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Geopolitics moves to center stage of Obama trade deal push
Trade supporters are pushing the geopolitical importance of a sweeping Asia-Pacific agreement in an effort to save the deal from defeat on Capitol Hill.
Proponents are arguing that passing the Trans-Pacific Partnership (TPP) will demonstrate U.S. leadership in the region and will define future economic relationships that assure the long-term stability of the Pacific Rim.
“TPP recognizes both America’s concrete economic interests in Asia and demonstrates U.S. steadfastness,” Robert Zoellick, the former World Bank president and U.S. trade representative, recently wrote in the Wall Street Journal.
“If the U.S. abandons TPP, our Asian allies and partners will perceive America as yielding to China, and they will accommodate accordingly,” said Zoellick, who met with White House officials last week on trade.
The White House has argued that the TPP sets the stage for tougher global trading rules that will give the United States an economic and strategic edge in the region amid China’s economic rise.
“There’s no one who disputes that it is better for the U.S. to have this presence in the Pacific Rim from a strategic and foreign policy point of view, from the perspective of making sure that we are in fact setting up trading rules,” Douglas Holtz-Eakin, former director of the Congressional Budget Office and president of the American Action Forum, told reporters recently.
Jeffrey Frankel, professor of capital formation and growth at Harvard’s Kennedy School of Government, said that if the United States doesn’t pass TPP “Asians are going to interpret it as a U.S. withdrawal from their region, and they’re going to get closer to China.”
Frankel said that many in Asia have come to think that “maybe they can’t depend on us, that we’re withdrawing and that feeling may be worse in this presidential election year.”
President Obama has said that if the United States doesn’t write the rules, China will take the lead on foreign policy and trade.
The president is wrapping up a weeklong trip that included stops in Vietnam and Japan, two TPP partners, where he made the push for passage of the deal.
In Japan, Obama and Prime Minister Shinzo Abe both vowed to ratify the TPP before the end of the year.
Earlier this week, Obama acknowledged that “the politics of it will be noisy” and there may be some bumps in the road but he hoped to get TPP done.
U.S. Trade Representative Michael Froman said recently that there is no way to measure “the cost to American leadership if we fail to pass TPP and allow China to carve up the Asia-Pacific through their own trade agreement.”
Supporters view TPP as a way to push Beijing into adopting higher trade and economic standards in the rapidly growing region.
As part of that plan, the United States and China are working aggressively toward forging a bilateral investment treaty.
Fabio Ghironi, an economics Professor at the University of Washington, said that TPP will “create an opportunity for engagement rather than for antagonizing” with China, giving the U.S. and its trading partners more influence on the security and trade fronts in the region.
But the TPP faces a huge uphill battle in Congress given Trump’s and Clinton’s positions.
Moreover, most congressional Democrats are already opposed to the agreement and Republicans are stressing that they won’t help pass the TPP until the White House resolves their concerns on issues like the treatment of pharmaceuticals and tobacco.
As Congress wavers, TPP trading partners such as New Zealand are saying that the deal must be passed or the United States will face the stark reality of being left out.
The United States is no longer the only game in town in the region with the 16-nation Regional Comprehensive Economic Partnership (RCEP) moving forward with China and India as well as New Zealand and Australia. That deal could be done by year’s end, putting the pressure on the TPP countries.
“This is unquestionably the year to do it,” Tim Groser, New Zealand’s ambassador to the United States, told reporters recently.
If Congress doesn’t pass the TPP this year “where the U.S. will go is a very interesting question,” Groser said.
Most supporters say that congressional lawmakers understand the gravity of the decision they are facing on whether to pass the TPP this year.
Gabe Horwitz, vice president of the economic program at the center-left think tank Third Way, said that lawmakers are looking at both the economic and the strategic aspects of the deal but “U.S. leadership in the region is a huge thing on Capitol Hill.”
“The Trump effect magnifies it more about leadership and not abdicating that leadership and trade is a way to do that,” he said.
Ed Gerwin, a trade expert with the Progressive Policy Institute, said that the significance of the strategic issues only became clear to him after he traveled to Japan last fall and spoke with their defense ministers where there are rising concerns about China actions in the South China Sea.
“I think in terms of the TPP there’s a huge geopolitical basis for passing it,” he said.
“TPP influences what kind of China we have commercially,” he said.
Thomas Donohue, president and CEO of the U.S. Chamber of Commerce, said that TPP will determine which of the countries in the Pacific are going to align with U.S. views and which ones align with China.
He said that whomever wins the White House will have to acknowledge that point.
“When you walk into the White House and sit in the chair in the Oval Office and you start looking at the realties of what we face around the globe geopolitically and economically you’re going to be looking for a lot of help in a big damn hurry,” he said.