A multilateral approach to diplomacy and trade is consistent with his administration’s diplomatic and economic pronouncements.
President Joe Biden may have to jump through a few political hoops to make it happen, but he seems to be inclined to have the United States rejoin the Trans-Pacific Partnership (TPP). Doing so would advance his avowed diplomatic and economic agenda.
TPP was initiated during the incumbency of former President George W. Bush and was concluded in 2015, when Barack Obama occupied the Oval Office. Former President Donald Trump, on his third day in office in January 2017, removed the U.S. from the agreement, after which the 11 remaining parties—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam—continued in a trade relationship now known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). CPTPP “suspended” 22 TPP provisions which were urged on the group by the U.S., presumably as an incentive for the U.S. to rejoin. (See Will CPTPP welcome US back?)
Meanwhile, in November 2020, China and 10 members of the Association of Southeast Asian Nations (ASEAN) plus Australia, Japan, New Zealand, and South Korea inked the Regional Comprehensive Economic Partnership (RCEP). That agreement, which has yet to be ratified, aims to eliminate 90% of tariffs on imports among the signatories within 20 years. According to S&P Global Platts Analytics, “The new accord demonstrated Beijing’s commitment of engagement in the Asia-Pacific market, which is a breakthrough for multilateral trade relationships in the region.”
TPP Goes from Centerpiece to Dustbin
The TPP, for its part, was designed as a centerpiece of the U.S. strategic pivot toward the Asia-Pacific but the idea was dumped in the dustbin with the Trump Administration’s lone wolf approach to global trade.
During negotiations, Obama emphasized that he wanted the U.S. to “write the rules of the road for trade in the 21st century.” Five years later, during the recent political campaign, Biden echoed those words, telling the Council on Foreign Relations, “When it comes to trade, either we’re going to write the rules of the road for the world or China is. When we backed out of TPP, we put China in the driver’s seat. That’s not good for our national security or for our workers.”
Biden acknowledged that “TPP wasn’t perfect,” but, he added, “the idea behind it was a good one: to unite countries around high standards for workers, the environment, intellectual property, and transparency, and use our collective weight to curb China’s excesses.”
Any Biden move to rejoin TPP may catch some flak from the political left over labor and environmental standards, although provisions in those areas were included in the agreement. Sen. Bernie Sanders (I-Vt.) complained that TPP disadvantaged U.S. workers, telling the same CFR forum that “it would force more American workers to compete with desperate workers in Vietnam who make less than a dollar an hour.”
And as Peter Friedmann, Washington-DC based Counsel for the Coalition for New England Companies for Trade (CONECT) recently wrote, “Trump tariffs by executive order, but he has not. That’s not surprising; after all, during the past three years, not one Democrat or Republican in the House or Senate introduced any bill or amendment to rescind the tariffs. In fact, there was—and still is—bipartisan support for those tariffs, so they will likely remain in place and continue to burden our trade relationships. Plus, the AFL-CIO, with significant clout in the Biden White House, has already demanded that the tariffs against China remain in place, and that new tariffs be imposed on Vietnam.”
Addressing environmental issues, Sen. Elizabeth Warren (D.-Mass) said she opposed entering “into new trade agreements unless and until our potential partners meet certain preconditions that match our values and our policy goals, including combating climate change…”
Biden and his appointees have signaled that they intend to continue the Trump administration’s hard line on China, but by taking a multilateral, rather than a go-it-alone, approach. Secretary of State Antony Blinken said Biden would maintain Trump’s “tougher approach” to China, but by “leading with diplomacy [and] mobilizing our friends and allies to work together in common cause.” Kurt Campbell, Biden’s new Indo-Pacific coordinator on the National Security Council, emphasized, in an essay in Foreign Affairs, Biden’s intention of working with U.S. allies to create a balance of power in the Asia-Pacific.
On the economic front, it has become evident that the U.S. refusal under Trump to engage with the most dynamic part of the world economy left the country isolated and disadvantaged. As the 11 other nations moved forward with CPTPP, the U.S. is being denied the preferential tariff treatment and expanded market access that nations such as Australia and Canada are receiving in the region.
Asia-Pacific Economics Lesson
The Asia-Pacific regional economy represents 40% of current global GDP and will include 66% of the global middle-class population by 2030, according to the Organization for Economic Cooperation and Development (OECD). The U.S. Chamber of Commerce has said that the U.S. is “being left behind” in the “vital” Asia-Pacific region.
The Trump administration opted to conclude bilateral pacts such as the U.S.-Japan trade agreement. That accord attempted to replicate some of the benefits the U.S. would have enjoyed if Trump hadn’t withdrawn the U.S. from the TPP. But its economic benefits pale by comparison with the TPP, and it did nothing on the diplomatic front to curb China’s influence in regional politics, nor its trading patterns and practices. The purpose of the U.S.-Japan trade agreement, from Trump’s perspective, was to score a quick political win.
The limited, agriculture-centric U.S.-Japan trade agreement potentially allows the U.S. to sell more beef, pork, fruits, and nuts to Japan, but TPP would have gone much farther, eliminating tariffs on U.S. tobacco and soybeans and establishing a level of U.S. rice that would be allowed to enter Japan duty-free. The agreement glaringly omitted any mention of the services economy and automobiles—allowing Trump to threaten to slap tariffs on Japanese cars that could have cost U.S. consumers billions of dollars. (Ultimately, the former president declined to impose those levies.)
Had the U.S. joined the TPP, it would have realized around $131 billion in increased real income per year, according to a report from the American Action Forum, while CFR projected that TPP would have cost China $18 billion per year in real income. China’s initiation of the “RCEP reverses this dynamic,” noted Tom Lee, a data and policy analyst at the American Action Forum. According to Lee, “RCEP is projected to increase real income for the United States only $1 billion per year, while China will increase its real income by about $85 billion a year.”
But it’s worth noting that RCEP won’t go into force until six months after it’s been ratified by at least six ASEAN members and at least three from outside that organization. The ratification process has just barely begun and could take years to complete. That timeline could give the Biden administration the space it needs to reassert its professed diplomatic and trade goals for the U.S. in the Asia-Pacific region.