[CTC] China arguments for TPP don’t make sense

[Arthur Stamoulis]

https://www.bostonglobe.com/opinion/2015/05/30/arguments-for-tpp-don-make-sense/W8WNu5IR9xkhzsqYV0pBWK/story.html <https://www.bostonglobe.com/opinion/2015/05/30/arguments-for-tpp-don-make-sense/W8WNu5IR9xkhzsqYV0pBWK/story.html>
 
Arguments for TPP don’t make sense
 
The Boston Globe
By Chas W. Freeman
May 31, 2015
 
NO COUNTRY IN ASIA wants to choose between political allegiance to the United States and economic alignment with China. Nor can any country in the region be forced into such a choice. Efforts by Washington to do so create a zero-sum game with zero appeal.

The debacle that followed recent US efforts to oppose the Chinese-sponsored Asian Infrastructure Investment Bank, or AIIB, is a case in point. The more Washington sought to prevent other nations from joining the AIIB, the more they questioned US leadership. In the end, they effectively repudiated it. There is an important lesson in that.

Apparently unperturbed, the president and his top officials are now going for a repeat performance. They are promoting the Trans-Pacific Partnership, or TPP, trade agreement as a bulwark against rising Chinese influence in the Asia-Pacific region. In his 2015 State of the Union address, and again in a recent interview, President Obama declaimed: “If we don’t write the rules, China will write the rules out in that region.”

Not to be outdone by his boss in the effort to fend off a defeat for the treaty in Congress, Defense Secretary Ashton Carter recently warned that “We already see countries in the region trying to carve up these markets.”

So TPP is about geopolitical influence, not about economics — even butchered economics. (Far from being carved up, Asian-Pacific markets are coalescing, and US firms have been and remain among the drivers of this process of integration.) Somehow — it’s not explained how — persuading Asians to adopt the intellectual property practices favored by Hollywood, BigPharma, and patent-trolling American lawyers will keep China at bay. Really?

In the end, trade agreements need to be justified in terms of their economic impact much more than by the putative political leverage they may provide. The two operative questions are: Will the TPP improve American competitiveness and/or create jobs in the United States? What US economic problems does it fix?

When the US Department of Agriculture modeled a version of the TPP that eliminated all tariffs (an unlikely outcome), it found that the pact would produce zero growth gains for the US economy. Other modeling has suggested that the partnership might boost growth by something less than 0.2 percent. A key reason for this is that the United States already has free trade agreements that eliminate tariffs in six of the 11 TPP negotiating countries. (The major exception is Japan.)

Meanwhile, America’s largest and fastest growing market in the Asia-Pacific region is China, which TPP studiously ignores.

The White House’s efforts to portray the treaty as critical to national security simply underscores its inability to make a case for the agreement on the basis of economic benefits. The best that can be said for the trade agreement is that it could reduce nontariff barriers in Japan, opening opportunities to reduce the chronic US trade deficit with that country. It would also make it easier for US companies to outsource production to Vietnam and Malaysia. But it would do nothing to address the huge US trade deficit with China.

Quite aside from this, the administration’s geopolitical case for TPP is fanciful. In the real world, there is no way that new rules for trans-Pacific trade, written without regard to China and without Chinese participation, will somehow pivot the United States into a lasting position of supremacy in China’s backyard.

Four basic facts explain why that is so: First, China is now everybody’s biggest trading partner, including America’s prospective partners in TPP. Second, the Chinese market represents the major growth opportunity for all these nations.

Third, whatever their concerns about China’s increasing military power, Asian leaders have no interest in distancing themselves economically from China — or from the supply chains that converge there. Fourth, most economists expect China’s economic growth will continue to be much faster than that of the United States.

Casting the partnership as a way to cut China out of the rule-making process for trade and investment in the Asia-Pacific region may appeal to American Sinophobes and protectionists. But it ignores commercial realities on the ground in Asia. They, not the internal dynamics of US politics, will always guide Asian nations’ diplomacy.

Even the Obama administration seems to recognize this. After initial silence on the subject, administration officials have begun to say that China will be free to join TPP once negotiations have concluded, provided that China undertakes further, unspecified legal and economic reforms.

All this makes it almost surreal that the administration has staked the future of US relations with Asia on TPP as a counter to Chinese influence in the region. The likelihood that this will succeed is poor to nonexistent, and there is no fallback proposal should the effort fail.

In the end, the administration’s current arguments for trade treaty boil down to this: We have made the conclusion of this deal a test of our credibility as a Pacific power. If it fails, our credibility will suffer along with our geopolitical influence. So TPP must go forward.

But that’s both a circular argument and a bad bet.

More importantly, it’s irrelevant to what ought to be the main issue: What would the TPP do for US competitiveness and growth and how would it effect American workers and consumers?

It is absurd to imagine that TPP could wrest China — soon to be the world’s largest economy — from a preeminent role in Asia. The United States is far more likely to buttress its influence in Asia by leveraging rising Chinese prosperity and working with China than by ignoring it or attempting to bypass it.

Perhaps the Obama administration understands this. Even as it tries to sell the TPP as a means of containing China, it is well along in negotiating a bilateral investment treaty with Beijing. That makes sense. But it would be nice to hear a serious economic case for the TPP rather than a largely frivolous geopolitical one.

Chas W. Freeman was President Nixon’s main interpreter on his historic trip to China in 1972. He is a retired career diplomat who also served as assistant secretary of defense for international security affairs from 1993-94.

 
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