Monday, June 13, 2011

ASEAN and the TPP

This week I am attending the Asia-Pacific Council of American Chambers of Commerce (APCAC) Washington Doorknock along with other Amcham Asia representatives.  During the event, Amcham and U.S. Chamber of Commerce representatives meet with U.S. executive and legislative branch officials to discuss issues affecting U.S. companies in the Asia Pacific.   I am speaking at a Mansfield Foundation-sponsored lunch panel during the Doorknock on economic integration in Southeast Asia and the Trans-Pacific Partnership (TPP).

You can read through the rest of this blog to see my skeptical-but-supportive take on the former topic.  What about the TPP, which has direct relevance to ASEAN as four ASEAN members – Brunei, Malaysia, Singapore and Vietnam – are among the TPP negotiating parties?

Well, for a start, the fact that the TPP parties have made this much progress is a positive development.  The TPP began as a four-party FTA made up of Brunei-New Zealand-Chile-Singapore, covering trade in goods, trade in services, IP, ROOs, sanitary and phytosanitary measures, technical barriers to trade, government procurement, and competition policy.  The TPP talks brought in Australia, Peru, Vietnam, Malaysia, and the United States and added new topics such as labor and the environment.

The stated short-term goal is to complete the broad outline of an agreement by the November APEC summit in Hawaii.  The long-term goal is to create an FTA that could encompass the entire APEC membership.  I think the short-term goal is achievable, but there are many obstacles to reaching the long-term goal, mainly related to the U.S. domestic political situation.

Most of the additional issues such as labor and environment were brought in at the insistence of the United States due to domestic interests.  The other TPP parties do not necessarily share these sentiments, but understand that these issues need to be covered to get the agreement done.

More importantly, it is not clear whether the Obama administration could get a TPP package through Congress.  U.S. FTAs previously negotiated by the Bush administration with Korea, Colombia and Panama are still stuck in the legislative approval process, and this impasse is adversely affecting the approval of a new U.S. Commerce Secretary and worker assistance funding.   Neither does the Obama administration have the benefit of Trade Promotion Authority  (TPA) which would allow the TPP partners to know that whatever is agreed upon in negotiations will actually be passed in the final text.  Even when both houses of Congress were Democrat-controlled, Congress was reluctant to give TPA to President Obama.   It is more unlikely with a Republican-controlled House, even though the Republicans are traditionally more supportive of FTAs.

Ultimately the biggest concern is whether the sheer scope and size of the TPP talks, covering a wide variety of issues and countries, will drag down the TPP process just as the WTO Doha Round has been dragged down.  There is deep bi-partisan skepticism in the U.S. Congress about concluding an FTA with a “non-market economy” such as Vietnam.  Indeed, Vietnam is being used as a proxy for pre-emptive discussion on China, if and when China ever joins the TPP. 

Nevertheless, I hope that competition will help convince U.S. policymakers that the TPP is worth pursuing.  If the United States doesn’t move forward, then the EU will, as it has with its own FTA concluded with Korea, and with its own FTA talks with Singapore and Malaysia.  The EU-Singapore FTA talks should be concluded by October 2011, and the Malaysians believe that they can conclude their talks with the EU by early 2012. The EU has stated that they are willing to start negotiations with Vietnam, Thailand and Indonesia in the near future.

I think this should motivate the TPP negotiators such that we will have a broad agreement  on the TPP by APEC Hawaii, but work will necessarily have to continue beyond into the next presidential term due to the electoral schedule and U.S. domestic political concerns. That is not necessarily a bad thing, as the TPP could bring in the entire Asia-Pacific. More importantly to the United States, it’s the only game in town at the moment.  Either way, more time to get things right and convince the skeptics is a worthwhile investment.