Business

TPP's fate rests with Japan, U.S.

by Kakumi Kobayashi

Kyodo

Now that Congress has granted President Barack Obama the power to sign the Trans-Pacific Partnership Agreement without interference, attention will be focused on whether he can take advantage of the reinvigorated talks to seal both the deal and his legacy before his departure in 2017.

The Obama administration has said the United States should be a strong Pacific country in the face of a rising China, and the giant free trade pact being formed with Japan and 10 other countries in Asia, Oceania and the Americas has been the main plank of his pivot to Asia.

Defense Secretary Ash Carter even compared the significance of the TPP to a new aircraft carrier in executing Obama’s “rebalance to Asia” policy.

Obama said the United States needs the TPP, which would cover 40 percent of the global economy, to boost its economy and prevent China from setting the rules of trade in the Asia-Pacific region.

However, Obama had to deal with rebellions in his Democratic Party to pass the related bills, including the one last week that gave him trade promotion authority — which enables him to sign trade deals with only a yes or no vote by Congress.

Democrats who are critical of free trade deals because of the risk they pose to domestic jobs blocked one of the bills, forcing the legislation to be batted back and forth between the Senate and the House of Representatives.

“It has been a roller-coaster ride,” said Mack McLarty, a former White House chief of staff, describing the twists and turns in the congressional debates on trade, including the TPP, since a bipartisan group of lawmakers introduced the TPA bill in April.

The split in Congress apparently stoked a sense of crisis among leading lawmakers and prompted them to call for unity in supporting Obama’s trade agenda and the TPP itself.

“The world is watching. If we don’t do this, we will send a signal to the world that America is not reliable,” Rep. Paul Ryan, a veteran Republican, told a House session before voting on a trade bill earlier this month.

Sen. Mitch McConnell, the Republican leader in the Senate, said on the floor that passing the trade bills will send America’s allies the message that “we understand they are somewhat wary about Chinese commercial and potentially military domination.”

Congress finally passed the last piece of key TPP legislation on Thursday, prompting the negotiating members to renew the dialogue, which has been bogged down for months.

“The momentum is with the administration,” McLarty said, noting that congressional passage of the trade bills by coordinating different opinions “has strengthened the president’s leadership” not just on the TPP, but on other issues as well.

“The U.S. has overcome a big challenge. Now the partners have to overcome whatever their challenges are and make better offers,” said Derek Scissors, resident scholar of the American Enterprise Institute think tank.

The 12 TPP countries are now expected to re-convene and address gaps on contentious issues, including market access and intellectual property protection. The other 10 are Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

“Japan is the biggest source of uncertainty,” Scissors said, noting that the success of the TPP hinges on Tokyo’s talks with Washington.

The U.S. and Japan account for 80 percent of the trade bloc’s economy but are at odds over issues that include Japan’s intention to retain special tariffs on certain agricultural produce and U.S. calls to remove nontariff barriers in Japan’s tough automotive market.

Scissors said the U.S. should not rule out the idea of launching the initial TPP framework without the participation of any of the 11 partners if it cannot satisfy the standards for the deal.

If the TPP contains too many unsatisfactory compromises, Congress won’t pass it, Scissors said, and Obama won’t be able to seal his Asia-Pacific legacy before his term expires in January 2017.