Posted March 12, 2018

Elegy for the Trans-Pacific Partnership

Robert A. Rogowsky
Professor of Trade & Diplomacy
Middlebury Institute of International Studies in Monterey, CA

It has been more than a year since President Trump pulled the United States from the Trans-Pacific Partnership: the result of nearly a decade of negotiations with 11 other countries, including three of our largest trading partners, two South American trade partners and six more in Southeast Asia. The jilted trading partners have found their way back to a new TPP-11, which will undoubtedly open new opportunities for their industries and consumers, much at the expense of their U.S. counterparts.

The TPP was the new gold standard in trade agreements, to be surpassed in the future to be sure, but for now a major step forward in the hard task of negotiating rules for the rapidly evolving global marketplace, increasingly dominated by complex supply chains. It was the latest version of a long evolutionary process begun by Ronald Reagan when he proposed the expanded and visionary trade agenda to the GATT in 1982. Hard fought negotiations to open a new Round of negotiations in 1986 led to the Uruguay Round Agreement in 1994 creation of the WTO and expanded the trade agenda from manufacturing tariffs to begin to incorporate the global nature of business into rules defining a new level of governance for international commerce. Specifically, it pulled textiles and apparel and Agriculture into international trade disciplines. More importantly, it expanded trade agreements to include intellectual property, investment, services, sanitary and phyto-sanitary measures, technical barriers, greater anti-dumping disciplines; as well as regular peer review of members progress. U.S. bilateral and regional trade agreements have, since then, pushed these disciplines further and added strong requirements for labor and the environment. The record is strong on labor standards improvements and environmental agreement enforcements across U.S. trading partners as a result of the leverage created by U.S. FTAs.

The TPP, moved this agenda forward significantly, as the 12 nations looked to create the next generation of rules. Hard fought compromises would have opened up markets for American agriculture in our largest markets (especially Canada and Japan). Intellectual property protections would have been enhanced, investment better protected, and investor-state disputes made more carefully circumscribed.

Importantly, the TPP pushed to new rules promoting digital trade, the free flow of information, and an open Internet. Provisions related to digital trade were salted across multiple chapters of the TPP (e.g., e-commerce, financial services, telecommunications, technical barriers to trade, intellectual property rights), underscoring the complexity of digital trade barriers and issues that would have been addressed if the TPP had been implemented.

The International Trade Commission’s analysis found significant gains to American industry. In particular agriculture, all forms of services, and high-tech industries would win big. Meaning higher incomes and wages in those sectors. Some industries would experience more competition, and in turn, lower prices for consumers but wage pressure in those sectors. Winners and losers. Thus it always is with opening markets. The USITC, consistent with many studies, found aggregate gains in the tens of billions of dollars.

The US lost in other important ways as well. TPP was without doubt a critical step in U.S. engagement in Asia. The geopolitical

Moreover, when Trump brandishes protectionist rhetoric and discredits the role of international trade, he is ignoring the fact that, in international relations, trade also serves as an expression of diplomatic goodwill and a means for constructive connectivity. The United States has for 75 years championed an open, rules-based trading system. This system helps define the international relations of all major nations. U.S. trade policy has promoted free market principles and the regulated capitalism, abroad that has been the foundation for rapid economic growth for scores of nations around the world. Misguided focus on bilateral trade deficits is poor strategy and would be an extremely unproductive trade doctrine.