The TPP: International Law and Geopolitics

After seven years of negotiations, the Trans-Pacific Partnership (or TPP) has finally been agreed upon by the twelve signatories. The parties involved are the United States, Canada, Mexico, Singapore, Brunei, New Zealand, Chile, Australia, Peru, Vietnam, Malaysia, and Japan. There has been significant controversy regarding the TPP from within the United States, with naysayers arguing that the benefits accruing from the TPP are minimal, and that the US already has bilateral trade agreements with most (if not all) the participating countries, making the bulky agreement redundant. Yet there do exist considerable advantages for the US from the conclusion of the TPP negotiations. To name but a few, the TPP has ensured the updating of the frameworks applied to multilateral trade agreements. It also allows for the harmonization and regulation of standards across a global and dispersed supply chain.

A significant worry has been the investor-state dispute settlement mechanism (ISDS), key buzzwords thrown about by the American and international media. The inclusion of the ISDS in the TPP has been regarded by some, most notably Elizabeth Warren, senator from Massachusetts as a threat to regulatory sovereignty. It allows for corporations to sue governments for changes in the regulatory environment that have adverse impacts upon the former. The legal provision, however, does not allow the reverse, i.e. governments cannot take legal action against firms. Nevertheless, the inclusion of the ISDS is a major development for international law precedent, which has typically been restricted to matters of interstate disputation.

The glaring exclusion of China from the agreement has been highly debated in the intellectual circles of Washington. Some have argued that the nation chose to stay aloof – that the Chinese economy has outgrown the “meager” benefits that could accrue to it from the TPP that pale in comparison to the restrictions and conditions that China would have to meet if it joined. Optimists hope that the coalition of participating countries will be able to contain, offset and challenge China’s rapid relative economic ascent. They suggest that the success of the TPP will lead to a clamor by countries like China and India to be included, the conditions of which would be set by the triumphant and advantaged existing members. Whatever the future of China in relation to the TPP may be, its current exclusion clearly limits its geopolitical reach.

 

Michael R. Czinkota (czinkotm@georgetown.edu) teaches international business and marketing at Georgetown University’s McDonough School of Business. His key books is International Marketing, 10th edition.

US Senate Committee Approves TPA Bill

The U.S. Senate Finance Committee has approved the Trade Promotion Authority (TPA) bill which gives the White House “fast track” authority to streamline the passage of international trade deals through Congress. It was approved on a 20 to 6 vote. If passed by the full Senate and the House in the coming weeks, the bill would require Congress rather than amending trade deals, by changing details to vote either up or down only. Such a bill is vital to finalizing the Trans-Pacific Partnership (TPP) deal between the U.S., Canada, and 10 countries in the Asia-Pacific region.

In addition to the TPA bill, the committee also approved three other bills “to bring new transparency, enforcement, and labor protections to trade agreements.” This includes provisions to beef up rules against countries found to be manipulating their currencies.

U.S. President Barack Obama has made the TPP a major focus of his efforts to boost U.S. economic investment in Asia. Many Democrats and labor union fear that it would not benefit the nation.

New trade agreements and partnerships with Asia and Europe, such as the Trade Promotion Authority, the TPP and the Transatlantic Trade and Investment Partnership (TTIP) are useful. But there needs to be stronger domestic support for these agreements so they can kick start the U.S. contribution to the global economy.

Source: http://www.ibtimes.com/us-senate-finance-committee-approves-trade-bill-key-finalizing-trans-pacific-1893420

Related articles on TPP:
• It’s not double or nothing for trade
• Trade opportunities beyond the Americas

It’s not Double or Nothing for Trade

By Michael R. Czinkota and Charles J. Skuba

In January of 2010 State of the Union address, President Obama set the goal of doubling U.S. exports over the next five years, supporting two million new American jobs through trade with international partners. At the terminus of that timeline, our analysis indicates the completion of less than half the goal with exports of goods and services at approximately $2,350 billion in 2014, compared to $1,571 billion in 2009.

Although he did not hit the numbers, we credit President Obama for an ambitious trade agenda, including completion of previously negotiated free trade agreements with South Korea, Colombia and Panama, and the pursuit of new trade agreements like the Trans Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP), and Trade in Services Agreement (TISA).

But why the failure in export growth? In 2009, total global trade decreased by 12%, while U.S. exports decreased by 14%. At the time it seemed reasonable to project stronger growth from 2010 forward. U.S. exports did grow at a robust annual rate of nearly 17% that year and 14% in 2011. Growth of only 4% in 2012 and 2.9% in both 2013 and 2014, however, did not help, since doubling exports requires annual growth of more than 15%.

President Obama’s export goal hinged on the strength of U.S. production, but even the best products require customer spending to generate sales. Europe has experienced disappointing economic growth while major emerging markets like China, India, and Brazil, all sharply declined. A strong U.S. dollar makes American products more expensive, further affecting demand.

One encouraging note is the transition of President Obama from a relatively protectionist U.S. Senator, in favor of trade barriers and subsidies for domestic industries, to a strong advocate of trade agreements.

Where are we now and where do we go from here? Jobs supported by exports now represent 13% of the U.S. economy, up from only 5% in 1990. Yet, the U.S. is still behind on a global scale. Exports represent half of Germany’s economy, 30% of Canada’s, and one quarter of China’s. These key trading partners export more than twice the value per capita than the United States.

U.S. free trade agreements play an important role in lowering trade barriers, boosting exports, and creating jobs. In 2014 the 20 countries with which the United States has a free trade agreement received almost half of U.S. exports and exports to those countries grew by almost twice the overall rate. Free trade agreements level the playing field for global competition. The TPP does that and includes labor and environmental provisions crafted to the highest standards in the world in the strategically important Pacific Basin.

Opponents of free trade agreements often claim that previous accords like NAFTA sent American manufacturing jobs abroad. We disagree. A global economy imposes competitive pressures and requirements on all industries. American manufacturing and services companies cannot escape from the competitive realities of globalization but they can benefit from free trade agreements.

Our outlook for 2015 trade policy and politics: the Administration and Republican majorities on Capitol Hill must and will collaborate on international trade. President Obama has asked for bipartisan support for Trade Promotion Authority (TPA), allowing Congress to vote yeah or nay on trade bills, but not on individual provisions. This will allow U.S. trade negotiators to deliver meaningful industry and regional commitments. TPA is a crucial negotiating tool which the Republican Leadership supports.

There should also be strong domestic support for free trade agreements like TPP and TTIP, which can restore and perhaps even kick start further global progress in the World Trade Organization.

For both Republicans and Democrats, the key trade policy objective of increasing jobs requires policy assessments of the jobs affected by new laws, regulations, and executive orders. It also means linkages between investment and job outcomes, and specific rewards for employment success and help for those hurt by trade. A successful economy requires new measures in technology oriented education availability, and greater global partnerships in science, technology, research and development.

It is time for Congress and the Administration to develop and share credit for progress in international trade. Past failures and shortcomings demonstrate the need for collaboration in achieving trade agreements that deliver significant economic results. 2015 offers an excellent opportunity for the President and Congress to achieve a new beginning. The United States and the world will benefit from such joint leadership.

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Michael Czinkota (czinkotm@georgetown.edu) researches international marketing issues at Georgetown University He served in trade policy positions in the Administrations of Presidents Reagan and G.H.W. Bush. Charles Skuba (cjs29@georgetown.edu) teaches international business and marketing at Georgetown University. He served in the George W. Bush Administration in trade policy positions in the U.S. Department of Commerce.

News from the USTR: US-Japan Trade Talks

Trade talks between the US and Japan continue today marking the strategic importance of concluding the TPP negotiations before the end of the year. US Trade Representative Michael Froman’s visit to Japan is an attempt for the two nations to jointly commit to the proposed TPP rulings without succumbing to the pressure from local lobbyists.

The Japanese government has vowed to protect tariffs on certain farm products while USTR Froman maintains the US’s goal of the elimination of tariffs.

Due to Japan’s tensions with China and Europe, exports to the US rose 18.4% this past year signifying the vital importance of strong cooperation between the US and Japan.

News from the USTR: Trans-Pacific Partnership (TPP) Negotiations

On July 25th, 2013, strong progress had been reported about the TPP negotiations that ended that same day. Japan was welcomed into the negotiations while TPP leaders hope to reach agreement by the end of the year.

The United States’ goal of this agreement is “to advance a 21st-century trade and investment framework that will boost competitiveness, expand trade and investment with the robust economies of the Asia Pacific, and support the creation and retention of U.S. jobs, while promoting core U.S. principles on labor rights, environmental protection, and transparency.”