TPP AND THE AUSTRALIAN ECONOMY

"Australia's had 26 years of uninterrupted economic growth, and that, by and large, has been driven by the rise in Asia."

David Brightling

November 16, 2017

David Brightling is the Counsellor for Trade at the Australian Embassy in Washington, D.C., and he was the first of four panelists at the Global Business Dialogue event on November 16, TPP, AFTER APEC. To a large extent, it was he who set the stage for the other speakers by explaining just what it was that the remaining members of the Trans-Pacific Partnership agreed to when they met in Vietnam in mid-November.

Today's featured quote, however, is something Mr. Brightling said in the Question-and-Answer portion of the program. Andrew Durant of Samuels International Associates, Inc. served as moderator - and did so with humor and insight. It was he who asked the first question. And it was David Brightling who gave the first response. Here is a bit of both, Mr. Durant's question and Mr. Brightling's response. 

 
MR. DURANT: What really emerges from these four voices to me is - as Yamakoshi [of Keidanren] so eloquently said, it was a shock - but the regional actors have now gotten over that shock, and they have figured out a way forward, whether it's with the CPTPP ... or ... RCEP. So the question becomes, what about the United States? .... If we sit down a year from now, what will the U.S. have done, if anything, to really engage more deeply in the region?

MR. BRIGHTLING: I can only really speak from Australia's perspective and how we look at this. We are in Asia, in the Pacific Region. It is the area where global growth is really taking off at an extraordinary rate, and to be frank, Australia's had 26 years of uninterrupted economic growth, and that, by and large, has been driven by the rise in Asia. So, economic integration is a very real thing for us, and being part of that regional architecture, whether it's through TPP or through RCEP or other arrangements, is a key part to our economic prosperity.

Now, when we think about the TPP, of course, ideally, we would like a TPP 12 agreement. We would love to have the U.S. come back in at some point in the future. And that really guided our position in the discussions that took place this year. We were very keen to keep the high standards that were agreed, but we were also very keen to ensure that the open framework was maintained to allow - not only the United States but other future members to come in at some point in the future. So, we do look very favorably upon an open architecture, and having the United States come back at some point is part of that. We do think that the United States' presence in the region is a good thing and is very important. 

 
I might leave it to others to make further commentary on U.S. trade policy.

Of Richard Wilbur's many wonderful poems one is The Mill. The title identifies a dying friend's memory of "...the wrecked mill/You stumbled on in Tennessee; or was it somewhere down in Brazil?" When discovered, it had been long abandoned, hidden by overgrowth, and situated against a crumbling structure. But it was still working! And it is the one unshakable vicarious memory. The poem ends: "All that I can be sure of is the mill-wheel. It turns and turns in my mind, over and over." 

 
Well, Andy Durant's question is a little like that. Each of the answers it elicited was worth noting, and we are bound to return to it. But today it is Mr. Brightling's response, the Australian response, that we want to focus on. Throughout the process of moving from TPP 12 (that is, the original agreement that included the United States) to TPP 11, now CPTPP, Australia has been clear about the desirability of having America rejoin the group. We read the fact that the original TPP agreement is preserved within the new CPTPP as a powerful expression of that hope. 

 
And it certainly is there. David Brightling explained that the original TPP has been incorporated by reference into the new CPTPP. Deborah Elms of the Asia Trade Center in Singapore put that in perspective when she noted that "of [TPP's] 622 pages, only 28 were scrapped in revisions."* Only they have not been scrapped; they have been suspended. (Is that a distinction without a difference? Time will tell.)

One does not need to question Australia's desire to get the U.S. back inside the TPP tent - we emphatically do not! - to note that a TPP without the United States has its compensations for Australian producers. A recent article in Australia's Financial Review, for example, said TPP was "a blockbuster opportunity for Australian exporters," and it described those exporters as being "better off without the participation of the United States in the trade pact." 

Driving that point home, the author of the Financial Review article, Vesna Poljak, cited the example of wine. She wrote: 

By the time [the agreement] is fully implemented, the tariff on wine exported to Japan will fall to zero, from as high as 27.2 percent, creating an advantage for Australian producers at the expense of Californian wineries in the Japanese market. It does not end there, Australian companies will also be able to compete for government procurement contracts in all TPP 11 countries.

And, we might add, wine is not the only product where TPP will give Australian (and Chilean, and New Zealand) producers an advantage in the Japanese market over their U.S. counterparts. More broadly, as Mr. Brightling noted in response to another question, the other 10 countries in the TPP 11 already account for some 30 percent of Australia's exports. 

There are really two questions here. One is implicit in the fact that the TPP agreement continues, namely: will the United States ever be a part of it? Then, separately, there is the question: if the U.S. does not join TPP, how will it address its future trade concerns vis-à-vis the TPP 11 and others in the region? 

 
Canada and Mexico, of course, are both TPP countries, and they, along with the United States, are in the process of forging the start of an answer to that second question, as they work to produce a new NAFTA agreement.
As for whether the U.S. might at some point rejoin TPP, if one uses the short, one-year time horizon of Mr. Durant's question, the answer is almost certainly no. Wendy Cutler of the Asia Society Policy Institute addressed that question directly. "I don't see this Administration getting back into TPP," she said, noting that the President's lack of interest in doing so is made clear in speech after speech. 

  

Still, we think it is a good thing that the TPP 11, and especially Australia and Japan, so fashioned the new agreement as to allow for U.S. participation should America change its view. And we do not rule out the possibility that it might. Even this administration. When the TPP 11 start implementing the new agreement, American politicians as well producers will feel the chill of lost markets and the sting of discovering that "most-favored-nation" status doesn't buy you many favors in the world of regional trade agreements. As for the President, well he wouldn't be the first president to manage a 180-degree course correction on a signature issue. (Think of Woodrow Wilson and his 1916 campaign slogan: "He kept us out of war.")