Name a foreign policy issue on which China and most of the rest of the world’s nations are struggling to keep up with a U.S. initiative. If you guessed “free trade,” you’re correct.
In a season that has mostly brought reversals for Obama administration efforts abroad, the free-trade agenda keeps on chugging. The massive weight of the U.S. economy creates incentives for cooperation with the United States rather than resentment.
The pacesetter is the negotiation for a Trans-Pacific Partnership that would include the United States and 11 other nations. This idea has gathered force since President Obama announced the negotiation in late 2009, and it now involves powerhouse countries on both sides of the Pacific such as Mexico, Japan, Canada and Australia.
Michael Froman, the U.S. trade representative, hopes this so-called TPP negotiation is nearing the endgame. On the tricky issue of intellectual property rights, there are now fewer than 10 unresolved issues, down from 125 in September. U.S. officials think a breakthrough could come if Japan opens markets to more food imports, such as beef, pork and dairy products, and Canada follows with concessions on several issues.
A Pacific agreement is important because it would add momentum for truly global trade standards and market access. The TPP countries account for about 40 percent of the world’s gross domestic product and 40 percent of U.S. exports. According to the trade representative’s office, an agreement could add $223 billion to global income by 2025 and boost U.S. exports by $124 billion. That means jobs, here and abroad.
The only major Asian player left out of the TPP club would be China, which is making Beijing nervous. With freer trade elsewhere in Asia, Western companies that are frustrated with manufacturing in China — because of low profits, corruption, pollution and theft of intellectual property there — could decide to pull up stakes.
China has been asking U.S. officials privately if it might join a TPP follow-on. Beijing is also negotiating an investment agreement with the United States that could open China to much freer Western activity.
The most telling indication of Chinese angst is the country’s proposal of a TPP-like pact with Europe. “We must work to make China and the E.U. the twin engines for global economic growth,” Chinese President Xi Jinping said Tuesday in Belgium in urging the pact.
China’s problem is that the European Union is already deep into negotiations for a new trade agreement with the United States. This one is known as the Transatlantic Trade and Investment Partnership, or TTIP to acronym-lovers. An agreement among the 28 E.U. countries and the United States would cover about 45 percent of the world’s GDP and 30 percent of global trade.
The European trade talks got off to a rocky start last summer in the shadow of Edward Snowden’s revelations about National Security Agency surveillance, which infuriated Europeans. There was some talk of suspending the TTIP negotiation but cooler heads prevailed, and there have now been four rounds of talks.
To try to harmonize European and U.S. product-safety standards on autos, drugs and cosmetics, regulatory agencies on both sides of the Atlantic are talking directly. The model is the common air-safety rules agreed on by the United States and Europe a few years ago.
As always in trade talks, negotiators must overcome parochial protectionism. Europeans argue that Parmesan cheese should come only from Italy and feta cheese from Greece. The United States has similar petty protections, and Congress is often a stumbling block to free-trade agreements despite their job-creating benefits.
European anxiety about NSA snooping remains a problem. European politicians have talked about creating a “Euro-cloud” that would, in theory, be free from U.S. surveillance. But business leaders argue that such efforts to wall off data are “not the way,” in the words of SAP Chairman Hasso Plattner, because they might cut off European companies from global markets. The Russian threat in Ukraine also makes partnership with the United States more attractive, despite worries about the NSA.
What’s dawning on people is that there’s a tipping point in global trade. If the United States can complete the Pacific and Atlantic partnerships, it will have framed standards and market access for about two-thirds of the global economy. At that point, it becomes economic suicide for China, Brazil and India to remain outside.
Free trade is one of those subjects that often make people’s eyes glaze over. But it’s an area where the United States remains an indisputable superpower — and where its trade partners increasingly seem ready to work by common rules.