Obama Finally Gets His Pacific Trade Deal
In a potentially massive win for the White House, negotiators agree on the Trans-Pacific Partnership.
In what could become the most significant foreign-policy legacy of President Barack Obama’s administration, negotiators from 12 nations inked the Trans-Pacific Partnership (TPP), one of the largest free trade agreements in history.
The deal will boost trade among a dozen nations comprising 800 million people and making up 40 percent of the global economy. But it was in doubt as late as Sunday, as negotiators in Atlanta wrangled over the smallest details of how the deal would shape trade in the Asia-Pacific region. On Monday, U.S. Trade Representative Michael Froman announced what he called a “historic agreement” that came after more than five years of seemingly endless negotiations.
TPP “helps define the rules of the road for the Asian-Pacific region,” Froman said.
As talks in Atlanta creeped into the weekend, it was unclear whether concerns about dairy-market access and biologic medicines could be resolved.
The president must wait 90 days after the TPP agreement is done before he signs it. Then it goes to Congress for a vote. The text of the deal must be public for at least 60 of those days.
The trade deal, the centerpiece of Obama’s rebalancing to Asia, has sparked opposition from both the left and the right, angering environmentalists, trade unions, and lawmakers representing Rust Belt states who fear the pact will accelerate the exodus of U.S. manufacturing jobs. Some presidential candidates, including the front-runners, Republican Donald Trump and Democrat Hillary Clinton, are also opposed to the deal. Bernie Sanders, the independent senator from Vermont who is running as a Democrat, is also opposed to TPP.
Obama does have one advantage: fast-track trade authority, won in June, to quickly review trade bills and get an up-or-down vote from Congress. Administration officials insist the deal is necessary to keep the United States competitive in the 21st century.
“It will strengthen the hand of American workers and ensure that our businesses can compete on a level playing field in some of the world’s most significant markets,” U.S. Commerce Secretary Penny Pritzker said in a statement Monday.
The deal touches on nearly every aspect of trade between the United States and 11 other countries in the Asia-Pacific. It calls for the gradual reduction or elimination of tariffs on hundreds of goods and services, from cars and trucks to rice and cheese. It also clarifies intellectual property rights for movies and pharmaceutical drugs, as well as the Internet, and is meant to create new standards for environmental protection and labor rights in participating countries. The deal also creates a novel dispute-resolution mechanism.
The economics of the deal, including potential trade gains and job losses for different sectors, loom largest for leaders and legislative branches. The deal has proved unpopular among Canadian farmers, who fear their protected dairy industry could come under assault by international rivals, and among car-parts makers in Mexico, who fear outside competition.
But the geopolitics of the deal are a major selling point for the White House as well. In a statement on Monday, Obama underscored his view that a deal “strengthens our strategic relationships with our partners and allies in a region that will be vital to the 21st century.”
Inside the administration, the deal is frequently called the economic backbone of Obama’s “pivot to Asia,” or Asia rebalance — a broad policy meant to reassure allies of America’s staying power in the region amid China’s explosive military and economic growth. One part of the pivot involves shifting of military assets to the Asia-Pacific region in order to reassure allies and partners, especially in light of China’s recent aggressive moves. The trade pact is meant to be complementary by more fully integrating the United States with countries that have deepened their economic and trade relations with China over the past decade or more.
Notably, China is not a member of the TPP, though both Washington and Beijing have signaled an openness to China joining the club at a later date.
“The TPP’s significance is not just economic; it’s strategic — as a means of embedding the United States in the region, creating habits of cooperation with key partners, and forming a foundation for collaboration on a wide range of broader issues,” Froman said in a speech at the Center for Strategic and International Studies (CSIS) last month.
Without the TPP, experts say there is no clear alternative to expanding the U.S. footprint in the region given that the multilateral World Trade Organization process has been stalled for years. “TPP shows some competence and commitment to Asia,” Michael Green, a senior vice president for Asia at CSIS, told FP. “Without it, there would be a lot more uncertainty.”
Others have pointed out that the deal puts the United States in the driver’s seat as a leader in defining how trade will be conducted in this economically vibrant region. “It reinforces U.S. standing as a leader in establishing regimes that set rules for global best practices,” Scott Snyder, a senior fellow at the Council on Foreign Relations, told FP.
Obama reiterated that argument Monday. “When more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy,” he said.
The agreement drew immediate praise from the U.S. business community, which has long backed the TPP.
“Increased trade with the TPP partners will expand economic opportunities and strengthen our security ties in the Asia-Pacific region,” defense contracting giant Lockheed Martin said in a statement Monday.
But opponents are already calling on Congress to find a way to kill it.
“The only way for this to end well for the American people, and our economy, is for Congress to reject this awful agreement, lock it in a metal safe, and dump it at the bottom of the Pacific Ocean,” Charles Chamberlain, executive director of former presidential candidate Howard Dean’s grassroots group, Democracy for America, said Monday.
Image credit: Alex Wong/Getty Images
David Francis was a senior reporter for Foreign Policy, where he covered international finance. @davidcfrancis