An ambitious free trade agreement between twelve Pacific Rim countries could mirror NAFTA negotiations, with added wrinkles from China and new technologies.
U.S. trade delegations are currently reaching across both Pacific and Atlantic oceans to negotiate two massive free trade agreements. The first, with the European Union, has been moving ahead steadily and (with the exception of the row over U.S. surveillance of European heads of state) has met only the predictable sticking points, such as how countries will be able to shelter domestic agriculture from the pressures of international free trade.
The other set of negotiations, however, is anything but ordinary. The Trans-Pacific Partnership (TPP) joins twelve Pacific Rim countries, from Chile to Australia to Vietnam, with the notable exception of China. If enacted, the TPP would cover 40 percent of the U.S.’s international trade. These negotiations bring together a set of countries that vary widely in their wealth, geography, and prominent industries. Free trade agreements between developed and developing countries can be a tenuous balance of interests, as shown by the tough negotiations and politically charged perception of the United States’ previous largest free trade agreement, NAFTA. TPP is no different.
Larger and more contentious than NAFTA
The now twenty year-old NAFTA provides the best historical guide for how the political debate in the U.S. will move forward for the TPP, and how it will perform. Many of the potentially contentious areas will be the same, but others have emerged over the last two decades.
It is useful to reflect on how NAFTA has performed as the next round of major free trade agreements are negotiated. A new report from the Congressional Research Service concludes that NAFTA has not been as successful as proponents promised or as destructive as opponents warned. It has, however, promoted trade and integration between Canada, Mexico, and the United States that would not have been otherwise possible. For instance, supply chains for manufacturers now stretch across the continent, with final goods assembled on one side of the border with parts manufactured in all three countries. NAFTA has created a bloc of North American trading partners to compete with the rest of the world.
Some concerns remain the same
It is reasonable to believe that the results of an eventual TPP would be similar to those of NAFTA. But TPP negotiations are still far from complete, and from the American perspective, many potential roadblocks are the same ones that weighed on NAFTA negotiators twenty years ago: agriculture, U.S. manufacturing jobs and Senate approval.
The politically important agriculture sector will once again slow down negotiations during the TPP. The biggest clash to watch for is between Japan and the U.S. Farmers wield significant influence over the ruling LDP in Japan, as well as the House Republicans and Senate Democrats in the U.S. Worries are strong that removal of tariffs – especially on Japanese rice, livestock, wheat and sugar – could scare parties away from the negotiating table, or weaken the final agreement. Given that negotiations are closed-door to allow frank conversations, it is likely the U.S. and Japan will eventually hammer out an agreement to slowly wean their agricultural markets off some of their supports.
Major labor unions are already voicing concern that the TPP will enable corporations to offshore jobs, especially manufacturing jobs, from the U.S. to low-cost countries. The rhetoric is strong: Don’t Let The TPP Pacific Offshoring Treaty Kill Your Job. After twenty years of job losses in American manufacturing – even if they were due to factors other than NAFTA – unions are gearing up to fight this generation’s big free trade agreement. With their strong ties to the Democratic Party, labor unions will be looking to derail TPP unless it looks significantly different than NAFTA. Their efforts will no doubt increase the drama when the U.S. Senate votes to approve the final product.
How the Senate handles the final agreement will be among the last of the major hurdles. Typically, including when NAFTA was approved, the Senate cedes much of the judgment on trade agreements to the President and gives a simple vote on the final draft. The President’s Trade Promotion Authority authorization ended in 2007, however, meaning that the Senate could have a much more active debate on the TPP. This could pose a problem for President Obama, since his Democratic Party is skeptical of renewing the authority and has organized labor pushing them to derail the agreement. With the President’s party only holding a narrow majority in the Senate, only a few defectors could swing the vote. The President could be forced to court Republican Senators, with whom he has frequently had an icy relationship. In either case, the Senate approval of the TPP could pose a significant hurdle.
Twenty years of globalization brings new concerns
When NAFTA was negotiated, China was not the economic powerhouse it is today. The pharmaceutical and technology industries in the U.S. were not as well-developed or powerful, either. These two changes will make the TPP look unlike any treaty has before.
It is no coincidence that the TPP includes all the major Pacific economies except China: Many see the bloc as a counterbalance against the People’s Republic. Several TPP countries already have free trade agreements with China, but they are seeking connections with the U.S. to prevent their economy from becoming dependent on China . The U.S., however, is negotiating as part of its strategic pivot towards Asia. Potential clauses of the TPP will limit the use of China’s raw materials in the textile industry and include rhetoric about currency manipulation.
Intellectual property is poised to play a major role in these negotiations as well. In leaked drafts of the agreement, U.S. negotiators appear to be pushing for strong language on medical patents and copyrights – even stronger than many current U.S. laws. These provisions are being championed by industry trade groups as providing the protections to keep U.S. firms profitable, but the issue is becoming contentious. Doctors Without Borders and others have raised concerns about the TPP’s ability to limit the spread of generic drugs to the middle-income countries in the agreement.
Negotiations over the TPP were scheduled to be completed by the end of the year, but with few days left until 2014, it is unlikely to happen. As the agreement is finalized next year, how these contentious issues are resolved will shape the success of the TPP.
