With TPP Vote, Will the United States Abandon the Liberal World Order It Created?
If Congress shoots down the president's Pacific trade deal, the United States will be taking a huge step back on the world stage.
Many observers explain America’s victory in the Cold War and subsequent international primacy as functions of its unrivalled military power. In fact, U.S. global preeminence is better explained by its construction of a liberal international economic order in which it and its allies have thrived. In other words, trade.
A key test for the future of that order comes this week. Passage by the U.S. Congress of Trade Promotion Authority (TPA) for the president and completion of the 12-nation Trans-Pacific Partnership (TPP) are the building blocks of a 21st century economic order that sustains American leadership. Yet in recent weeks, a minority in the U.S. Congress has tied that institution in knots to block TPA, setting President Barack Obama up for failure to conclude the TPP negotiations. A pivotal vote in the Senate occurs on Tuesday.
Nearly every Asian nation would see rejection of the U.S. president’s negotiating authority to complete TPP as a broader signal of a U.S. retreat from Asia-Pacific leadership. It would also raise hard questions about America’s ability to compete in the new global economy. We have seen the chaos that has arisen in the Middle East from the U.S. military retreat there. If the U.S. backs away from economic leadership as well, the damage to the interests of America and its allies would be even greater.
The United States has been an Asian trading power since its early days as a republic. Its merchant fleet profitably plied Asian waters in the 19th century. Its diplomats in the region were there to promote trade: America signed commercial treaties with Thailand (then Siam) in 1833, Qing Dynasty China in 1844, and Tokugawa Japan in 1854. The Spanish-American War of 1898 even resulted in U.S. acquisition of the Philippines as a colony, giving it a resident base for flourishing trade with East and Southeast Asia.
In the second half of the 20th century, following Japan’s failed attempt to build a Greater East Asian Co-Prosperity Sphere that excluded the U.S., Washington successfully integrated its former World War II adversary into a Western economic order that circumvented the closed economic sphere of the Moscow-led Warsaw Pact.
Japan became Asia’s first “miracle economy” as a member of this economic club; Europe built a regional order that sustained a durable peace through institutions of interdependence; and the U.S. derived so much economic power from these trading arrangements with the world’s other leading industrialized nations that the Soviet Union simply could not compete.
The collapse of the hostile Soviet empire — and China’s post-1978 opening to trade after decades of autarky — enabled this liberal economic order to become truly global, thanks to the freedom of the global commons made possible by American military superiority. In the 1990s and 2000s, a hyper-globalized international economy propelled new trading dynamos, from Southeast Asian nations to Gulf emirates to Latin powerhouses like Mexico. America was also the greatest booster of China’s rise, granting it permanent normal trade relations — a legal status that grants trade advantages — in 2000 and sponsoring its accession to the World Trade Organization in 2001. The open U.S. economy grew strongly during this period of integration.
Although the rise of so many new economic players, starting with China, eroded America’s share of global GDP, the U.S. was much better off — because it retained intimate trading relations with every leading economic power, and because a richer world created deeper markets for U.S. companies and investors, strengthened American friends and allies, and vested every major economy in an open global trading regime.
At the same time, the more recent failure of the World Trade Organization to complete a further round of global trade liberalization, as well as the persistence of non-tariff barriers in many economies, has meant that competitive regional trading arrangements have assumed a new primacy. U.S. rivals have used them as geopolitical tools against the West.
Russia’s Eurasian Economic Union is a zero-sum game: Moscow prevents its member states from simultaneously enlisting in the European Union’s Eastern Partnership, and the preferential trade and investment ties it offers. China has leveraged the influence of its huge market to more subtly advance its own geo-economic agenda: namely, edging Asian neighbors away from the U.S. in order to create a soft Chinese sphere of influence.
China’s integration of global supply chains into a “Factory Asia” of which it is the hub has tied many Asian trading nations much more closely to their giant neighbor’s economic orbit. China has pursued regional trading arrangements, like ASEAN Plus Three and the Regional Comprehensive Economic Partnership (RCEP), that exclude America. President Xi Jinping has called for “Asia for Asians,” a formulation that pointedly does not include the largest Pacific economy, the U.S.
This is where the TPP comes in. As global power diffuses away from Europe and concentrates in the Asia-Pacific, the United States cannot afford to be absent from what will become the world’s most important markets. Nor do countries like Japan want to submit themselves to China’s economic dominance; instead, they seek to offset its power through intimate commercial and military arrangements with balancing partners like America.
The prospect of a new Pacific economic zone encompassing some 40 percent of global GDP has also helped drive domestic economic liberalization in countries determined to be founding members. Prime Minister Shinzo Abe has strategically used the requirements of TPP membership to push through controversial reforms to Japan’s economy that will enhance its productivity and competitiveness — and make it a stronger U.S. ally. Washington has left the door open to Chinese membership in the TPP if it takes the necessary steps to open its economy, including by creating a level playing field for international investment and strengthening intellectual property rights.
Completion of the TPP is being held up by debate in Congress over granting the president fast track negotiating authority, which would allow him to submit the final TPP agreement to Congress in an up-or-down vote without amendment. To his credit, Obama has lobbied hard for passage of the TPA. But many of his fellow Democrats in Congress are insisting that they cannot give the president trade negotiating authority to complete the TPP without also passing Trade Adjustment Assistance, a program to support domestic workers whose jobs are lost from trade (although more jobs are created by trade agreements than are lost to them, losses are concentrated while gains are diffuse, creating a minority lobby for side-payments to the economic losers from trade).
It is fair for Congressional Democrats to express concern for the minority of American workers dislocated by trade. It is neither fair nor prudent, however, to undercut the competitiveness of the United States — and the vast majority of American workers and consumers who benefit enormously from open trade and investment rules — by denying the president authority even to conclude trade agreements that must still be submitted for Congressional approval.
Astonishingly, many Congressional Democrats actually voted against the benefits for workers displaced by trade which they themselves had advocated in order to defeat TPA — suggesting that protectionist and isolationist constituencies, rather than pure welfare concerns, animate today’s opposition to new trade deals.
The United States created the liberal world order; it benefits more than any other nation from it. Obama has warned that if America does not write the rules of trade in the 21st century, China will. This is not wrong, but it somewhat misses the point.
By doing well, China is not going to diminish the United States; ultimately, America can only do that to itself. A good way to start would be by voluntarily walking away from a 70-year commitment to free trade and open markets at home and abroad. The trade votes in Congress this week are, therefore, about much more than the intricacies of the TPP trade pact.
At a time when America’s Asian friends and adversaries alike question Washington’s commitment to internationalism, the unusual alliance between Obama and Congressional Republicans on trade must prevail over the minority in Congress who would handicap their country’s ability to compete, and to lead.
Once TPA is enacted and the political fever over it has cooled, the Democratic president and his Republican allies on Capitol Hill could then discuss a new compact for executive-legislative cooperation on trade to ensure that the U.S. does not commit hara-kiri over agreements that are in its economic best interests.
A version of this article appears in the Nikkei Asian Review.
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