Why Losing TPP Won't Hurt the U.S. in Asia

The Yomiuri Shimbun via AP Images

Japanese Prime Minister Shinzo Abe and U.S. President Barack Obama hold a summit meeting at the White House in Washington, D.C., U.S.A. on April 28, 2015. 

The failure of the House of Representatives last week to accept the president’s proposals for approving the Trans-Pacific Partnership free trade deal (TPP) he has long been negotiating, has resulted in a cloudburst of baleful predictions of the collapse of American foreign policy and the complete impotency of the rest of the Obama presidency. You would think that while the trade provisions were controversial, there was unanimity on the premise that TPP is a foreign policy imperative.

Former Treasury Secretary Larry Summers likened the vote to rejection by the Congress of President Woodrow Wilson’s proposal for a League of Nations after World War I. Conservative New York Times columnist David Brooks said the vote against the president would help China dominate Asia. Speaking at a Washington think tank, Singapore Foreign Minister K. Shamugam asked of the U.S.: “If you don’t do this deal, what are your levels of power?” He went on to say: “the choice is a very stark one. Do you want to be in the region or do you want to be out of the region?”

With respect, this is not only a hugely overblown reaction. It is a manifestation of plain, downright wrong analysis. For starters, let’s look at which countries are actually involved. In addition to the United States, there are: Canada, Mexico, Peru, Chile, New Zealand, Australia, Brunei, Singapore, Malaysia, Vietnam, and Japan. The total population of these countries is about 750 million persons. Of those, roughly 500 million are in the Americas. Canada, the United States and Mexico account for more than half the total by themselves. You might well ask why the deal isn’t being called the NAFTA–Pacific trade agreement.

Now, consider a couple of other facts. The United States already has free trade agreements with Canada, Mexico, Peru, Chile, Australia, and Singapore, or more than half the countries involved in the TPP. Of the four TPP countries that do not already have a free trade agreement with the United States, three are not very large economies. Brunei’s population is less than 500,000. Malaysia’s is about 30 million but with a GDP per capita of only about $10,000. Vietnam’s population is 100 million but the GDP per capita is really small at less than $2,000.  So the only major economy in the group that does not already have a free trade deal with the United States is Japan. But of course, the United States and Japan have had almost continuous trade negotiations between them with numerous mini-free trade arrangements since the late 1970s. Finally, we should note that while it is not part of the present TPP negotiation, South Korea concluded a free trade agreement with the United States in 2012.

So are the pundits and foreign policy experts saying that America’s position in Asia is hopeless because the U.S. Congress has not agreed to an up or down vote on what essentially would be a new free trade deal with Brunei, Malaysia, and Vietnam? Certainly during his just concluded visit to Washington, Japanese Prime Minister Shinzo Abe didn’t sound as if he would send the U.S. Seventh Fleet packing if eventually the trade deal were not concluded. Indeed, he sounded like he was more interested in a stronger U.S. military presence in Asia than he was in reducing Japan’s sky high tariffs on U.S. beef and pork exports.

That takes us to the heart of the question. Since the end of World War II, America’s influence in Asia has always essentially rested on its ability to project military power. It was the U.S. defense umbrella held over Korea, Japan, and the Philippines by dint of so called mutual security treaties, and the patrolling of the western Pacific by the U.S. Seventh Fleet that maintained the stability in Asia that was essential to the development of Japan, the so called Asian Tigers, and now of China.

Free trade agreements were not part of that arrangement. Of course, the general openness of the U.S. market under the rules of the World Trade Organization and the off-shoring of U.S. production, jobs, and technology in reaction to the search for low-cost Asian products and to Asian mercantilism played an important role in the development of Asia. But those things are not going to disappear in the wake of the recent vote against the rules for considering the TPP.

The notion that China will somehow seize Asia in lieu of a TPP or that a TPP could prevent China from writing the future rules of world trade would be hilarious if it were not being expressed by so many otherwise educated, cosmopolitan people. Virtually all of the Asian countries involved in the TPP negotiation are concurrently negotiating trade deals with China. The TPP will not stop these deals, but nor will they become the template for a new WTO.

In addition, U.S. companies have only been accelerating their eagerness to make their own separate peace with Beijing, building factories there to take advantage of China’s subsidies and suppressed wages, and in exchange sharing technology with Chinese “partners.” Nobody has explained how TPP will slow this down or change the often one-sided terms that advantage China’s push to become an industrial leader.

It really is time for our elite commentators and foreign policy gurus to get a grip.  

You may also like