Introduction
Trade is habitually held responsible for the financial challenges a nation encounters. This is particularly the case during the campaign period where America’s commitment internationally is under attack. In a gradually interrelated realm, nevertheless, no nation, the United States not being an exception, may or ought to revert to segregation (Huntsman & Locke, 2016). With a considerable amount of U.S. occupations relying on trade, and extraneous customer markets being opened like never experienced again, instituting new blockades to trade would only harm the economic forecasts (Office of the US Trade Representative, 2012). It is obvious that the post-World War II period has seen significant strides by key players in the trading industry. Aided by globalization, key players witnessed the dramatic growth of global trade and the creation of global trading frameworks. The developments are founded on the principles of open economies. Nonetheless,
With universal trade discussions delaying, the United States has, ever than before, chosen to turn to local and consensual “Free Trade Agreements” (FTAs) (Office of the US Trade Representative, 2012). President Obama secured the route of FTAs with South Korea, Panama and Colombia. Prior to vacating office, he spearheaded the “Asia-centered Trans-Pacific Partnership” (TPP) negotiations and also furthered a distinct U.S.-EU commercial agreement. According to McBride (2017), the U.S., despite being less reliant on trade in comparison to other developed economies, has been a major player in advancement of changes in international trade arena. In response to the stalling global trade talks, the U.S., the Obama administration in particular, turned attention to the increasing influence of regional and bilateral free trade agreements (FTAs).
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The Trans-Pacific Partnership (TPP) is an Asian–centered trade agreement negotiated by President Obama before leaving office. The TPP, the largest trade agreement in history, was finalized in early February 2016 after 7 years of negotiations. It is a trade agreement between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States (until 23 January 2017) and Vietnam (Granville, 2016). TPP sought to expand the existing trade agreements while reducing their provisions to avoid conflicts with TPP or enhance them to provide greater liberalization. However, TPP suffered a dramatic setback when President Trump decided to upend it. The arguments advancement by the Trump administration are drawn from concerns of some stakeholders in the U.S. labor movement and economists that TPP could potentially harm workers and degrade the U.S manufacturing base. The move opened debate on the significance of TPP in relation to the U.S foreign trade policy. This paper examines TPP in the context of the U.S foreign trade policy and implications of current policy and prospects for policy changes to ensure success (Office of the US Trade Representative, 2012). Proponents propose that multidimensional trade contracts generate jobs by opening up novel markets to the United States’ trades and makes it even stress-free for the U.S. corporations to take part in overseas markets.
The Current U.S Policy is towards the Area
The Origin of Concerns for TPP
It is imperative to point out that globalization and the flattening of the world are responsible for emergence of new economies that threaten to disrupt the status quo of global economic superpowers. China, India, and Brazil come to mind. Countries such the U.S cannot afford to adopt a business as usual approach. The risk of losing its position and influence is significant. Regional and bilateral FTAs represent the best option for the U.S to remain relevant. However, as evidence by Trump’s decision to upend the TPP, one can argue that U.S foreign trade policy is a major impediment. Under the TPP, the U.S and 11 other pacific nations reached a deal to link 40% of global economy, phasing out tariffs on thousands of goods and creating uniform trading rules. The agreement also captured critical aspects of intellectual property rights, government procurement, and state regulation of private enterprise (Huntsman & Locke, 2016). China’s absence was conspicuous, but the world’s second largest economy was projected to join later with other countries. Reluctance by other nations can be attributed to perceptions of treatment from the U.S. because of its discriminatory trade policies. Critics from the East assert that TPP was meant as a counterweight to China’s growing influence in Asia and worldwide. This has led to perceptions of the agreement as a critical aspect of the U.S foreign policy because it seeks to strengthen America’s influence in the region.
There are mixed reactions about the controversies of TPP. While the East may be weary of the U.S intentions, the U.S itself is concerned about the implications of the pact. Labor unions and critics of the North American Free Trade Agreement assert that TPP, among other things, would push manufacturing jobs to other countries resulting to loss of thousands of jobs in the U.S. In addition, stakeholders in the U.S are adamant that benefits to be realized by America are insignificant compared to what other countries get from the pact. For instance, the pact is projected to support many high paying jobs for Americans and generate additional $123.5 billion in exports (Lee, 2015). However, benefits for countries such as Vietnam surpass the gains to be made by the US.
Current U.S Policy
The U.S stance through TPP negotiations has been consistent. According to Capling and Ravenhill (2011), the U.S was unwilling to offer a single set of arrangements for all TPP partners, opting to build on existing bilateral trade agreements instead. This further makes its involvement suspect as it has only served to exacerbate concerns about dividing the region and China’s containment. Yuan (2012) posited that Chinese scholars have advanced the argument of TPP being driven by the U.S geopolitical intentions rather than economic reasons. China’s economic rise and increase in political and military might has not gone unnoticed. The withdrawal of the U.S form TPP by president Trump is informed by the U.S long standing policy of emphasis on striking smaller regional and bilateral and investment deals. The argument by Trump is that bilateral deals provide the U.S with an upper hand in negotiating better terms than multilateral talks (Office of the US Trade Representative, 2012). The U.S intention to advance its interests has been met by opposition from developing countries such India and China who are adamant of retaining flexibility in imposing import tariffs –“safeguard duties” – while pushing for subsidized farm inputs from the U.S and Europe (McBride, 2017).
Why it Fails to Achieve an Important American Foreign Policy Goal
American economic woes have always been blamed on trade. However, Huntsman and Locke (2016) posited that in an increasingly interconnected world, the U.S, like any other country cannot fathom the risk of reverting to isolation (Huntsman & Locke, 2016). One can thus argue that the move by Trump’s administration to retain the foreign trade policy that emphasizes on bilateral rather than multilateral arrangements, will damage the country’s economic prospects. Erecting new barriers will affect the tens of millions of U.S jobs dependent on trade, coupled with opening up of consumer markets worldwide. Despite the withdrawal of the U.S from TPP, its prospects before the decision were questionable. The motive behind the calls to ratify the agreement may be irksome to other nations. The Trans-Pacific Atlantic agreement represented a major economic breakthrough from the perspective of U.S proponents. According to Huntsman and Locke (2016), TPP would have cemented the U.S role in authoring trade rules of the 21 st century. It would also play a central part in reinforcing the U.S strategic leadership in the region, a critical aspect of the country’s prosperity in the new economic and geopolitical dispensations. Arguments have also been advanced that failure by the Congress to pass TPP will send a message of weakness, retreat, and unreliability to partners in the East.
The issues raised depict the authoritative approach adopted by the U.S in advancing its economic interests. With other partners presenting dissenting views because they believe to have a voice in a leveled playing field (Huntsman & Locke, 2016). It is unlikely that China, India, and other prospective partners to TPP are unlikely to yield to the U.S to advance its interest at the expense of their own. Conglomeration of 40% of the global economy under TPP implies reduced tariffs and opening of markets to all players. In a bid to protect its interests, the U.S opted to exert its superiority, a move that would not be received well by other partners. The U.S move to backpedal from TPP can be attributed to the realization of the stance of partners from the East. One can argue that the U.S has preference for foreign policy that gives it the autonomy of control, which is afforded by regional and bilateral agreements advocated for by the Trump administration (Huntsman & Locke, 2016). As a result, the high financial, economic, and security stakes of TPP negotiations have led to requests from different sectors to clarify the role of the US in pushing the economic agenda, evaluate the future effects of the agreement on the major players, potential strategies by China to counter the perceived U.S influence, and the role of such strategies in influencing the global trade arena in the long run.
An Alternative Policy and Why it will Achieve the Goal
It is worth revisiting the issue raised earlier that about the dissent expressed by China towards TPP. Fears that successful negotiation and implementation of TPP would jeopardize China’s future economic prospects need to be allayed (Huntsman & Locke, 2016). The U.S insistence on regional and bilateral pacts is detrimental to this process. The U.S policy makers should explore the potential benefits of adopting a multilateral policy. It is important to recognize that with or without the U.S involvement, emerging economies in China and India are likely to continue their ascent. Rather than instituting strategies protective strategies, the U.S should adopt an open door policy that allows other partners to understand what is in the pact for them (Huntsman & Locke, 2016). No partner should feel the pressure of being victimized by the agreement in the future. In addition, while the benefits from multilateral agreements such as TPP may have insignificant benefits to the U.S in the short term, the same cannot be said about the long term. One can argue that comparatively high benefits for countries such as China, India, Vietnam, among others are an outcome of their virtue of being developing economies (Huntsman & Locke, 2016). Once developed, benefits are likely to even out with the U.S emerging the victor in the long run because of its economic superiority.
Justification of Adoption of Multilateral Policy
Adoption of multilateral policy approach, though perceived by China as a recipe for negative economic impacts in the future, would go a long way in aiding positive reception of TPP. The U.S should dangle evidence of contradicting facts to soften the stance of other partners. In an article presented by Watch (2014), truths and myths about TPP are presented. Watch (2014) suggests that the path taken by China in opposition of the TPP, informed by its concerns about the U.S motives are rather unjustified given the prevailing evidence. Review of concerns about the use and abuses of TPP lead to the conclusion that similar reasons were advanced during negotiations for NAFTA and FTAs. The perennial sales pitch has become a mainstay in as geopolitical claims continue to be advanced. While the legitimacy of the U.S’s concerns about the implications of China’s rising economic power cannot be discredited, the assertions that the U.S would control any trade agreements can be contradicted.
Some factions have opined that Chinese owned firms of operating in the U.S lobby for TPP and fast track. The U.S and China have been indirect beneficiaries of some of the trade agreements in different capacities. For instance, after warnings of the potential Chinese control of global trade if the U.S failed to enact NAFTA and FTAs, the opposite has been true. Twenty years after NAFTA came to effect, the U.S experienced a 20% decrease in its exports to Mexico, while China’s share of the same rose by over 2,600%. A similar trend was evidenced after the U.S enacted another pact with 8 Latin America countries; the U.S share of Latin imports fell by 36% while that of China rose by 575% (Watch, 2014). The implication of these figures is that they disapprove concerns of the U.S influence. It cannot be disputed that the trade agreement were enacted with the U.S’s economic interests in mind, but in both cases, China ended up benefiting more despite not being a partner in the negotiations. On the basis of the evidence, one can argue that the Chinese concerns are selfish because TPP is likely to benefits the East more than the U.S.
The Strengths and Weaknesses of the policy
Multilateral trade agreements have the potential to transform the global business arena because they open up access to markets around the world. Elimination of tariff and policy barriers to free trade creates a level field for competition with only firms with the best strategies surviving. The benefits of globalization cannot be realized in major economies in the U.S and China are unwilling to strike agreements because of dependence on limiting policies that advance their selfish interests. It is important to point out that in any normal business environment, firms would strive to maintain a competitive advantage by advancing their interests firsts. The U.S cannot be faulted for taking necessary measures to protect its interests, but the tradeoffs may be insignificant. Multilateral agreements present the perfect opportunity to exert more influence even if it means ceding ground on some issues. Neither the U.S nor China can have it all their own way. By virtue of their status as leading global economies, they should set the precedent for other partners through willingness to compromise.
Pros and Cons
Despite all the pull and push about the role of the major economic superpowers, a policy for adoption of a multilateral trade agreement such TPP would boost economic growth and create jobs for all the 12 partners involved. TPP is estimated to increase exports by $305 billion by 2025, with the US claiming the majority share $123.5 billion coming mostly from auto, machinery, plastic, and agriculture industries. The agreement would also remove 18,000 tariffs significantly increasing the US exports (Office of the US Trade Representative, 2012). It also adds significant amount to workers income with a major share going to the U.S. Implementation of TPP will favor workers earning high wages thus creating income inequality. Such agreements also promote cheaper goods from low wage countries, thereby affected the labor market of importing country (Huntsman & Locke, 2016). Reduction in availability of cheap generics due to patents agreements will raise the cost of drugs. It may also lead to reduction in incentives to protect the environment.
Conclusion
The Trans-Pacific Partnership (TPP) discussions are the only supplementary trade concession to which the United States is part of. The TPP has the prospect to be the edifice block for a broader “Free Trade Agreement of the Asia-Pacific Region” (FTAAP) – an objective sanctioned by the leaders of APEC at the APEC Conference held in the year 2006 in Hanoi (Watch, 2014). This idea was echoed by Ron Kirk, the United States’ Trade Representative. Nevertheless, accusations have been traded about the role of politicians and pundits to activate Americans’ anxieties about the rising economic influence of China, a move intended to masquerade the real fears that fast tracking of TPP would send American jobs overseas and undermine its wages by forcing Americans to compete with developing countries where labor costs are low such as Vietnam (Huntsman & Locke, 2016). While such concerns may be justified, adopting a protectionist approach that isolates the country from the rest of the world is ill advised. It is time the U.S leads from the front by doing what it would expect of other nations in the partnership – compromise. The reluctance by Trump’s administration to shift form its foreign policy that encourages regional and bilateral talks over multilateral agreements would be a great undoing. The rise of China as an economic, political, and military might was inevitable. In any business industry, entry of a new powerful competitor should spur innovation to develop more effective strategies to counter the effects and achieve a sustainable competitive advantage. The U.S long standing interests in the Middle East should not be the reason for deliberately locking China out of the TPP as all those concerned are likely to benefit more from an inclusive agreement. It is such associations that foster development that has a global impact.
References
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Huntsman, J., & Locke, G. (2016). The Trans-Pacific Partnership: Vital to America's Economic Interests. The National Interest. Retrieved 7/10/2017 from: http://nationalinterest.org/feature/the-trans-pacific-partnership-vital-americas-economic-16938.
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Watch, P. C. S. G. T. (2014). The rising use of the trade pact sales pitch of last resort: TPP foreign policy arguments mimic false claims made for past deals. Retrieved 7/10/2017 from: https://www.citizen.org/sites/default/files/tpp-foreign-policy.pdf.
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