Obama’s Trade Defeat Imperils U.S. Credibility in Asia

Lawmakers from both major American political parties joined forces Friday to defeat a trade bill that would have delivered a potentially legacy-defining victory for the president.

But Friday’s lopsided vote wasn’t simply a humiliating blow for President Barack Obama, who invested significant amounts of political capital in a high-profile, last-minute lobbying effort that would help him complete a landmark trade pact with 11 other Pacific Rim nations. The biggest consequences could instead be felt in Asia, where jittery U.S. allies are already afraid that Washington is neglecting the region while China continues to expand its economic and military influence there. The potential demise of the Trans-Pacific Partnership (TPP) would further embolden Pacific leaders who believe their countries would be better off siding with China than with a United States increasingly seen as rudderless and disengaged.

“This will be a blow to American credibility beyond just trade,” Michael Green, an Asia expert at the Center for Strategic and International Studies, told Foreign Policy. “Asian leaders will question whether the American political system has the ability to implement the Asia pivot.”

Since the beginning of his presidency, Obama has struggled to implement a planned strategic shift toward Asia, because crises in the Middle East and Eastern Europe have dominated his agenda and forced the administration to stay heavily engaged in parts of the world where it had hoped to gradually reduce Washington’s political and military involvement. The president had pitched the TPP pact as a way to establish rules to guarantee America’s economic primacy across a region that covers 40 percent of the world’s gross domestic product.

The sprawling pact — one of the biggest trade deals in the world — was also meant to forge greater economic alliances with Asian partners that would in turn enhance America’s political standing in the region. Experts fear that the administration’s failure to get the pact through Congress will will only serve to benefit China.

“If there’s a vacuum or perceived vacuum in Asia — China is prepared to fill it,” Scott Snyder, director of the U.S.-Korea policy program at the Council on Foreign Relations, told FP.

As an example, Snyder noted China’s success in establishing the Asian Infrastructure Investment Bank (AIIB), a multilateral financial institution Beijing formed in 2014.

The United States had long sought to satisfy Asia’s growing infrastructure needs through the World Bank, but in the last year, Beijing has succeeded in making the AIIB a major player throughout the region. Key American allies like Germany, Britain, and France have joined the bank, which has an estimated $100 billion in assets.

Another factor that plays into China’s favor is the increasing irrelevance of the World Trade Organization, according to Mireya Solis, a senior fellow at the Brookings Institution. Historically, the WTO has been the go-to body to set the rules on multilateral trade and investment. But for the last 20 years, political disputes at the WTO have rendered it largely futile, leaving regional clusters of nations to set the rules on key issues like intellectual property, telecommunications, and transportation. TPP provided a major opportunity for the United States to integrate its economy into this cluster of Asian countries. Without it, Beijing’s geographical proximity will help China consolidate its economic power throughout the region.

“If we don’t write the rules on trade, China will,” Solis wrote in a piece for the think tank. “Moreover, we will have no way to encourage China to move away from its mercantilistic practices.”

Friday’s vote in Congress greatly diminished the prospects for a TPP deal during Obama’s final 18 months in office, but it did not seal its fate. In an effort to kill the Trade Promotion Authority bill, a critical mass of Republicans and Democrats voted against a measure that provides assistance to workers who lose their jobs as a result of free trade. That measure needed to win congressional approval in order to pave the way for the passage of separate legislation giving Obama fast-track authority, which the president needs to complete the TPP deal.

Republican leaders in the House and Senate may try again next week, but those efforts will not succeed unless either House Speaker John Boehner (R-Ohio) or Obama can pick off more votes from their respective parties. That will be difficult for Obama because of strong opposition from House Minority Leader Nancy Pelosi (D-Calif.) and other prominent Democrats. During the vote, Pelosi took to the House floor to make clear she wanted to kill the legislation.

“Whatever the deal is with other countries, we want a better deal for America’s workers,” she said.

In any event, if Congress ultimately fails to grant Obama fast-track legislation, it could do lasting damage to a key pillar of Obama’s “Asia rebalance.”

That strategy, according to experts, relied on three pillars of American power: economic, military, and diplomatic.

The first pillar involves an increase in active diplomacy in the region, a goal in which the Obama administration can credibly claim progress through the importance it has given to the Asia-Pacific Economic Cooperation forum and the East Asia Summit, two regional meetings that focus on free trade and economic growth. The president and top cabinet officials, including Secretary of State John Kerry, have regularly attended these forums, which were given far less value during the George W. Bush and Bill Clinton presidencies.

The second pillar of strategy is raising America’s military profile in the region. On this front, it’s a mixed bag. The United States has increased military cooperation with Japan and Australia when it comes to air power and basing, but U.S. allies remain jittery because Beijing’s defense budget has increased by 10 percent every year as China buys a laundry list of military hardware.

The third pillar is greater economic engagement, which seems far less likely now than it did before Friday’s vote. “If the president can’t get a trade agreement through, it will lead to questions about what Congress and by extension, the American political system, can get done,” said Green, the CSIS expert.

Those questions are already being asked by Asian leaders concerned about whether they could still see America as a reliable partner.

In 2013, as a government shutdown loomed in Washington due to a dispute between Democrats and Republicans on the debt ceiling, Singapore’s prime minister openly criticized the United States. Speaking with CNN, Lee Hsien Loong said Americans were “unable to get their act together,” and that the political dithering in Washington was sending a “negative signal which will last much longer than the shutdown.”

Because of that political crisis, Obama was forced to cancel his attendance at the APEC leaders’ summit in Bali, Indonesia, just days ahead of his scheduled arrival.

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