A FAREWELL AND THE TPP CONUNDRUM

"...  I have to admit I am a little perplexed.  There is simply no way to reconcile a get-tough-on-China policy with withdrawing from TPP."

Amb. Michael Froman

January 10, 2017

The context is obvious enough. In just two days the Obama Administration will leave office and a new team will take over. Last week was a week of goodbyes. To note just three, there was a stirring farewell ceremony for departing Defense Secretary Ashton Carter at Fort Myer on Monday, January 9.   President Obama gave his farewell address on Tuesday evening in Chicago. On Tuesday morning, departing U.S. Trade Representative Michael Froman spoke at WITA. Our guess is that most readers of these pages are already very familiar with what Ambassador Froman said on February 10 and have probably read today's featured quote many times. 

Still, we make no apology for quoting it again. It bears repeating and thinking about and has the bonus of being interesting as well as important. We'll offer our own thoughts on the China-TPP conundrum in the Comment section. First, it is worth taking note - however briefly - of some of the other topics Ambassador Froman touched on last week. 

The Audience. Fittingly, the event took place at WITA, the Washington International Trade Association, which occupies a special place and hosts the year's single most important event for the Washington Trade Community, the Trade Prom, which is held each summer and looked forward to year-round. "I've always wondered what the Trade Prom would look like when they turned the lights on," he quipped as he began his talk.

On USTR. "They are the finest.... ." 

On Trade Politics. There is a disconnect between the polls which show that Americans "understand that we live in a global economy" and the strong strain of politics that seems to be pushing policy in another direction.

On Continuity in U.S. Leadership. "During the Reagan, Bush, and Clinton administrations, it was U.S. leadership that set down the global rules that today help America's [producers]," across a wide range of industries. And more recently, it was U.S. leadership that "helped navigate the WTO supertanker ... off the sandbar that was the Doha Round."

O n Trade, Technology and Jobs. " ...[A]ny competent economist will tell you that technology has had a much greater impact on jobs and wages than trade has had. Some estimate that more than 80 percent of job losses comes from technology alone. But no candidate runs on doing away with computers ... ."

On the future of work. We can't do justice to the Ambassador's remarks on this topic in this space, and so we shall simply highlight one development he mentioned which caught our eye: "[ F]rom Maine, where the Thornton Academy and Pratt & Whitney partner to give students concurrent high school degrees and certification in tooling industries that qualify them for high-tech manufacturing work in aircraft parts."

On China. These are all large topics - and the list is not exhaustive - but, as we said at the outset, our special interests today are China and the China and TPP connection. Let's take them one at a time. First China, Ambassador Froman made a number of points about China and the Obama administration's trade policies. There was the bow to China's dramatic growth over last several decades twinned with the challenges that it poses. Here Ambassador Froman said:

We would be inclined to see the 15 WTO cases that the U.S. has filed against China during the past eight years as part of USTR's effort to fit the rise of China into a larger system. No quarrel there. 

As for the reference to the last 15 centuries, it may be true, and yet there is an element of the rhetoric that is disquieting. China is given to justifying her current belligerence and overreaching by references to past glories. It's the Chinese version of manifest destiny. But that is no reason for other statesmen to buy into it. 

On China and TPP. Also last week six U.S. ambassadors in the Asia Pacific region sent an open letter to Congress, urging the United States, not to abandon TPP, but to follow through with its ratification and implementation.
One of those was Ambassador Max Baucus, who is the U.S. Ambassador to China and a former chairman of the Senate Finance Committee. The five other U.S. ambassadors who signed the letter were Ambassador Nina Hachigian (ASEAN), Ambassador Caroline Kennedy (Japan), Ambassador Mark Lippert (South Korea), Ambassador Mark Gilbert (New Zealand), and Ambassador Kirk Wagar (Singapore). Expressing the concerns of leaders in the region, they posed the question, "Will we [the United States] relinquish our mantle as the pre-eminent force for good in the planet's most dynamic region?"

They warned that "The alternative to a TPP world is not the status quo," noting in particular China's drive to complete RCEP, the 16-nation Regional Comprehensive Economic Partnership agreement. And they argued that "TPP is good for American workers, American values, and American strategic interests."

In his article about the letter from the six Ambassadors, Edward Wong of The New York Times wrote that "China was not included [in TPP] but would have been able to join."

That last point - China would have been able to join - is one that begs for a little plain speaking. A little speculation might not go amiss either. 

However many times various officials may have said that China would be welcome in TPP, it was always a statement with an air of unreality about it. First, there was the fact that President Obama, Ambassador Froman and others regularly presented TPP as an alternative to a China-led commercial arrangement for Asia. Second, and perhaps more important, was the political reality. As it happened, there were a few things that almost everyone in Washington could agree these last few years. One is that Congress would never approve a TPP that included China - certainly not at the outset. 

Against that background, we're inclined to give China a little credit for restraint. Had she truly wished to play the spoiler, China could have done enormous damage to the TPP process simply by asking to join. After all, several of the other eleven countries in TPP already have free trade agreements with China. They would not have said no. The U.S., on the other hand, could not have said yes. 

Yes, the Chinese are negotiating RCEP now, but who knows how that will turn out? 

It may be far-fetched, but it is not unimaginable that China might yet ask to join TPP. That would be the TPP that others are in the process of ratifying and the U.S. seems poised to reject. Who among the other TPP partners would say no? And how would America feel about such a turn of events?