By Esther Sainsbury —
U.S. president Barack Obama recently said that he was “confident” Congress would pass the Trans-Pacific Partnership (TPP) trade deal in 2016. But with no apparent effective legislative strategy, the conclusion of Obama’s presidency fast approaching, and congressional support for the TPP uncertain, it is time to consider what the next president could do to revive the trade deal in 2017.
There are a number of reasons why Obama is unlikely to be able to ratify the TPP in 2016, even during the lame duck session after the elections. The TPP has become highly politicized in the U.S. presidential election campaign, it lacks widespread support from the American public and lawmakers, and both of the major parties’ presumptive nominees, Hillary Clinton and Donald Trump, oppose the trade deal in its current form.
By 2017, the context and imperatives for ratification are likely to have changed. If negotiations remain on schedule, by January 2017 the Association of Southeast Asian Nations (ASEAN)-led Regional Comprehensive Economic Partnership (RCEP), a competing free trade agreement that excludes the United States but includes China, will have been concluded or be nearly completed. In early 2017 a new president could find him/herself looking in from the outside as the RCEP broadens and deepens Asia-Pacific regional economic engagement, while the U.S.‑led alternative is left to languish.
Presuming the next president is convinced that ratifying the TPP with its imperfections is a better alternative than no trade agreement, he/she would likely direct the new administration to develop a TPP modification strategy. Credible modification options would primarily need to be “U.S. centric” to avoid TPP renegotiation and go some way to bolster U.S. industry and public support for the trade deal. Here are a few ideas about how the new president could build support for TPP ratification:
1) Deliver a keynote speech in the United States on the U.S. role in the world, make the case about the importance of trade to U.S. economic growth, and confirm in-principle support for the TPP.
The momentum behind TPP consideration in the United States should be maintained. Rather than shelve the deal, the next president should deliver a speech advising the public of his/her intention to continue to pursue the TPP. This needs to be qualified by a commitment to reassess the impact of the TPP in specific areas of most concern and relevance to the U.S. economy and its people, such as job creation, wages, and national security. The speech should be based on strong support for the TPP in the interests of the U.S. role in a globalized world. This messaging would be of particular importance to the other 11 signatories.
2) Scrap the 2015 Trade Adjustment Assistance (TAA) Act and launch a new and improved strategy for supporting workers that may be negatively affected by international trade agreements.
Following the release of the 2016 TPP impact assessment and the proposed 2017 reassessment mentioned in the first recommendation, the incoming president should commit to responding to the report findings, particularly by seeking to improve the ability of U.S. businesses and workers to respond to job loss that may result from TPP implementation. The TAA needs to be totally reconceptualized. The U.S. government needs to expand and deepen job training under a new initiative that ensures Americans are able to take advantage of the new opportunities that trade presents. Congress needs to ensure the new workforce development program is sufficiently funded and addresses the real driver of job loss in the United States: automation and technological advancement.
3) Promote the growth of the U.S. innovation advantage and improve industry access to information on intellectual property (IP) protections.
The new administration should launch a new whole-of-government business innovation fund and IP advisory center offering funding incentives and IP protection advice to small and medium enterprises working in “IP-intensive” sectors, such as the digital and pharmaceutical industries. This could be a standalone initiative but should link closely with existing hubs such as the U.S. Patent and Trademark Office.
4) Improve U.S. tools to address currency manipulation.
The issue of currency manipulation and its impact on the U.S. trade deficit and jobs has been central to anti-TPP rhetoric in 2016. Although currency manipulation is difficult to quantify, the next president should commit to pursue new bilateral macroeconomic cooperation agreements with other major TPP economies, such as Japan, that specifically look to strengthen exchange rate policies, deter economic distortion, and establish a set of enforcement mechanisms with which to punish violations. These efforts should be supplementary to but complementary with the current TPP side agreement on currency manipulation.
5) Address concerns about TPP provisions relating to pharmaceutical patent protections, tobacco exemptions, and financial services data flows.
The new president should seek to address key domestic policy differences with Congress about TPP patent exclusivity periods for pharmaceuticals, legal protection for tobacco interests, and the regulation of cross-border data flows in the financial services sector. This should be done through meaningful dialogue with Congress, targeted in particular at the senators and representatives opposed to the TPP.
Senator Elizabeth Warren and others consider investor-state dispute settlement (ISDS) a key sticking point in the TPP, but these concerns are largely a result of misinformation. The reality is ISDS does not and cannot require the United States to change any laws or regulations. The United States is experienced with ISDS, and is already party to about 50 agreements that provide investment protections. The United States is not vulnerable to claims under the TPP. Only 13 cases have been brought to judgment against the United States over three decades, and it has never lost a case. The TPP actually sets a new, higher set of ISDS standards with stronger safeguards and better transparency provisions than the agreements that came before.
While these recommendations assume that the TPP remains unratified by the U.S. Congress in 2016 and that a new president would be interested in pursuing the TPP in 2017, it is not too late for ratification in 2016. The strategic case for TPP remains. There is still time to advocate for the TPP, dispel incorrect assumptions about its impact on the U.S. economy, and advocate for better public understanding of its importance to U.S. security and prosperity.
Ms. Esther Sainsbury is an Australian foreign service officer, former Thawley Fellow and current visiting fellow with the Southeast Asia Program at CSIS. The views expressed here are solely those of the author and do not reflect the views of the Australian government.