In its push for Trans-Pacific Partnership, US engages China in a battle over free trade rules

Andrew Hammond says the Trans-Pacific Partnership, which may well reach a deal this week, underlines the race to rewrite global rules

PUBLISHED : Wednesday, 29 July, 2015, 11:18am
UPDATED : Wednesday, 29 July, 2015, 12:58pm

Trade ministers from a dozen countries in the Americas and the Asia-Pacific region are in Hawaii for talks that could see the landmark Trans-Pacific Partnership (TPP) deal agreed by Friday. The proposed treaty is one of the most important free-trade agreements since the North American Free Trade Agreement in 1994.

This is not just because the 12 markets - the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam - encompass about 40 per cent of the world's gross domestic product. In addition, the TPP has an important component, with Obama administration officials asserting that the new treaty will enable Washington, rather than Beijing, to write the "rules of the road" for important 21st century economic issues, including intellectual property in the digital economy.

Passage of the treaty would be a major win for Obama as he seeks to define his presidential legacy before his term ends in January 2017

The key development that enabled this breakthrough, after about five years of negotiations, was the US Congress' passage in late June of the so-called Trade Promotion Authority. The authority allows the White House to negotiate deals without major congressional interference after negotiations are complete. To be sure, the House of Representatives and Senate must still approve or reject final agreements, but they may not amend them.

While a TPP deal now appears probable, there could yet be obstacles that delay or derail a deal. The TPP remains a controversial agreement with many domestic constituencies, including labour organisations in the US, which are concerned about possible job loss.

Importantly, the TPP is being promoted by the Obama administration to embed US influence internationally. President Barack Obama made this explicit in May when he said: "If we don't write the [new] rules for free trade around the world, guess what, China will. And they'll write those rules in a way that gives Chinese workers and Chinese businesses the upper hand."

There is a significant geopolitical component to TPP as it will help reorient and lock in US international policy towards the Asia-Pacific region (the "pivot") and other strategic high-growth markets. In this sense, passage of the treaty would be a major win for Obama as he seeks to define his presidential legacy before his term ends in January 2017.

Taken overall, agreement on TPP could come as soon as this week. The White House will press as hard as possible to see the agreement wrapped up before 2016 US presidential and congressional election-year pressures potentially make it harder to secure a final agreement in Washington.

Andrew Hammond, a former special adviser to the British government, is an associate at IDEAS at the London School of Economics