Marianne Schneider-Petsinger is a Geo-Economics Research Fellow for Chatham House. This piece has been published in collaboration with Chatham House. The views expressed are the author's own.
When the next round of negotiations on the Transatlantic Trade and Investment Partnership (TTIP) starts in mid-July, the process will have been ongoing for more than three years. Progress has been slow, with disputes between the negotiating parties compounded by strong public opposition to what is often seen as a secretive process designed to benefit big business. Similar concerns have been raised with regard to the other two pillars of the Obama administration’s trade agenda -- the Trans-Pacific Partnership (TPP) and the Trade in Services Agreement (TiSA).
Proponents of the three agreements have tended to focus on the economic arguments in favor of reducing tariffs and unifying business regulations. For instance, the recent report by the U.S. International Trade Commission predicts that if TPP is passed, U.S. exports to trade partners would increase by $57.2 billion annually by 2032, and that U.S. annual real income would be $57.3 billion higher in 15 years. However, while these effects are positive, they are smaller than previously estimated. Given the uncertainty around economic projections, the extraordinary strategic benefits of all three trade pacts are arguably more important than the usual economic arguments.
To counteract the gloomy picture of the “multi-headed trade monster” that is painted by some critics, supporters of the deals must move beyond the narrow economic rationale for each single deal and show how the trade agreements fit together as part of a broader strategic plan. This strategic case should build on the following three points.
First, these agreements are a U.S. foreign policy tool to bolster American partners and allies. In the case of the TPP, the United States’ desire is to strengthen political and strategic ties with many of the 11 countries along the Asia-Pacific rim (such as Japan, Vietnam, and Malaysia) at a critical time for a region in flux. TTIP, meanwhile, is intended to cement the old alliance between the United States and the European Union. The 23 parties to TiSA, which represent two thirds of the world’s services market, are also aiming to reaffirm their ties. Negotiations are taking place under the leadership of the United States, the European Union, and Australia among a group of countries -- sometimes dubbed the "Really Good Friends of Services” – which include Korea, Pakistan, and Turkey.
A second strategic aspect of TTIP-TPP-TiSA is maintaining western leadership in the international economic space. The BRICs -- Brazil, Russia, India, and China -- are notably absent from these agreements. State-led capitalism in the BRICs -- particularly in China -- is increasingly wrestling for dominance by pulling other economies into its orbit. America will not be the economic giant of the world forever. In fact, China has already overtaken the United States as the world’s largest economy (when GDP is measured in terms of purchasing power parity). And China has set up alternatives, such as the Regional Comprehensive Economic Partnership (RCEP), to compete with Western-led international economic institutions.
Through these new trade deals, Washington will lead efforts to write the rules of the road at a time when there are competing visions for the global economy. These three agreements attempt to update global rules. For instance, TiSA will take into account advances in digital services since the last major services agreement, which dates from 1995. In the case of TTIP, given the sheer scale of the U.S.-EU economic relationship, a common set of transatlantic standards and norms would have enough pull for others to copy them in order to gain market access. This would maintain (if not expand) Western leadership in the global economic arena.
Thirdly, jointly the three trade deals have the potential to provide new impetus for a 21st century trade architecture. While negotiations under the umbrella of the Word Trade Organization (WTO) have ground to a halt, these agreements could become the basis for a multilateral trade accord. TiSA has from the start been designed to encourage others to join as it is open to all WTO members who want to open up trade in services. Once TTIP is agreed and TPP is ratified, other countries could be offered access. With a role in all three agreements, the United States (which accounts for roughly 10 percent of global trade) would be at the center of a hub-and-spoke trade system that covers more than 70 percent of the global economy.
The strategic potential of the three trade deals is substantial. Rather than looking at the TTIP, TPP, and TiSA agreements in isolation, it is important to keep their broader and overarching strategic implications in mind. To counterbalance the descriptions of the “multi-headed trade monster,” trade leaders need to come up with a convincing narrative for TTIP-TPP-TiSA that puts the trade deals into geopolitical and geoeconomic contexts.
