Obama "Confident" of TPP Passage, Touting Trade Benefits During Asia Trip

25 May 2016

US President Barack Obama said on Monday that he is “confident” that his country’s Congress will be able to ratify a sweeping 12-country trade deal, even as election politics and public debate continue to pose questions for the agreement’s actual prospects going forward.

“The reason I’m confident is because it’s the right thing to do. It’s good for the country. It’s good for America. It’s good for the region. It’s good for the world,” he told reporters in Vietnam on Monday.

Later in the week, Obama affirmed that not only does he expect the deal will be approved, but that the objective remains to secure congressional sign-off in 2016, his final full year in office. Obama has touted the deal as being a key component of Washington’s “pivot to Asia,” as well as being an essential step to ensuring that the US remains at the forefront of global trade rule-making.

Whether the 2016 ratification goal is indeed realistic, however, has increasingly come into question during the first half of this year, as leading presidential candidates from both major political parties have outright rejected the deal in its current form. (See Bridges Weekly, 12 May 2016)

Congressional lawmakers have similarly cautioned that it will be exceedingly difficult to hold a vote on the TPP before the November polls, both due to the current political climate as well as to concerns raised on certain substantive elements of the pact, such as the time periods for data protection regarding biological drugs – known otherwise as “biologics.”

“I’ve spent enough time in the Senate to know that every trade deal is painful, because folks are always seeing if they can get an even better deal,” said Obama in response to reporters’ questions in Hanoi. Given that it is also an election year, he added, it is not unexpected that certain people will “try to score political points off it.”

“The politics of it will be noisy. That was true when I, for example, inherited the Korea Free Trade Agreement, or the Colombia and Panamanian Free Trade Agreements when I came into office. But we got them done,” he continued.

The trade deal, known as the Trans-Pacific Partnership, counts among its signatories Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam. Together, the group makes up nearly 40 percent of global GDP.

Labour, environmental provisions

While visiting the Southeast Asian country, both Obama and his Vietnamese counterpart, President Tran Dai Quang, made the case for why each side would benefit from the TPP, including the increased bilateral cooperation that the deal’s implementation will require.

Among the deal’s selling points, the leaders said, are commitments involving both labour and environmental concerns. Along with specific chapters on these subjects, the TPP includes bilateral “consistency plans” that the US has reached with Vietnam, Malaysia, and Brunei in relation to improving those countries’ labour rights regimes.

Should Vietnam not uphold the specific provisions on establishing independent labour unions within a set period following the TPP’s entry into force, the US can then examine compliance with the consistency plan. A finding of non-compliance would give Washington the option of suspending certain tariff concessions. (See Bridges Weekly, 12 November 2015

Ahead of Obama’s visit, groups such as Human Rights Watch called for the US leader to openly push Vietnam officials to undertake additional reforms to labour and human rights, and urged Washington to ensure that the terms of the bilateral consistency plan under TPP are indeed enforced.

“The threat of enforcement is not the same thing as enforcement,” the letter read, arguing that a future US leader may choose not to suspend tariff concessions in the event of Vietnam’s non-compliance with the consistency plan.

During this week’s meetings, Obama and Quang both emphasised in their remarks to reporters and in a separate joint statement that they remained committed to early ratification and implementation of the TPP, including its labour rights provisions.

US ITC report: TPP to have positive, limited impact

The debate in Washington over the TPP’s merits ratcheted up a notch last week, however, when the US International Trade Commission (US ITC) released its highly-anticipated report on the potential gains and losses to the United States from the 12-country pact.

According to the document, which numbers nearly 800 pages, the deal would yield “positive effects, albeit small as a percentage of the overall size of the US economy.” Specifically, the US ITC said that within 15 years, US annual real incomes would increase by 0.23 percent relative to a baseline level, while the country’s GDP would be 0.15 percent higher than without the trade deal.

Breaking the gains and losses down by sector, the report suggested gains for agriculture, food, and services, while predicting possible losses in manufacturing and energy outputs, among others. 

The numbers were quickly seized on by opponents of the deal as proof that the TPP has been oversold in the US, with groups such as Washington-based Public Citizen arguing that the pact would be “damaging” for American jobs and incomes across several sectors, including manufacturing. 

American trade officials, however, have cast the report in a vastly different light, with US Trade Representative Michael Froman suggesting that the report’s findings are further proof that the TPP should be ratified by congressional lawmakers in 2016.

“[The report] is part of a growing body of evidence that shows that TPP will benefit our economy at home and allow the US to help set the rules of the road for trade in the Asia Pacific,” he said.

The US trade chief also suggested that the report “took a more narrow approach in their projections,” comparing it to other studies conducted by Washington-based think tanks, namely the Peterson Institute for International Economics.

Froman suggested that the latter studies have shown evidence of even greater TPP benefits, given that they incorporated the gains that could come from the deal’s intellectual property rights protections and other rules.

“What cannot be quantified in this study or any other is the cost to American leadership if we fail to pass TPP and allow China to carve up the Asia-Pacific through their own trade agreement,” said Froman, referring indirectly to the Regional Comprehensive Economic Partnership (RCEP).

The RCEP has 16 members, including China. It also has a significant overlap in membership with the TPP, but does not include the US among its participants.

After missing an end-2015 deadline, RCEP officials now say that they plan to conclude a deal later this year which would include goods and services trade, investment, intellectual property and e-commerce, competition, dispute settlement, and economic and technical cooperation. (See Bridges Weekly, 12 May 2016)

While these chapters may have some overlap in certain TPP topics, other areas such as labour and environmental issues and treatment of state-owned enterprises were not included under the deal’s initial guiding principles, though that foundational document does allow for the consideration of other issues covered by different trade deals involving RCEP members.

In Vietnam on Monday, Obama did not make a concrete reference to the US ITC report or to the other competing estimates of the TPP’s potential benefits or costs. However, he did tell reporters that he has “not yet seen a credible argument that once we get TPP in place we’re going to be worse off.”

“We are demonstrably better off. American workers and American businesses are better off if we get this deal passed. And I’m confident we will get it passed,” he continued.

Ratification updates at APEC

Trade ministers from the TPP’s 12 economies also met last week in Arequipa, Peru, on the sidelines of an Asia-Pacific Economic Cooperation (APEC) ministerial gathering. (For more on APEC, see related story, this edition)

The event was meant to give the officials the chance to discuss jointly their respective efforts to advance TPP ratification in their home countries, following the February signing ceremony for the deal that was held in Auckland, New Zealand. (See Bridges Weekly, 11 February 2016)

“The ministers underlined that they share the goal of strengthening and broadening the mutually-beneficial linkages between member economies; enhancing regional and global competitiveness; supporting the creation of jobs and new economic opportunities; promoting economic growth and development; supporting innovation and helping to alleviate poverty; and ensuring the greatest benefits for our people,” they said after the gathering, touting the TPP’s potential benefits in meeting these objectives.

The statement also referred to the potential interest from other countries in joining the Pacific Rim deal, noting that ministers are working with those nations to ensure they fully understand what changes they would need to make to become TPP members.

Any new countries would have to accede after the TPP enters into force. The timing of that will depend primarily on the pace of ratification, as well as which signatories ratify when. The February signing ceremony kicked off a two-year period for all 12 countries to complete their respective domestic processes.

However, if not all 12 have ratified by that stage, then the TPP would only enter into force upon ratification by at least six economies that together make up 85 percent of the group’s GDP. Meeting that threshold will require, at a minimum, that the US and Japanese legislatures have approved the pact.

ICTSD reporting; “Obama Reasserts Hope for TPP Passage This Year,” THE WALL STREET JOURNAL, 25 May 2016; “TPP’s slow roll in Japan,” POLITICO, 23 May 2016.

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