labor and environmental protection, in part to protect U.S. workers from unfair competition. But the United States is largely isolated in the talks on both issues. The president could ask for Japanese support for strong labor and environmental provisions in exchange for softening U.S. demands on agriculture and autos.

Or what about currency manipulation? Some Democrats in Congress have insisted that the TPP must contain measures to prevent governments from intervening in currency markets to hold down the value of their currency and gain an export advantage. Obama could ask for Japan’s support on the issue, and might get it since Tokyo has largely abandoned direct intervention in currency markets. But again, there would be a price to pay on other negotiating issues.

Whatever the president does, he will do with one eye on the Congress, where members of his own party are opposed to giving him the trade negotiating authority he needs to complete the TPP, and the Republicans are willing only if enough Democrats sign on. If Obama pushes too hard on Japan, a deal may be impossible, but if he does not bring home enough then his currently slim chances in Congress will become even slimmer.

The president has so far managed to remain above the fray, leaving the difficult negotiations to others in his administration. But if he truly wants to finish the agreement, and make the TPP part of his presidential legacy, he has no choice but to get his hands a bit dirty. And there’s no time to start like the present trip.

Post a Comment 13 Comments

  • Posted by Peggy Palma

    DON’T send any more jobs over seas.

  • Posted by Tad King

    N.A.F.T.A. was a disaster for manufacturing and blue collar families, what makes this one any better?

  • Posted by Wanda Berthold

    Why not let other countries make their own decisions ,and we stay out of other countries decisions and make our own .It seems to me that all these difficult negotiations just make disagreements that causes conflict.

  • Posted by Bruce

    TPP will put the final nails in our coffin that NAFTA left out.

  • Posted by Danny

    Excellent, pithy analysis of the dilemma facing Obama and the TPP. We need to remember what trade agreements are not – they do not in themselves generate trade. They are merely Governments slowly dismantling Government-erected barriers to allow the freer flow of goods, services and investment.
    With this in mind, let’s hope Congress can see the value of to the US of integrating itself into some of the fastest growing markets on earth, under the TPP.

  • Posted by Tdc

    Um, TPP is going to destroy freedom of internet and censor anyone on it to be heard. Bad, bad, bad idea. Check out the IP (Intellectual Property) part of it. Oh wait, it is not open to public except for a leaked early draft on wikileaks.

  • Posted by Raymond Borgman

    It will screw working people in the USA. Just like every other deal has. More jobs lost and wages driven down.

  • Posted by Dave

    Fair Trade Mr. President – Labor and Environment must be part of the deal along with fair trade to reduce the trade deficit US workers carry on their back’s. Corporations like WalMart want “free” trade which equal WalMart & China/Japan getting the Gold Mine and US working families getting the Shaft!

  • Posted by Eino

    I sent a letter to my congressman about how I was against this treaty because it hinders peoples’ abilities to innovate, among other things. I also asked, why does it lack transparency for the common people to read?

  • Posted by Theo

    Negotiating Fair Trade Deals is always a challenging feat. Overall, such Fair Trade Agreements improve the situation, because they optimize the global economy, increasing trade, increasing economic opportunities and interwinding economies in a way that discourages war. The challenge, however, is for middle class blue collar workers that suddenly find themselves in competition with individuals oversees and the impact those changes have on their lives. It is my belief that these downsides can be assuaged by adding global living wage standards so these trade agreements allow American Workers to compete on level playing field. It is important that America maintains a substantial industrial base; something that is all the more valuable if it can exist within fair market competition free from excessive subsidies.

  • Posted by Yoshimichi Moriyama

    The trade between the United States and Japan is very big compared, say, to that between the US and Vietnam or that between Japan and Vietnam, and so it is the central part of the TPP negotiations.

    Suppose each of these two countries had a very high tax. For instance Japan had a 50% tax on every article it imports from the US, and the US had a 50% tax on every item it imports from Japan. Mutual tax reduction would enormously facilitate cost cuts, promote productivity and improve consumption and welfare of the two peoples.

    But since the two countries already have very low taxes imposed on most items they exchange with the other, the TPP would not contribute to a remarkable increase of economic welfare.

    The theory of free trade is not a scientific truth like the Newton’s universal gravitational attraction. It is not a moral goodness, either. The grave confusion we are in is that we mistake it for a scientific truth and a moral goodness, from which if we dgress, we think we will be commiting a heinous sin. It is simply a theory of economics and putting it into practice simly can bring a lot of profit to everybody, or can bring a lot of loss to a great number of people while bringing in a little or a very big profit to a small number of people, etc., all depending upon economic situations.

    It is time we should look it in the face.

  • Posted by Yoshimichi Moriyama

    There are things of great value in society that need to be protected from economic competition, cost-cutting, efficiency promotion, etc. Thou shalt not live by bread alone.

  • Posted by Yoshimichi Moriyama

    The theory of free trade was developed in Great Britain in the nineteenth century. It was not simply an economic theory but it was also an international relations theory for intenational peace.

    In what relation does free trade stand with peace? GM or Toyota would go to a country, according to the theory, where they could find cheaper labor, not hesitating to kick a million Americans or Japanese out of job, to China or the Philippines. They would prefer China if they could employ a Chinese for a dollar an hour while they had to pay two dollars for a Filipino. Would all these a rational choice in terms of national security, leaving a million people jobless at home, enriching an antagonistic country and impoverishing a friendly country?

    How come the British thought free trade made for international peace? It was due to the blindspot; we fail to see a thing that exists but which lies too close to us or which we have been accustomed to taking so much for granted. The British did not see the preponderant power of its navy all across the globe. If they had not had naval supremacy, they would not have mixed up economics with politics in confusion.

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