Will the West Choose to Lead on Trade?
Associated Press
Will the West Choose to Lead on Trade?
Associated Press
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On Feb. 5, the United States and 11 other states finally signed the Trans-Pacific Partnership, or TPP, a trade deal that was negotiated last October. The partnership represents the future; it is a milestone in what will be a slow but inexorable march toward open trade. And yet there is enormous resistance, enough so that U.S. President Barack Obama is unlikely to be able to move it through Congress on his watch. Whether one likes globalization or not, change is coming. The TPP allows its members (particularly the United States) to manage and lead that change. The alternative would be less comfortable for the West.

Putting aside politics and strategic importance for one moment, the mere process of getting the TPP ratified is going to be a painful one (in the United States and other member states). With the deal signed, the U.S. administration will have to provide Congress with the administering regulation indicating how it is to be managed. It then goes to the Senate Finance Committee and the House Ways and Means Committee for debate.

Meanwhile, the International Trade Commission has already started reviewing the deal and anticipates completing its report on May 18, exploring the TPP's impact on U.S. gross domestic product, on exports and imports, and on employment and consumers.

It then can finally go to the full U.S. Congress for a simple majority vote.

Which brings us on to the politics. Even at the best of times, trade agreements are politically divisive. And with an election in November, these are not the best of times in American politics. The Democratic Party has traditionally been against free trade agreements, arguing that they lead to lost American jobs and lower wages (among other negatives). For this reason, despite heavily promoting the TPP as secretary of state, Hillary Clinton has come out against it for the campaign. Bernie Sanders has done the same.

Meanwhile, many in the Republican Party, normally a proponent of market-opening free trade agreements, have also been negative. They have no desire to give President Obama a win, preferring instead to hope for a new Republican president in 2017 who can push this through.

Assuming that Obama moves TPP through all the committee hurdles, given his numbers in Congress, even a simple majority is going to be hard to find. There is just too much political force pushing back against the positive policy arguments.

Which leads us now to the strategic importance. While the TPP has economic benefits (according to the World Bank, by 2030 it will lead to a 0.6 percent increase in GDP, and the Petersen Institute predicts an increase of annual exports of 9 percent), these are not the greatest argument for the deal. The benefits are more intangible (for now), strategic, and long-term.

The TPP represents the next step toward a new set of global business and trade standards. It is about creating a more level playing field among different parts of the global economy. And it is about opening up markets so that ideas, energy, and materials can flow.

Whether you are comfortable with it or not, globalization is taking place. The development of safe standards and of open markets and transparency is a positive force. The TPP is one step on the road toward this. (The U.S.-EU Transatlantic Trade and Investment Partnership, or TTIP, is another.)

However, if the deal doesn't pass now, there will be both economic costs (according to Peterson, $77 billion in benefits per year delay) and strategic ones as other arrangements take its place -- arrangements such as China's Regional Comprehensive Economic Partnership.

The consequences then would be lower standards and the lack of a common and level playing field. It would mean increased trade between the Pacific powers and China, rather than with the United States. Perhaps most importantly, failure will also reaffirm the views of those who believe that America is a declining power. America will no longer be leading the creation of a Western-defined economic platform.

The consequences reach beyond the Pacific region. A failure of the TPP would likely have repercussions on TTIP. Together, these two trade agreements could provide the basis of global trading standards. But if TPP doesn't happen, competition will heighten as TTIP and whatever new trading agreement develops in Asia go head-to-head to expand their standards onto a global field.

It is inevitable that regional and, in time, global standards will be developed. They can either be led by the West (through TPP and TTIP) or by the East (through the Regional Comprehensive Economic Partnership and the equivalent). Americans on both sides of the aisle have criticized President Obama for "leading from behind." Yet when he leads from in front, as he is doing in trade, he is held back by outdated and partisan thinking. In some form, a trade deal is going to happen. The only question is whether the United States will lead it or be left behind.

(AP photo)