US President Barack Obama?s recent Asian tour was a mixed bag. He won kudos in India and Indonesia, but failed to cut ice in South Korea on a bilateral free trade agreement and on reining in spiralling discord within the G20. Yet, as is the wont of American leaders who revel in agenda setting, Obama floated some fresh ideas and diplomatic trial balloons in the global policymaking space throughout his travels.
The most internationally consequential concept that emerged from his Asian sojourn came at the fag end, during the Asia Pacific Economic Cooperation (APEC) summit in Yokohama. It was the push for a ?Trans-Pacific Partnership? that could potentially become the mother of all preferential trade zones by surpassing the European Union, North American Free Trade Agreement (NAFTA) and the China-ASEAN FTA in value of exchanged goods, investment and services.
Although a rudimentary multilateral pan-Pacific preferential trade agreement has been functional since 2005 via small partner states like Chile, New Zealand and Singapore, Obama raised the salience of this grouping by calling for a final settlement of terms to be threshed out and a treaty to be signed in one year. The White House trumpeted its enormous possibilities by hailing ?the first full-fledged trade pact of the 21st century?.
What catches the eye the most in the Trans-Pacific Partnership is its geographical breadth and scope. While multilateral preferential trade agreements have proliferated in the backdrop of a frozen Doha Round of universal free trade negotiations, the former have thus far remained confined to geographically tight blocks of countries. In its prime, the trans-Pacific pact will unite the US with South America (Peru and Chile), Southeast Asia (Malaysia, Singapore, Vietnam and Brunei), East Asia (South Korea and Japan) and Australia (including New Zealand) into a single borderless economic entity that will improve business opportunities for companies across multiple regions.
For the Obama administration, the trans-Pacific pact is a crucial entry point for American corporations into economically dynamic areas of the world that have been integrating among themselves and thus locking out the US. Fears that new trade deals by the EU and China in Southeast Asia will erect fresh barriers to US exporters have been driving forces for fervent lobbying by American industrial titans like Exxon Mobil, Coca-Cola and Boeing to anoint the Trans-Pacific pact as a pillar of American foreign economic policy.
High levels of unemployment and budget deficits are other domestic wellsprings of a renewed American push for FTAs abroad. Obama has pledged to cut the US federal deficit by half by the end of his first term and to simultaneously double US exports, goals that are predicated upon prising open fresh markets for American companies. The deficit-killing mood, which had remained confined to the right of the political spectrum, has now come to the centre stage as a result of the Republican Party?s victories in the Congressional elections. Thus, the combined pressures from a depressed economy and big businesses dreading isolation lend the trans-Pacific pact an air of urgency like never before.
The trans-Pacific FTA has been labelled by its founders as a ?strategic economic partnership?. Such language is an easy giveaway that there is a geopolitical angle to the whole exercise. States fearing Chinese domination are lining up for membership owing to the fact that China is not an invitee to join the pact, and consensus among observers that Washington intends to counter Beijing?s growing regional and global influence through the trans-Pacific mega FTA.
Presentiment about China?s mammoth economic and military presence is so overwhelming in Southeast and East Asia that the governments of Vietnam, South Korea and Japan have indicated an interest in applying for the US-led trans-Pacific pact. The logic of hedging against China?s might is compelling enough for these states to risk overriding objections of powerful domestic interest groups that oppose opening their respective economies to foreign competition.
Japan?s rice farmers and South Korea?s automobile majors may end up losers of a grand Pacific Rim trading alliance, but taming the menacing dragon asks for sacrifices and will not come free of cost.
The author is Vice Dean of the Jindal School of International Affairs
