A 12-nation Pacific trade deal strengthens President Barack Obama’s hand in his strategic pivot toward Asia and challenges China to accept U.S.-backed rules for doing business.
A trading bloc stretching from Chile to Japan, with the U.S. at the economic center, bolsters Obama’s effort to counter growing Chinese military and economic influence in the Pacific. The agreement, reached Monday in Atlanta, also bolsters his diplomatic position as he travels to Asia next month for meetings with regional leaders.
More than that, the deal means the U.S. now has closer trading partners -- and closer friends -- in the region. That may force China to live up to the deal’s standards or else be cut from some of the resulting economic growth.
“American influence in Asia has long been based on our economic strength and admiration of our economic system,” said Jeffrey Bader, a former Obama adviser on Asia policy and now a visiting scholar at the Brookings Institution in Washington. The trade deal “binds countries more closely and makes economic interdependence more of a reality.”
If ratified, the Trans-Pacific Partnership would be the largest pact governing international commerce in more than two decades, encompassing 40 percent of the world’s economic output. The deal would set new precedents for breaking down subtle, politically entrenched barriers to trade and would reinvigorate an expansion of global commerce.
The trade pact would eliminate more than 18,000 taxes on U.S. products and includes enforceable labor and environmental standards, Obama said in a statement.
“When more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy,” Obama said.
“The U.S. is back in the driver’s seat with trade in a way that it hasn’t been for more than two decades,” said Edward Alden, a senior fellow at the Council on Foreign Relations in Washington. “It really does reassert a strong U.S. role in the trading system.”
China remains the world’s second-largest economy and its role as Asia’s dominant commercial force won’t diminish, despite a slowdown in growth that has roiled its financial markets this year. President Xi Jinping has moved to enhance his nation’s economic influence, including by establishing the Asian Infrastructure Investment Bank, which has attracted participation from more than 50 countries.
While China is not a party to the Trans-Pacific Partnership, the participation of so many of its trading partners and neighbors -- including Japan, Malaysia and Vietnam -- raises pressure on Xi and his government to accept its standards. The pact would require stronger intellectual property protections for drug companies and easier access to foreign markets for financial services firms and telecommunications companies, among other provisions.
“The Chinese are studying very carefully the pros and cons of participation in TPP,” said Jeffrey Schott, senior fellow at the Peterson Institute for International Economics and a former U.S. trade negotiator.
A shift in U.S. strategic focus toward Asia has been a centerpiece of Obama’s foreign policy. His administration considered the Asia-Pacific trade pact critical to that strategy; Defense Secretary Ashton Carter even said he’d prefer the agreement over another aircraft carrier in the Pacific.
Domestically, the Asia-Pacific deal confirms the triumph of free-trade supporters over labor unions and critics of globalization within the Democratic party. Obama becomes the second Democratic president in a row to achieve a major free- trade deal in his presidency. President Bill Clinton oversaw ratification of the 1993 North American Free Trade Agreement and the Uruguay Round international trade agreement in 1994.
Obama has cast the Trans-Pacific Partnership partly as a re-write of NAFTA, which has been blamed by many Democrats for an erosion of U.S. manufacturing jobs. NAFTA participants Mexico and Canada are also parties to the Asia-Pacific deal, whose terms would supersede the earlier pact if it is enacted.
The run-up to a congressional vote on ratification of the Asia-Pacific agreement during presidential primary campaigns will stoke political passions over trade, particularly within the Democratic Party.
Vermont Senator Bernie Sanders, who is running against Hillary Clinton for the Democratic nomination, and Massachusetts Senator Elizabeth Warren have led opposition to the deal, saying it favors corporations and will undercut U.S. wages. Clinton has so far declined to take a position, saying she will wait to review the final agreement while expressing doubts about it.
Negotiations on the pact were completed just more than a week after Xi traveled to the White House for a state visit that underscored points of contention between the world’s two largest economies. The U.S. and China have found themselves increasingly at odds over cyberespionage, territorial disputes in the South China Sea, currency manipulation and labor practices.
The influence of the new trade bloc may grow as other Pacific Rim nations seek to join, with South Korea likely among the first.
Obama spent much of this year lobbying Democrats to grant him authority to negotiate trade deals and submit them to Congress for up-or-down votes, called fast-track. Legislation providing him fast-track power eventually cleared the House with the support of a couple dozen Democrats and a majority of Republicans.
Opponents, including labor unions, have pledged to fight final approval.
“If negotiators come to a bad deal, our scrutiny will be thorough, and our opposition fierce if what we find does not help working families,” Richard Trumka, president of the AFL- CIO, said Thursday in a statement.
Under the fast-track legislation Obama signed in June, Congress will have at least 90 days to review the deal. That means up-or-down votes will not take place until 2016, just as the first primary election votes loom.
The signing rounds out a 12-month period in which Obama has won a nuclear deal with Iran, ended a half-century-long U.S. effort to isolate Cuba, reached a climate-change agreement with China and hosted Pope Francis at the White House.
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