The Pacific in search of a partnership

Greetings from Birmingham, Alabama, where few residents have heard of the Trans-Pacific Partnership and even fewer would consider it beneficial to their livelihoods. Yet their congressional representatives will be asked to pass a bill to bring it into law. Herein lies the problem for the agreement’s architects and advocates. The World Bank estimates that by 2030 the total effect of the Trans-Pacific Partnership on US gross domestic product will be just 0.4 per cent. Not 0.4 per cent per annum but a total of 0.4 per cent after 15 years. It’s a rounding error and the American people instinctively know it. The estimated benefit for Australia is a tiny 0.7 per cent of gross domestic product.

Developing countries like Vietnam and Malaysia would benefit most, with estimated increases in gross domestic product of more than 8 per cent.

Among US presidential aspirants the Trans-Pacific Partnership is virtually friendless. Donald Trump and his angry white Trumpeteers despise it. Hillary Clinton, who, as secretary of state, supported it, has since distanced herself from the deal, pledging to renegotiate it. America is turning inwards. Both its left and much of its right are anti-trade, fed up with economic dislocation and the movement of manufacturing offshore. For a time, cheaper domestic energy attracted many manufacturing operations back onshore, but the pace of offshoring is now fast outstripping that of onshoring.

The campaign against the Trans-Pacific Partnership in America never mentioned that China was not party to the agreement. It did not need to. The presumption has been that the agreement would result in a further loss of jobs to China.  The well has been poisoned.

The best judges in Washington give the Trans-Pacific Partnership no chance of passing through Congress if Donald Trump becomes the next president and rate the chances under Hillary Clinton only negligibly higher. Clinton, they argue, lacks the political capital to say one thing before the election and do another after it. She would need to substantially renegotiate the agreement to keep her pre-election promise. This is more easily said than done. Several of the partner countries were at breaking point in reaching the deal that was negotiated. Politically they would not have the room to manoeuvre in the event of an attempted American renegotiation.

But this bleak prognosis does not mean the Trans-Pacific Partnership is destined for the mortuary. It has one real chance – passage through Congress during the lame-duck period before President Obama hands over to his successor in January 2017. Obama is America’s No. 1 supporter of the agreement. He could count the Trans-Pacific Partnership as among his big legacies if he decided to prioritise it. But why would members of Congress – especially Democrats – risk their own re-election prospects down the track for a deal that Americans don’t really want? They might want to get on the good side of an incoming President Clinton, who would be mightily relieved to have the legislation passed and off the agenda before her swearing in.

Yet there is an argument for early passage of the Trans-Pacific Partnership to which Congress might be highly receptive. It has little to do with economics. For better or worse, richer or poorer, the United States took a leadership role in advancing negotiations for the Trans-Pacific Partnership on the basis that it would be a tangible expression of America’s pivot into Asia. Having encouraged 11 other countries to conclude the agreement, abandoning it – and them – after the deal was done would be a spectacular demonstration of bad faith to its friends and allies in the Asia-Pacific region.

Meanwhile, China is engaged in negotiations for another agreement that does not include the United States – the Regional Comprehensive Economic Partnership. Its members are the ASEAN nations, Australia, New Zealand, China, Japan, Korea and India. Seven countries have overlapping membership. Negotiations for the Regional Comprehensive Economic Partnership have been slow. But if the Trans-Pacific Partnership agreement stalls in the US Congress, it’s a safe bet that China will pull out all stops to complete its agreement with the region expeditiously.

In those circumstances, the United States would have been humiliated, its pivot into Asia a failure and China would announce a new national day of celebration as the dominant power in the Asia-Pacific region. That’s what happens when trade policy is merged with foreign policy. But that co-mingling cannot be undone at this late stage. Congress will have much more to contemplate in coming months than the task of persuading the citizens of Birmingham, Alabama, that trade is good for them.