Strange bedfellows of 2015: As the Obama administration pushes toward a major new trade agreement in Asia this spring, it is developing two unlikely allies: Chinese officials abroad, who are signaling that they want in, and Republicans in Congress, who appear willing to support what would be one of President Obama’s biggest successes.
The Trans-Pacific Partnership, or TPP, is down to its final haggling. This week, negotiators from 12 countries met in New York to resolve the remaining issues, which have been narrowed from more than 2,000. The toughest matters left, ironically, are agricultural disputes with Japan and dairy and poultry disagreements with Canada.
U.S. negotiators hope they can close out the TPP deal by the summer and get it approved by Congress — thanks to Republican votes promised by House Speaker John Boehner (Ohio) and Senate Majority Leader Mitch McConnell (Ky.). Republicans like trade even more than they dislike Obama, evidently. It’s a jobs bill that doesn’t cost any money. The Peterson Institute for International Economics estimates that the market-opening features of the TPP will boost U.S. exports by about $123 billion annually by 2025 and add 600,000 jobs.
What’s fascinating is that China seems to be catching TPP fever as the trade negotiations accelerate. Four years ago, when the talks began, Beijing was dismissive. Chinese leaders argued that the “Great Recession” showed that the United States wasn’t competent to lead the global economy, and that the TPP was just another scheme to encircle and contain the fast-growing Chinese economy.
You don’t hear that kind of carping now. Chinese Prime Minister Li Keqiang sounded supportive last week at the World Economic Forum in Davos, where he said: “We need to act along the trend of our time, firmly advance free trade, resolutely reject protectionism, and actively expand regional economic cooperation.”
Chinese officials go further in private, recent conversations in Beijing and Washington. They have said that China wants to negotiate membership in the TPP and, indeed, would like to join in the process of setting its rules. The Chinese are more cautious in talking with U.S. trade officials, asking instead how the process might work. But the message is clear: China sees this train leaving the station and wants eventually to be onboard.
U.S. Trade Representative Michael Froman is said to have cautioned the Chinese that it will take a while for their economy to match the openness that the TPP would require. But in the meantime, the United States and China are negotiating a bilateral investment treaty that front-loads some of the toughest TPP issues. Chinese President Xi Jinping personally decided last year to embrace the investment treaty. The two sides are bargaining now over the “negative list” of industries or products that would be excluded from the pact; everything else would be included — a big jump for Beijing.
The Chinese seem to realize that they have to live in a TPP world. Other Asian countries that stayed out of this round, such as South Korea and the Philippines, have signaled that they want in. As a trading nation, China either joins its neighbors or risks losing a share of the expanding global market.
“The current situation for China is unsustainable,” argues retired Adm. Dennis Blair, a former director of national intelligence who’s now head of the Sasakawa Peace Foundation USA. He contends that unless China joins the U.S.-Japan led TPP consensus, accepting rules that will limit theft of intellectual property, its trade relations “will drop back to a conventional, transactional basis, without an overarching framework.”
The TPP demonstration effect isn’t lost on Europe, either. After dithering for much of last year about a similar agreement known in trade-speak as the Transatlantic Trade and Investment Partnership, or TTIP, Europeans have held three negotiating meetings since November and will launch another round next week.
For a battered Europe veering back toward recession, the trade agreement offers the potential for export-led growth, especially as the euro sinks against the dollar and European exports become cheaper in world markets. The transatlantic solidarity represented by the TTIP is more welcome now, too, as Europeans and Americans contemplate the reckless behavior of Russian President Vladimir Putin. The moment when Europeans seemed ready to walk away from TTIP because of a snit over NSA surveillance seems long past.
What’s driving these political-economic realignments? Simply put, the U.S. economy is stronger than analysts expected a year ago, the Chinese and European economies are weaker and the Russian economy is much weaker. Even Republicans in Congress seem ready to let Obama harvest the fruits.