Stanford scholars weigh in on the Trans-Pacific Partnership agreement

 

Negotiators from 12 Pacific Rim countries recently reached an agreement on the Trans-Pacific Partnership (TPP), a sweeping trade pact that has been promoted by the Obama administration as a high-quality, next-generation deal that will set standards for international trade for years to come. While noting the agreement still requires ratification by each member state, Stanford scholars believe that the TPP will be approved and reshape not only trade but also security relations in the Asia-Pacific region and beyond.

 

The TPP negotiations originally began as an expansion of the Trans-Pacific Economic Partnership Agreement signed by Brunei, Chile, New Zealand and Singapore in 2005, and then took on broader significance in 2008 when the United States expressed interest. The number of members eventually grew to include the other North American Free Trade Agreement (NAFTA) economies of Canada and Mexico, as well as Australia, Peru, Vietnam, Malaysia and Japan. Even before the agreement was finalized, leaders of many other Asia-Pacific countries expressed interest in joining the next round of negotiations, including South Korea, Taiwan, the Philippines, Colombia, Thailand and most recently, Indonesia.

 

The appeal of the TPP in the region is twofold. First, the repeated failure of new trade talks at the World Trade Organization (WTO) has forced countries seeking greater trade liberalization to pursue it through other bilateral or regional multilateral negotiations. Second, in the Asia-Pacific region, the number of these agreements has rapidly multiplied, creating myriad different standards, procedures and tariff rates that raise the costs of doing business across state borders and inhibit international trade and investment.

 

The TPP offers the prospect of a common set of rules governing investment, production and exchange across all member states, with significant improvements in economic efficiency. In addition, the danger of being excluded from a new trade regime that includes a huge share of the region’s economic activity has created a sense of urgency to seek membership from those countries not in the initial round of negotiations. By far the most conspicuous absence among the TPP members is China, which is now the world’s second-largest economy and a significant trading partner of all current member states.

 

The Trans-Pacific Partnership has been a research focus at the Freeman Spogli Institute for International Studies.

 

The Walter H. Shorenstein Asia-Pacific Research Center has organized several events exploring aspects of the TPP, and the Taiwan Democracy Project in the Center on Democracy, Development, and the Rule of Law held a conference in 2013 that examined the TPP from a Taiwanese perspective. The conference produced a comprehensive report on the topic, and an audio recording of an earlier Shorenstein APARC panel event was made available online. Now that negotiations have concluded, the Taiwan Democracy Project will revisit the topic in an upcoming conference on Feb. 9.

 

With the public release of the agreement in early October, three noted experts from Stanford University, Thomas Fingar, Michael Armacost, and Donald Emmerson, offered their analysis of the TPP’s prospects for ratification and its impact on the Asia-Pacific region.

 

Now that the agreement has been published, what is significant about the TPP? What does it mean for China?

 

The TPP is a big deal for many reasons, perhaps the most important of which is that it will provide the impetus and the template for concluding the Trans-Atlantic Trade and Investment Partnership (TTIP) and myriad other regional and mini-lateral trade negotiations initiated in response to the failure of the Doha Round of WTO reform. As with all trade agreements, there will be winners and losers, pain will be local and benefits diffuse, and critics will find much to criticize. But the agreement is likely to be ratified and its provisions will affect corporate strategies, investment decisions and globalized production chains. The fact that North America (the United States, Canada and Mexico) are parties to the TPP virtually assures that the globally important NAFTA group will not accept terms in TTIP or other negotiations that are incompatible with the TPP because NAFTA governments and companies do not want to cope with multiple standards, requirements, and procedures. The same is true of other major trading states and international firms, so the TPP will quickly become the new standard for “everyone” wishing to take advantage of opportunities in a globalized world.

This means that the TPP will serve as a—the—decisive building block for beyond-WTO trade arrangements. Without success in the TPP (or TTIP, which also has the size and importance to have become the new global standard if it had been concluded before the TPP) negotiations, there was a danger that the advantages of an integrated global trading system would be degraded by adoption of multiple and partially incompatible sub-regional agreements. Now those negotiating bilateral and mini-lateral agreements are likely to strive for consistency with the requirements adopted by key trading nations and the firms based in them.

The TPP is often but erroneously described as part of a U.S. effort to contain or constrain China. It isn’t. The United States should and will seek to bring China into the TPP, not to exclude it. I anticipate that Beijing will join together with South Korea, Indonesia, and possibly other states that are not yet members.

 

Thomas Fingar is a Shorenstein APARC Distinguished in the Freeman Spogli Institute for International Studies. He served previously as assistant secretary of the State Department’s Bureau of Intelligence and Research, principal deputy assistant secretary, deputy assistant secretary for analysis, director of the Office of Analysis for East Asia and the Pacific, and chief of the China Division.

 

Does the TPP carry security benefits? What are possible consequences for the U.S.-Japan relationship?

 

The TPP is a trade agreement, not a security pact. Security is generally a predicate for growth and trade. It does not thrive amidst turmoil, let alone conflict. But with greater economic interdependence, the incentives for avoiding conflict increase. And fortuitously Asia remains an unusually peaceful region despite some growing tensions between China and its neighbors.

The TPP agreement is certainly an integral feature of the Obama administration’s effort to “rebalance” toward the Asia-Pacific region. It embeds the United States in a new institution whose membership, I believe, is destined to grow. America’s engagement in the region is a source of reassurance to our friends and allies there. The United States has been bolstering its alliance with Japan, and this agreement will add a broader framework to the U.S. alliance, which was established through the Treaty of Mutual Cooperation and Security, and which contains a specific clause encouraging expanded economic collaboration.

I regret that selling the agreement publicly has included some explicitly anti-Chinese features such as the claim that if the United States and others don’t write the rules of trade, China will. The TPP is and should be open to new members who are prepared to live up to its requirements and that includes China.

 

Michael H. Armacost is a Shorenstein APARC Distinguished Fellow in the Freeman Spogli Institute for International Studies. He held a 24-year career in the public service, including having served as U.S. ambassador to Japan and the Philippines.

 

How does the TPP fit into the context of Southeast Asia and its possible alternative arrangements for economic cooperation in the Asia-Pacific region?

 

In strictly economic terms, there is no exact alternative to the distinctively comprehensive and intrusive TPP. In loosely economic but mainly geopolitical terms, however, a competitor does exist: the Regional Comprehensive Economic Partnership (RCEP). The United States is in the TPP. China is not. In the RCEP, the reverse is true. The United States has propelled the TPP. China and the Association of Southeast Asian Nations (ASEAN) are driving the formation of RCEP by all ten ASEAN states plus Australia, China, India, Japan, New Zealand and South Korea.

Compared with the TPP, RCEP is far less robust. RCEP is mainly about straightening the overlapping and sometimes inconsistent free trade agreements that already complicate Asian regionalism—the tangled contents of Asia’s “noodle bowl” of overlapping FTAs. (Trade agreements in the Asia-Pacific have burgeoned from around 60 ten years ago to some 300 today.) Under pressure from the more detailed and thoroughgoing TPP, RCEP’s would-be progenitors have been trying to expand their agenda to include more intrusive proposals. Partly for that reason, observers are pessimistic that RCEP’s negotiators will be able to proclaim its successful completion before the end of 2015.

ASEAN is divided. Myanmar, Cambodia, Indonesia, Laos, the Philippines, and Thailand are inside RCEP but outside the TPP. The other four ASEAN members—Brunei, Malaysia, Singapore, and Vietnam—enjoy the advantage of sitting at both negotiating tables. If only one of the two projected partnerships fails, these four states would still have the other arrangement to fall back on, and so much the better for them if both schemes succeed. It is partly for this reason that varying degrees of interest in joining the TPP have been expressed by five of the six non-TPP states in Southeast Asia. The exception is Myanmar, but once the structure and character of its new government have been clarified, its leaders too may wish to consider the TPP. Even China’s initially hostile view of the TPP has softened.

Given the market-favoring and regulation stipulations of the TPP, new entrants may be unwilling to accept its detailed, full-spectrum rules. But the Doha Round is dead, and the proposal to replace it with a scaled-down “Global Recovery Round” has gone nowhere. For the time being, the best one can hope for in the Asia-Pacific region is a successful TPP that China could eventually join, or a successful RCEP that could someday welcome the United States, or the birth of both arrangements followed by effective steps to render them complementary rather than competitive.


Donald K. Emmerson is director of the Southeast Asia Program at the Walter H. Shorenstein Asia-Pacific Research Center in the Freeman Spogli Institute for International Studies, where he is also affiliated with the Center for Democracy, Development, and the Rule of Law and the Abbasi Program in Islamic Studies.

 

Interested in joining the conversation? The Taiwan Democracy Project will revisit this topic on Feb. 9. The one-day symposium will bring together scholars and practitioners to reconsider Taiwan's prospects for entry into the Trans-Pacific Partnership. RSVP here today.

 

Listen to the audio from the event "The Trans-Pacific Partnership (TPP) -- A New Order for the Asia-Pacific?" with Stanford scholars Donald Emmerson, Thomas Fingar, Daniel Sneider and Kathleen Stephens.