Friday, June 7, 2013

The TPP Gets Pushed Forward by China and the US

The Trans Pacific Partnership (TPP) had two developments this week that increase the likelihood of its completion and passage sooner rather than later.  Ironically, these developments come from the two countries are associated with being in the TPP talks (the US) and not being in the TPP talks (China).

First, the Obama Administration’s nominee for US Trade Representative (USTR), Michael Froman, said during his Senate confirmation hearing that the Administration would introduce trade promotion authority (TPA) legislation soon. This is a major development because of the nature of the US constitutional system.  In the Westminster parliamentary system, the executive branch will have a majority in the legislature, such that any trade agreements negotiated and signed by the executive will have effect.  However, in the US system, the executive branch only has authority to negotiate, but not to bind, the US to trade agreements.  Such agreements need to be passed by the Congress, and are subject to amendment.  TPA represents a pre-authorization of authority by the Congress to the President so that he or she can negotiate trade agreements without their being subject to legislative revisions.  This is necessary to reassure trading partners that their negotiated bargains with the US President will not be revised during the legislative process. 

Thus, TPA will reassure negotiating parties in the TPP and Transatlantic Trade and Investment Partnership (TTIP) FTA talks (and perhaps, the long-suffering WTO Doha Round talks) that the US takes the talks seriously and will implement bargains reached at the negotiating table.  Just as importantly, re-authorization of TPA will formalize the role of Congress in the process, as TPA legislation usually concentrates oversight and consultation during the negotiating process with the select committees responsible for trade.  This is no small development, as without TPA, the USTR can be subject to second-guessing by any member of Congress.

However, since TPA expired during the George W. Bush administration,  the President and Congress have had a contentious relationship on TPA.  When Congress last offered to give the Obama Administration TPA, the Administration shook off the offer.  So will the Congress go along this time?  The Republican-controlled House of Representatives may not want to give the Obama Administration policy victories.  On the other hand, the Obama Administration has been so battered by recent political controversies that the House may decide to let this one go.  In any event, most Republicans are pro-business and generally pro-TPA.  Also, if the agreements become too politically difficult, the House can always vote to suspend TPA, which the then Democrat-controlled House did to President Bush with the US-Colombia FTA.

The other major TPP development is China’s sotto voce statement that it was considering joining the TPP talks.  Now I for one do not subscribe to the theory that the TPP is intended as a trade bloc that would intentionally exclude China.  However, any TPP agreement that includes China must necessarily have sufficiently high standards both to bind China to its implementation and to secure approval in domestic legislatures that will view any FTA that includes China with a skeptical eye.  Japan’s joining the TPP talks has already caused enough political indigestion as it stands.

Hence China’s clearing of its throat on the TPP may motivate the current TPP negotiating parties to complete their work sooner rather than later.  A completed TPP negotiating text with sufficiently high standards will either discourage China from attempting to join the talks (and avoid the diplomatic awkwardness of having to explain why China should not attempt to join now) or encourage China to accept the completed trade compromises of an agreement which would be palatable to domestic constituencies in the US and elsewhere.  Of course the latter is the better outcome but the former is more likely.