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Barack Obama has been an active free trade promoter in recent months. The U.S. president signed free trade agreements with South Korea, Colombia and Panama in October. He then brought a new trade deal to the Asia-Pacific region. When hosting the APEC Summit in Honolulu, Hawaii in November, he put the Trans-Pacific Partnership (TPP), a previously little-known cause, at the top of his agenda.
The TPP is a multilateral free trade agreement originally signed in June 2005 by Brunei, Chile, New Zealand and Singapore. Over the past years, Australia, Malaysia, Peru, the United States and Viet Nam have also been negotiating to join the group.
As one of the numerous trade arrangements in the burgeoning Asia-Pacific region, the TPP could play a positive role, analysts said. But it should address the concerns of all regional players instead of imposing high standards in disregard of the region’s huge economic diversity.
A step forward
Leaders of the nine nations have agreed on the “broad outlines” of the TPP agreement, Obama said at the APEC Summit on November 12.
“There are still plenty of details to work out, but we are confident that we can do so. So we’ve directed our teams to finalize this agreement in the coming year,” Obama said.
The proposed trade pact’s details mostly remain confidential, but countries will agree to a single schedule of tariff reduction and common regulations for seamless business operations across borders. The trade deal will cover areas traditionally included in trade agreements as well as services, intellectual property, investment and state-owned enterprises, and could bring most import tariffs on trade within the group to zero over a 10-year period after the negotiations are completed.
According to the Singapore Institute of International Affairs (SIIA), the nine countries currently engaged in TPP negotiations aimed to reach a final agreement by July 2012. “The July date also means the TPP might be signed before Obama faces the U.S. presidential elections, giving him a boost as he seeks a second term,” said an article posted on the research institute’s website.
Analysts said the U.S.-led TPP agreement will reaffirm U.S. engagement with Asia. By finalizing this trade deal, Obama“seeks to cement the United States’ economic role in Asia,” said Bernard Gordon, a professor of political science with the University of New Hampshire, in his recent article published in Foreign Affairs.
Japanese Prime Minister Yoshihiko Noda announced Japan was joining TPP negotiations on November 11, a widely anticipated statement that observers argued would elevate the importance of the pact.
With Japan, the world’s third largest economy, on board, the size of that free market zone will be widened substantially. The eight TPP partners account for less than 6 percent of U.S. trade, about the same amount as U.S. trade with Japan alone. A combination of the economic clout of the United States and Japan might attract others to join the club.
But Japan’s accession to the TPP depends on its ability to reform and open its agriculture sector. And there are skepticism and opposition in Japan regarding the merits of the trade pact. Japan needs to overcome these hurdles before becoming a TPP member.
Canada and Mexico also expressed their interest in joining the TPP as the APEC Summit wrapped up.
Open attitude
China, the world’s second largest economy next to the United States, has yet to announce any intention to join TPP talks.
Pang Sen, Deputy Director General of the Department of International Organizations and Conferences at the Chinese Foreign Ministry, said at a news conference after the APEC Summit that China will “earnestly study” the TPP. China has “an open attitude to all mechanisms that are beneficial to promoting economic integration in the AsiaPacific region,” Pang said, adding that such mechanisms should be “open, transparent and inclusive” to make a difference.
China has earlier said it supports free trade in the Asia-Pacific region and will watch the progress of the TPP. It has also indicated the thresholds for the TPP are too high for some developing countries, including China.
Though the United States has touted the TPP as a “21st-century agreement” that will lead to flourishing regional trade, its real economic effects remain uncertain.
“We still need to analyze whether or not it is in line with the interests of most countries in this region as well as its impact on the world economy,” said Song Yinghui, a researcher with the China Institutes of Contemporary International Relations. Whether China should join the group will depend on a comprehensive analysis of the TPP’s overall impacts, Song added.
The TPP presents a new model for economic and trade cooperation in the AsiaPacific region, which might inject vigor into economic and trade relations in the region, she said. But many of the high standards the TPP has set are designed to serve U.S. interests, sparking doubts in a number of countries.
For instance, the United States proposed to cut tariffs on environmental goods such as solar panels to 5 percent or lower. Since average U.S. tariffs on these products are 1.4 percent, the new proposal will not have any impact on the United States, but can help it penetrate other countries’ markets.
Chinese experts said the TPP, as it stands, looks more like a tool for the United States to promote exports. Mei Xinyu, an associate research fellow with the Chinese Academy of International Trade and Economic Cooperation, said after the global financial meltdown, the Obama administration attached unprecedented importance to export strategies to boost economic growth and reassert U.S. influence.
Since Europe has been troubled by the sovereign debt crisis, and Canada and Latin America face problems such as weak growth and limited market capacity, the Asia-Pacific region has naturally become the top choice for U.S. exporters, he said.
Given its voluntary nature, APEC can hardly meet U.S. demands for the quick and compulsory opening of markets, nor can it respond to U.S. calls to attach political strings to trade. That’s why Washington has turned to the TPP as an alternative, Mei said.
Return to Asia
Analysts argued the TPP initiative, despite its focus on free trade, has strategic implications for the Asia-Pacific region.
The TPP has become a “battleground for influence” in the Pacific region between China and the United States, said Simon Tay, Chairman of the SIIA, during an interview with the Council on Foreign Relations, a U.S. think tank based in New York City and Washington, D.C. Tay said the TPP will be a “game changer” for U.S. presence in the region.
U.S. economic engagement in Asia has been on the decline over the last decade and it has also lagged behind in the development of free trade areas (FTAs) in the region, said Joshua Meltzer, a research fellow with the Brookings Institution.
According to Meltzer, the United States has finalized FTAs only with Australia, Singapore and South Korea, while from 2000 to 2009, the number of FTAs in Asia increased from three to 54 and another 78 are under negotiation.
“U.S. absence from this proliferation of rule-making in Asia has limited the nation’s role in designing the rules under which increasing amounts of trade and investment are occurring,” Meltzer said.
Meltzer also pointed out that Asian economic architecture has matured in the past decade. A range of forums have been established for discussing economic goals, such as APEC, the ASEAN Plus Three mechanism(the Association of Southeast Asian Nations plus China, Japan and South Korea) and the East Asia Summit, which the United States has recently joined.
“Ensuring that the United States plays a key role in shaping Asian economic architecture will also affect its influence in the region,” Meltzer said.
The United States cannot afford to allow its presence in the Asia-Pacific region to weaken. After a decade of war in Iraq and Afghanistan, the Obama administration is bringing the United States back to Asia.
U.S. Secretary of State Hillary Clinton declared that this century will be “America’s Pacific century” during a speech at the EastWest Center in Honolulu on the sidelines of the APEC Summit.
“One of the most important tasks of American statecraft over the next decades will be to lock in a substantially increased investment—diplomatic, economic, strategic, and otherwise—in this region,” Clinton said.
Obama’s Asia-Pacific trip on November 11-19 also demonstrated Washington’s increasing commitment to the region. After the APEC Summit in Hawaii, he visited Australia to celebrate 60 years of the U.S.-Australian alliance. He also made his debut at the East Asia Summit in Bali, Indonesia.
(Reporting in New York City with additional reports from Yan Wei in Beijing)
The TPP is a multilateral free trade agreement originally signed in June 2005 by Brunei, Chile, New Zealand and Singapore. Over the past years, Australia, Malaysia, Peru, the United States and Viet Nam have also been negotiating to join the group.
As one of the numerous trade arrangements in the burgeoning Asia-Pacific region, the TPP could play a positive role, analysts said. But it should address the concerns of all regional players instead of imposing high standards in disregard of the region’s huge economic diversity.
A step forward
Leaders of the nine nations have agreed on the “broad outlines” of the TPP agreement, Obama said at the APEC Summit on November 12.
“There are still plenty of details to work out, but we are confident that we can do so. So we’ve directed our teams to finalize this agreement in the coming year,” Obama said.
The proposed trade pact’s details mostly remain confidential, but countries will agree to a single schedule of tariff reduction and common regulations for seamless business operations across borders. The trade deal will cover areas traditionally included in trade agreements as well as services, intellectual property, investment and state-owned enterprises, and could bring most import tariffs on trade within the group to zero over a 10-year period after the negotiations are completed.
According to the Singapore Institute of International Affairs (SIIA), the nine countries currently engaged in TPP negotiations aimed to reach a final agreement by July 2012. “The July date also means the TPP might be signed before Obama faces the U.S. presidential elections, giving him a boost as he seeks a second term,” said an article posted on the research institute’s website.
Analysts said the U.S.-led TPP agreement will reaffirm U.S. engagement with Asia. By finalizing this trade deal, Obama“seeks to cement the United States’ economic role in Asia,” said Bernard Gordon, a professor of political science with the University of New Hampshire, in his recent article published in Foreign Affairs.
Japanese Prime Minister Yoshihiko Noda announced Japan was joining TPP negotiations on November 11, a widely anticipated statement that observers argued would elevate the importance of the pact.
With Japan, the world’s third largest economy, on board, the size of that free market zone will be widened substantially. The eight TPP partners account for less than 6 percent of U.S. trade, about the same amount as U.S. trade with Japan alone. A combination of the economic clout of the United States and Japan might attract others to join the club.
But Japan’s accession to the TPP depends on its ability to reform and open its agriculture sector. And there are skepticism and opposition in Japan regarding the merits of the trade pact. Japan needs to overcome these hurdles before becoming a TPP member.
Canada and Mexico also expressed their interest in joining the TPP as the APEC Summit wrapped up.
Open attitude
China, the world’s second largest economy next to the United States, has yet to announce any intention to join TPP talks.
Pang Sen, Deputy Director General of the Department of International Organizations and Conferences at the Chinese Foreign Ministry, said at a news conference after the APEC Summit that China will “earnestly study” the TPP. China has “an open attitude to all mechanisms that are beneficial to promoting economic integration in the AsiaPacific region,” Pang said, adding that such mechanisms should be “open, transparent and inclusive” to make a difference.
China has earlier said it supports free trade in the Asia-Pacific region and will watch the progress of the TPP. It has also indicated the thresholds for the TPP are too high for some developing countries, including China.
Though the United States has touted the TPP as a “21st-century agreement” that will lead to flourishing regional trade, its real economic effects remain uncertain.
“We still need to analyze whether or not it is in line with the interests of most countries in this region as well as its impact on the world economy,” said Song Yinghui, a researcher with the China Institutes of Contemporary International Relations. Whether China should join the group will depend on a comprehensive analysis of the TPP’s overall impacts, Song added.
The TPP presents a new model for economic and trade cooperation in the AsiaPacific region, which might inject vigor into economic and trade relations in the region, she said. But many of the high standards the TPP has set are designed to serve U.S. interests, sparking doubts in a number of countries.
For instance, the United States proposed to cut tariffs on environmental goods such as solar panels to 5 percent or lower. Since average U.S. tariffs on these products are 1.4 percent, the new proposal will not have any impact on the United States, but can help it penetrate other countries’ markets.
Chinese experts said the TPP, as it stands, looks more like a tool for the United States to promote exports. Mei Xinyu, an associate research fellow with the Chinese Academy of International Trade and Economic Cooperation, said after the global financial meltdown, the Obama administration attached unprecedented importance to export strategies to boost economic growth and reassert U.S. influence.
Since Europe has been troubled by the sovereign debt crisis, and Canada and Latin America face problems such as weak growth and limited market capacity, the Asia-Pacific region has naturally become the top choice for U.S. exporters, he said.
Given its voluntary nature, APEC can hardly meet U.S. demands for the quick and compulsory opening of markets, nor can it respond to U.S. calls to attach political strings to trade. That’s why Washington has turned to the TPP as an alternative, Mei said.
Return to Asia
Analysts argued the TPP initiative, despite its focus on free trade, has strategic implications for the Asia-Pacific region.
The TPP has become a “battleground for influence” in the Pacific region between China and the United States, said Simon Tay, Chairman of the SIIA, during an interview with the Council on Foreign Relations, a U.S. think tank based in New York City and Washington, D.C. Tay said the TPP will be a “game changer” for U.S. presence in the region.
U.S. economic engagement in Asia has been on the decline over the last decade and it has also lagged behind in the development of free trade areas (FTAs) in the region, said Joshua Meltzer, a research fellow with the Brookings Institution.
According to Meltzer, the United States has finalized FTAs only with Australia, Singapore and South Korea, while from 2000 to 2009, the number of FTAs in Asia increased from three to 54 and another 78 are under negotiation.
“U.S. absence from this proliferation of rule-making in Asia has limited the nation’s role in designing the rules under which increasing amounts of trade and investment are occurring,” Meltzer said.
Meltzer also pointed out that Asian economic architecture has matured in the past decade. A range of forums have been established for discussing economic goals, such as APEC, the ASEAN Plus Three mechanism(the Association of Southeast Asian Nations plus China, Japan and South Korea) and the East Asia Summit, which the United States has recently joined.
“Ensuring that the United States plays a key role in shaping Asian economic architecture will also affect its influence in the region,” Meltzer said.
The United States cannot afford to allow its presence in the Asia-Pacific region to weaken. After a decade of war in Iraq and Afghanistan, the Obama administration is bringing the United States back to Asia.
U.S. Secretary of State Hillary Clinton declared that this century will be “America’s Pacific century” during a speech at the EastWest Center in Honolulu on the sidelines of the APEC Summit.
“One of the most important tasks of American statecraft over the next decades will be to lock in a substantially increased investment—diplomatic, economic, strategic, and otherwise—in this region,” Clinton said.
Obama’s Asia-Pacific trip on November 11-19 also demonstrated Washington’s increasing commitment to the region. After the APEC Summit in Hawaii, he visited Australia to celebrate 60 years of the U.S.-Australian alliance. He also made his debut at the East Asia Summit in Bali, Indonesia.
(Reporting in New York City with additional reports from Yan Wei in Beijing)