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April 21, 2014

Pacific Rim Trade Deal Proves Elusive

by Ken Bredemeier

With the U.S.-led war in Iraq ended and American military involvement in Afghanistan winding down, President Barack Obama has sought to pivot the country's foreign policy focus towards Asia.  One aspect of that pivot is the negotiation of a free-trade agreement among 12 Pacific Rim nations.  But as Obama leaves this week on a trip to four Asian countries -- Japan, South Korea, Malaysia and the Philippines -- he has found it very difficult to complete the trade pact. 

America makes cars that it ships around the world, and Japan does the same thing.  U.S. farms sell their beef and pork to customers overseas.  Japan exports its electronic consumer products to faraway countries.

This is all just a small part of the international trade that occurs each day.

Now, 12 countries around the Pacific Rim are negotiating ways to increase that trade, by cutting or ending tariffs and easing regulations.

The Trans-Pacific Partnership, or TPP, is a pillar of President Barack Obama's engagement in Asia, and certain to be a key topic of discussion on his trip.

U.S. Commerce Secretary Penny Pritzker says the trade deal is a top priority of the Obama administration.

"Opening markets across the Asia-Pacific region to U.S. exports and investment will help promote growth and jobs here in the United States in many ways," she said.

The 12 countries account for about 40 percent of the world's economy and 26 percent of its trade.  But reaching a broad trade deal has proved so complicated that some nations are negotiating bilateral agreements.  

Australia agreed this month to ease duties on Japanese electronic products, while Tokyo is curbing tariffs on Australian pork and beef exports.

The U.S. and Japan have engaged in tough talks on a deal of their own.  U.S. Trade Representative Michael Froman recently described the contentious negotiations.

"Our teams arrived expecting that the talks would be tough and our expectations have been met," he said. "We understand the challenges."

An overall trade pact could involve much more than tariffs on imported goods.  It could cover banking regulations, drug manufacturing, food safety rules and more.

A critic of the possible trade deal, Lori Wallach of Public Citizen's Global Trade Watch, says the complexity is one reason the agreement is taking so long.

"In every country these issues are controversial," she said.  "So it’s not surprising by over-reaching and having so many countries, they’re having a very hard time in doing any one of those issues.”

The U.S.-led trade effort is partly aimed at displaying American interest in Asia at a time when the world's second biggest economy -- China -- is growing fast and could soon overtake the U.S. as the world's economic leader.

But China is not part of the trade talks.

Analyst Barbara Kotschwar is with the Washington-based Peterson Institute for International Economics:

“At the beginning was the fear a lot of people talked about, the 'C-word,' containment, of China," she said. "I think that that fear has been diminished somewhat and we see the United States and China speaking about negotiating a bilateral investment treaty.”

But for now, even without China, 12 Pacific Rim countries are already having enough trouble reaching agreement on ways to collectively expand their economies.