Tensions Run High on US Presidential Campaign Trail as TPP Debate Continues

7 April 2016

Tensions in the US over the Trans-Pacific Partnership (TPP) continue running high as the presidential contest moves forward – posing renewed questions over when and whether Washington lawmakers will ratify the deal, even as the White House continues to make the case for its swift passage. Meanwhile, deliberations on the TPP are now underway in the legislature of another major member – Japan.

As the weeks count down toward the Republican and Democratic National Conventions – both slated for July – trade has taken a particularly high-profile role in the debate, as candidates spar both within – and across – party lines over the merits of past deals such as the North American Free Trade Agreement (NAFTA) and the potential benefits or costs of passing the TPP.

The remaining candidates for both parties – with the exception of Ohio Governor John Kasich, who is running for the Republican nomination – have openly criticised the TPP and said they cannot support it in its current form.

However, Obama Administration officials have countered that the political climate – though difficult – does not make TPP passage impossible in Washington. Rather, some argue, the issue is about better explaining the issues in order to counter anti-globalisation narratives.

“I think TPP is feasible politically,” US Commerce Secretary Penny Pritzker said earlier this week in a discussion with Richard Haass, President of the Council on Foreign Relations. At the same time, she acknowledged “that there’s a lot of work to be done to make the case for trade.”

In a separate interview with the MSNBC news outlet this week, the US commerce chief stressed the value of the trade pact, particularly in response to Democratic presidential candidate Hillary Clinton’s criticisms of the final TPP outcome.

Clinton was previously the US Secretary of State from 2009 to 2013, during which she supported the TPP pact as a “gold standard” for trade agreements.

“Frankly having looked at this agreement, studied this agreement, I think it is the gold standard,” said Pritzker on Monday. “It is the toughest trade agreement out there in the world. Can you pick holes in the agreement? Of course. Any negotiation, there’s a give and take.”

During a visit to Washington last week, New Zealand Prime Minister John Key also aimed to quell criticisms of the trade deal. “It was the best we could do in a challenging set of negotiations and actually it’s a very good deal,” he said, according to comments reported in ONE News.

The New Zealand premier also suggested that the trade deal could still get passed in Washington in the “lame duck” period later this year – in other words, after a new US President is elected in November but before he or she takes office in January.

Both Key and Canadian Prime Minister Justin Trudeau were in the US capital last week, giving speeches to the US Chamber of Commerce, the major American business federation. While Trudeau also highlighted the value of trade, he reportedly did not confirm whether his government is ready to endorse the TPP, which was negotiated under his predecessor, given that domestic consultations are still underway.

Trade enforcement report

Meanwhile, the success of the Obama Administration in trade enforcement was also touted in this year’s National Trade Estimate report, which was released late last week.

The annual document, issued by the Office of the US Trade Representative, highlights various WTO dispute rulings that have found partially or fully in favour of Washington, ranging from Chinese trade remedy actions on high-tech American steel to Argentina’s various import restrictions.

“In response to barriers highlighted in previous NTE reports, this Administration has brought more enforcement cases at the WTO than any other member, used pre-dispute engagement to push trading partners to live up to their obligations, and strengthened US government enforcement capacity,” said US Trade Representative Michael Froman.

The US trade chief also pledged that Washington would continue its efforts to boost enforcement of international trade rules, while highlighting the importance of reducing existing trade barriers through other avenues, such as the negotiation and implementation of trade agreements.

“Opening foreign markets through smart, high-standard trade agreements – and enforcing our existing agreements to ensure that other countries live up to their commitments – is how we can level that playing field and make trade deliver for the American middle class,” he said.

In this context, the 474-page report features repeated mentions of the TPP, outlining the areas where Washington envisions potential trade growth or other key benefits with respect to each of its TPP partners.

“The TPP agreement, which was concluded in October 2015 and signed in February 2016, will significantly advance US economic interests in some of the fastest growing economies in the world, promoting US exports of goods and services, and benefiting American workers, farmers, businesses, and consumers,” the report notes.

Japanese legislature kicks off TPP debate

Meanwhile, efforts to advance TPP ratification in Japan got underway this week, prompting vociferous debates in the Japanese legislature.

During a 5 April meeting of the Diet, the trade pact reportedly drew harsh criticism from Japan’s Democratic and Communist parties, according to the Japan Times. Both parties are of the opposition in Japan, while the ruling Liberal Democratic Party is in favour of the pact and holds solid majorities in both legislative chambers.

Japan, which is one of the largest economies in the talks, was the last country to join in the negotiations while they were still ongoing. The trade pact has long been controversial in the Asian economy, with the difficult domestic politics on areas such as agriculture and automobiles largely credited with delaying its earlier entry into the talks. (See Bridges Weekly, 25 April 2013)

Given the threshold needed for TPP to enter into force – ratification by all 12 signatories within a two-year window, or if that fails ratification by at least six countries with 85 percent of the group’s GDP – ratification by both the US and Japan is essential for the pact to move forward.

Both Obama and his Japanese counterpart, Prime Minister Shinzo Abe, have also made the TPP a signature part of their respective policy agendas. While Obama has touted the TPP’s potential for setting the “rules of the road” in the Asia-Pacific region, Abe has included it as part of the structural reforms that make up the “third arrow” of his highly-scrutinised “Abenomics” economic plan.

“The importance of the Japan-US alliance will not change no matter who becomes president [of the United States],” said Abe in an interview with the Wall Street Journal, responding to questions on the American election’s impact on the TPP’s passage.

“Through [the agreement], the US, Japan, and the other countries participating in the TPP will achieve great profit and gain chances for growth,” he said.

Interest from others

Meanwhile, some countries currently outside the TPP pact are showing increased signs of interest in joining the agreement.

Thailand, for example, is expected to announce whether it will formally pursue TPP membership later this month, depending on the results of ongoing analysis regarding the Pacific Rim’s potential opportunities and challenges for the country.

South Korea, for its part, has already indicated a potential interest in the trade pact. Mexican President Enrique Peña Nieto, following a summit with South Korean President Park Geun-hye, said this week that his country would support Seoul’s entry into the pact. The two countries are also set to hold meetings later this year over a possible bilateral pact between them (for more, see related story, this edition).

Global growth prospects in background

Meanwhile, the state of global economy is another factor in the broader TPP debate, given the potential effect this agreement and others could have on boosting sluggish trade growth, among other areas.

In a joint press release following a 5 April meeting in Berlin, German Federal Chancellor Angela Merkel, together with the heads of the International Monetary Fund, World Bank, the International Labour Organization (ILO), Organisation for Economic Co-operation and Development (OECD), and the WTO, noted that trade “remains an important driver of global growth, development, and employment.”

Along with touting the outcomes of the WTO’s Tenth Ministerial Conference in Nairobi, the officials said that they “welcome ongoing efforts to conclude new bilateral and regional free trade agreements."

“We welcome the conclusion of the Trans-Pacific Partnership and expect significant progress in the negotiations on a Transatlantic Trade and Investment Partnership in 2016. In order to complement the multilateral trading system, such arrangements should be open, transparent, and comprehensive, and should minimise discrimination between members and non-members,” they added.

That same day, IMF Managing Director Christine Lagarde issued a call for “decision action to secure durable growth,” including through “shoring up global trade.” The Washington-based institution is slated to release the next edition of its World Economic Outlook next week, with the IMF chief warning that the global outlook has grown worse over the latest six-month period.

ICTSD reporting; “Japanese lawmakers lock horns over TPP,” THE JAPAN TIMES, 5 April 2016; “John Key attempts to rally US support for TPP: ‘It’s not a bad deal’,” ONE NEWS, 31 March 2016; “Obama’s Commerce Secretary Pritzker: ‘I don’t understand’ Hillary Clinton’s TPP Reversal,” THE WASHINGTON FREE BEACON, 4 April 2016; “Thailand’s decision on TPP likely this month,” THE NATION, 5 April 2016; “‘We Are Seeing Events That Shake Economic Activity and People’,” THE WALL STREET JOURNAL, 5 April 2016; “Korea, Mexico to hold talks on free trade deal,” THE KOREA HERALD, 5 April 2016; “Obama’s ‘lame duck’ period best chance for US to ratify trade deal – John Key,” STUFF.CO.NZ, 1 April 2016; “Trudeau touts trade, diverse economy in U.S. visit,” CTV NEWS, 31 March 2016.

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