US will not be as quick into CPTPP as UK

Hello from Washington, which has been caught up in a big snowstorm for the past few days. Poignantly, longtime residents say this usually heralds the arrival of hordes of sledding children on the garden slopes around the Capitol building. Those slopes are now sadly off-limits and tucked behind large prison-like fences after a pro-Trump mob stormed the place.

Today’s main piece focuses on the UK’s hopes that the US will some day join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and why this seems unlikely right now.

Our person in the news, meanwhile, is Alejandro Mayorkas, who as the newly appointed secretary of the Department of Homeland Security will help shape immigration policy — including on the sort of work visas US businesses use to bring in people from overseas.

Building ties with the UK is not a US priority

When news broke that President Joe Biden would call UK prime minister Boris Johnson only after phoning Canada’s Justin Trudeau, placing Britain further down the list of customary phone calls to foreign leaders by a newly inaugurated US president, the Brits responded like lovestruck teenagers over-analysing texts from a crush. The removal of the Churchill bust from the Oval Office caused similar anxiety among sensitive British souls (such as those who pen the Daily Mail and The Sun).

The so-called special relationship between the US and the UK has, in Brexit times, perhaps been more a source of forlorn longing from London than anything else. The UK has repeatedly touted a swift trade deal with the US as the big prize of it being a new singleton freed from the drudgery of the EU. 

But there have been very few signs that Washington returns London’s affections with anything close to the same level of intensity. Former president Barack Obama rebuffed the breathless advances by warning that Brexit Britain would be “back of the queue” for a trade deal, and even when Donald Trump sought to reward Britain’s rejection of Europe by focusing on a deal, scant progress had been made on the obvious points of disagreement concerning agriculture and pharma rules, or on other disagreements on digital tax and Airbus/Boeing (though these are apparently technically being dealt with outside of the free trade agreement talks).

There are signs that British officials are beginning to accept that hopes of a trade deal are fading. There are myriad procedural issues aside from the content of the text, not least the fact that important fast-track legislation governing the passage of trade deals through Congress is about to run out (which we’ve written a lot about here and here and here). Congress is also very distracted by trying to pass economic relief measures related to Covid-19, and after that Biden is keen to get allied lawmakers to help him do something on immigration. A trade deal with the UK is not on the political agenda. Bluntly, it doesn’t win votes and Biden and co have bigger fish to fry. 

But the British will not be defeated so easily. The new hope is that special closeness on the trade front could be resurrected by both parties joining the pan-Pacific CPTPP trading bloc, which the UK applied to join this weekend. The group is the world’s largest trading bloc, comprising 11 countries, including fast-growing economies such as Mexico, Malaysia and Vietnam, along with established regional participants Japan, Australia, New Zealand and Canada. One of the side-effects of this, they say, will be closer ties to the US.

That might be true. But it is far from certain that the US will join.

Obama failed to get the precursor to the CPTPP, the TPP, through Congress, and there are few signs that the updated deal would pass.

There are some arguments in favour of the US joining the bloc that chime with stated US foreign policy goals, such as curtailing the influence of China in the region and preventing Beijing from dominating regional trade being one. That argument would be likely to attract supporters in Congress, especially if there was some option to include Taiwan in such a deal, said Jeffrey Schott of the Peterson Institute. But there could also be high political costs. Democrats in Congress, especially progressive ones who have traditionally displayed scepticism towards trade deals, such as Sherrod Brown, are unlikely to back a US entry into the deal without significant protections for workers, and enforcement mechanisms to go along with them. This, trade analysts say, could be very hard for some Asian countries to accept. Biden may be unwilling to expend precious capital bringing his lawmakers on board in the near term.

There are also other options available to the US. “I don’t think TPP is the only mechanism for re-engaging in the Asia-Pacific region,” says Wendy Cutler, a former US trade negotiator now at the Asia Society Policy Institute. Narrow, sectoral trade deals could provide an alternative to a big blockbuster catch-all deal. Areas ripe for agreement could include digital trade, climate and medical supply chains, Ms Cutler said. This approach would help build trust in Congress and get momentum behind trade talks with the CPTPP countries. 

All is not lost. But in the short-term at least, expect the UK’s hopes of the US joining it in the deal to be dashed.

Charted waters

Our chief economics commentator Martin Wolf’s latest column states that containing China is not a feasible option for the Biden administration and its allies. One reason why is the economic ties China has built up with the rest of the world, making it an entirely different beast to the old Soviet Union. The chart shows that for many key economies China is now a more important export partner than the US.

Person in the news

The appointment of Alejandro Mayorkas signals what many businesses hope will be a more liberal approach to immigration in the US © Bloomberg

Alejandro Mayorkas is officially the new secretary of the Department of Homeland Security. Now confirmed by the Senate, Mayorkas will oversee the sprawling department that contains US visa and immigration services and directs policy on who can secure coveted US green cards.

US businesses were critical of moves by the Trump administration to ban the issuance of all sorts of worker visas, making it significantly harder for people ranging from scientists to au-pairs to enter the country.

Trump’s reasoning was that US companies should employ US workers, but businesses argued that they sometimes needed to bring in staff from overseas to fill staffing gaps.

The appointment of Mayorkas, the first Latino and first immigrant to lead the DHS, signals what many businesses hope will be a more liberal approach to immigration in the US.

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Source: Economy - ft.com