TPA: The Price of Failure

By John E. Matheson, Associate General Counsel for Intel in Singapore

With the United States Senate vote in favor of Trade Promotion Authority (TPA), the Trans-Pacific Partnership (TPP) took a small, but significant step towards closure. And now as the House of Representatives seems to be on the cusp of their TPA vote, I offer some Asian perspectives on the deep and strategic significance of the decision that lies ahead.

For the four ASEAN members of TPP (Brunei, Malaysia, Singapore and Vietnam) the negotiations have been a long, drawn out and expensive lift, pushing some of them to the brink. With more than 30 rounds of meetings, intersessionals and Ministerials- spanning Santiago to Singapore, Lima to Leesberg, Ottawa to Auckland, all 12 countries have had to mobilize large contingents of negotiators to cover the multiple tracks of talks being conducted in parallel.

The ASEAN members, like many others, would concede that they have been hauled well out of their comfort zones and forced to address areas of domestic sensitivity to get other parties to do the same. As a result, Vietnam is in discussions about reforms that will impact more than 3,000 of their state owned enterprises (SOEs), Malaysia is being pressed on domestic preferences in government procurement that favor indigenous Malays, and the whole group is being urged to adopt an open internet that many claim cultural reasons for wanting to restrict.

The only reason these sensitivities are on the table at all is that each member country has bought into the vision of being part of a 21st Century “gold standard” trade agreement that will change the architecture supporting 40% of the world’s trade. The vision may be difficult to define, but there has been an undeniable drive to push the boundaries of trade liberalization and to break down its multi-faceted impediments. As a recent proof point, the USTR announced the “Digital Dozen”, suggesting that several breakthroughs had been made that would accelerate e-commerce in the region.

USTR has shown impressive leadership throughout. From the time it joined, the U.S. has set the pace (if not the agenda) and has pushed to get hard issues on the table and constructively resolved. While there is a necessary confidentiality about how all this gets done, no one will deny that the U.S. has been holding its ground and consistently articulating the need to avoid the compromises that have caused liberalization on this scale to fail in the past.

Now, as negotiations draw to a close we must also reflect on the implications of not granting TPA and TPP not materializing at all. As Senator John McCain put it recently, “Failure would be a serious blow to American influence in the world.” Having seen the U.S. participation at close hand over several years, there is little doubt that failure to obtain TPA would be interpreted as the Asian pivot having failed and an invitation for less palatable solutions to move forward. This would be a catastrophic blow for U.S. influence in the region and would cause a significant loss of trust.

Failure would also be an opening for China and India to advance regional alternatives such as the Regional Comprehensive Economic Partnership (RCEP), which is being negotiated between the ASEAN nations and their Free Trade Agreement partners. It would also be an invitation for member countries to back down on hard fought concessions that many have made in expectation of U.S. market access. Vietnam, for example, has produced a draft law waiting to be enacted which goes against many of the areas of progress summarized in the “Digital Dozen” and even introduces strict controls on encryption in mass market products such as computers and smart phones. This law would need to be withdrawn if TPP proceeds. If it doesn’t, a return to command and control policies is only rubber stamp away. This would be a retrograde step for U.S. growth in Asian markets, sending a message to Vietnam’s ASEAN neighbors that localization and other mandates are a proper course of action.

Years of U.S. leadership has driven TPP countries a long way toward American values and standards, building safer, more predictable markets for U.S. goods and services. Having reached this critical stage, the price of failure is too high to not get TPA over the line.

 

 

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