How Asia Can Unlock American Prosperity
President Barack Obama and leaders of nine Asia-Pacific nations this past weekend announced their common vision for a major trade agreement that will set the standard for trade accords in the 21st century. And yet negotiations over the so-called Trans-Pacific Partnership have barely penetrated the public consciousness or drawn media attention.
This is a mistake for all concerned. The Trans-Pacific Partnership negotiations taking place between the United States, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam-with Canada, Japan, and Mexico expressing an interest in joining-will have a major impact on U.S. exports, jobs, and economic growth for years to come. As our country vigorously debates the future of the U.S. economy leading up to the elections next year, the Trans-Pacific Partnership must be an integral part of the debate.
Trade is an important part of the U.S. economy and the Trans-Pacific Partnership is important to U.S. trade. U.S. goods and services trade (exports plus imports) equaled 28.6 percent of U.S. gross domestic product-the largest measure of economic activity in our economy-with exports accounting for 12.6 percent of the U.S. economy in 2010. About 7 percent of U.S. jobs, or about 9.2 million jobs, depend directly on exports.
What's more, exports are one part of the otherwise struggling U.S. economy that have been doing well amid the recovery. Exports grew by 11.3 percent in inflation-adjusted terms in 2010. This was the fastest growth rate since 1997. Data for 2011 show that exports have remained strong so far, overcoming weaknesses elsewhere, such as in consumer spending.
The Trans-Pacific Partnership is important because:
The Trans-Pacific Partnership is the Obama administration's trade policy
The Trans-Pacific Partnership is the way the Obama administration is developing its trade policy, particularly in support of the president's National Export Initiative to double America's exports in the next five years from $1.57 trillion in 2009 to $3.14 trillion by the beginning of 2015. "If we're going to grow it's going to be because of exports" President Obama said in his meeting with multinational corporation chief executives at the Asia Pacific Economic Cooperation Summit this past weekend.
The Trans-Pacific Partnership will define 21st century global trade
The failure of the so-called Doha Development Round of global trade negotiations is evidence that international institutions such as the World Trade Organization are not currently equipped to deal with a global economy that is more integrated than ever before, yet consists of countries with diverse law, political, and economic systems. The Trans-Pacific Partnership is a shift toward a regional trade agreement at a time when the multilateral system isn't working well.
The negotiations themselves are an opportunity to strike a careful balance between national sovereignty and the need for coherence in policies, standards, and regulations across the countries taking part. This is essential to ensuring that American workers and businesses compete on a level playing field.
The Asia-Pacific region offers enormous potential
Asia-Pacific is by far the most dynamic region in the world today. The 21 members of the Asia Pacific Economic Forum collectively account for over a third of the world's population, 54 percent of the world's gross domestic product, and 44 percent of world trade. It is now clear that this region holds tremendous promise for potentially expanding markets for U.S. products and services.
Yet as Asia-Pacific economies open up their markets and establish trade ties with more countries, the share of imports that come from the United States have been declining in many countries in the region.
The Trans-Pacific Partnership is the vehicle through which America can open up new markets, but also allow America to claim its share of the Asia-Pacific market. As President Obama noted at the APEC summit last week, "If we're going to not just double our exports but make sure that good jobs are created here in the United States, then we're going to have to continue to expand our trade opportunities and economic integration with the fastest-growing region in the world."
Yet, even as the Asia-Pacific region offers great promise it is also home to some of the biggest challenges confronting the United States. Topping the list is the United States's complicated relationship with China. Beijing's model of command capitalism marked by subsidies, currency misalignment, violations of intellectual property rights, nontariff barriers in imports, restrictions to foreign investment, and a poor record on labor rights all pose a challenge to America's competitiveness in the global marketplace.
The Trans-Pacific Partnership is an opportunity to counterbalance the deep and complicated U.S.- China relationship with stronger linkages to other economies in the region. In the long-run, these negotiations are an opportunity to set strict parameters in areas such as labor and environmental standards, the treatment of state-owned enterprises, and government procurement practices so that the inclusion of other countries, including China, that may wish to be part of the trade agreement in the future is contingent on these criterion.
The Obama administration and the governments of the eight negotiating partners are charging ahead in crafting this agreement that will greatly impact the United States economy, jobs, and workers for decades to come. It's time to start paying attention to these negotiations.