Sometimes international diplomacy is so inept that it becomes genuinely entertaining. Recent US trade policy in the Asia-Pacific region is a case in point. Over a decade ago, the US devised a plan to export its economic model and outflank China through the Trans-Pacific Partnership. The idea: dangle the bait of preferential access to the voracious American consumer in order to rewrite the tariff, intellectual property, subsidy, regulatory and investment regimes of the world’s fastest-growing region.
The administrations of George W Bush and Barack Obama got the deal signed, but Donald Trump and then Joe Biden decided imports were politically toxic and pulled out without ratifying. Amusingly, this allowed China to escalate its campaign for trade hegemony in Asia by applying to join. China is currently dancing gleefully at every party in the Asia-Pacific it can get into. It is a founding member of the Regional Comprehensive Economic Partnership, a shallow but broad trade deal, and is also applying to join the Digital Economic Partnership Agreement between Singapore, Chile and New Zealand.
Having abandoned the 11-member TPP (now named the CPTPP after the clarification “Comprehensive and Progressive Agreement for” was tacked on), the Biden administration is now reduced to mumbling vaguely about creating its own partnerships in Asia. No one thinks they will achieve very much, especially with no extra market access to offer.
The US has definitely blundered. But it’s too strong to say, as some do, that this is a huge foreign policy mistake that will fatally weaken American influence.
Certainly, CPTPP members aligned with the US are dismayed by its absence. Officials from Australia, Canada, Japan and New Zealand are nervously flicking glances at each other — and upwards at their political masters — to check their mutual resolve on denying China easy entry.
If existing CPTPP governments want to block or delay China joining, they can set a high bar for proving adherence to rules on data localisation, state-owned enterprises, subsidies, IP rights, government procurement and so on. They are already making things difficult for the UK, which has also applied to join, just to show they aren’t soft touches. The British government has been somewhat taken aback by being made to squeeze through a bunch of low-diameter hoops to prove their laws fit CPTPP criteria.
Japan, a leading sceptic, has circulated proposals setting out very tough conditions for China to meet. Mexico and Canada could also cite the poison pill provision in the US-Mexico-Canada trade agreement, allowing a member to leave if others sign a pact with a non-market economy like China.
Holding up Chinese entry depends on political will as much as technical persnicketiness. It’s an ex ante judgment call, not an ex post objective fact, whether commitments on issues like state-owned enterprises will be honoured. As Lithuania and Australia are discovering, Beijing has ways of breaking trade rules that can be hard to prove. A Japanese official says: “The use of economic coercion in the context of Australia is directly contrary to the spirit of TPP.”
The longing for renewed US involvement, however quixotic, endures. The official says that while the political landscape is hostile to trade, “the TPP is based on American standards, and we strongly still hope the US will change its attitude and return to TPP”.
Though that seems unlikely, failing to join CPTPP doesn’t mean the US giving up on regional influence, whether economic or strategic. As the Japanese official also points out, American companies less dependent on trade deals to get market access — such as tech and financial services — are very present in Asia.
As for geopolitical clout, recent experience suggests actual firepower is more important than the economic kind. Trade deals don’t automatically mean political alignment or influence. It’s not the EU with its “deep and comprehensive free trade agreement” with Ukraine, but the US, with its troop deployments in eastern Europe, that attends security summits with Russia. Australia and China have a trade deal dating back to 2015, but it hasn’t stopped Beijing trying to coerce Canberra.
None of the US’s strategic capabilities — military might, security deals like the Australia-UK-US agreement, cyber security expertise, intelligence-sharing, imposing harsh financial sanctions via the dollar payments system — require CPTPP membership. And all are surely more important in projecting American influence. Taiwan wants to join CPTPP as a counterweight to China. But having the US put enough naval and air power in the South China Sea to deter a Chinese invasion is clearly better for Taiwan’s security and prosperity than having to fiddle around with its IP law so it can enter a trade deal with the US.
It’s true that US economic diplomacy over the past decade has been comically weak and inconsistent. It has been undermined by the excessive fear of trade deals among the American public, encouraged by lobbies like organised labour and the steel industry. But its ineptitude over the CPTPP should not lead to a counsel of despair. Trade deals are important, but they are neither necessary nor sufficient for American foreign policy to assert itself in the Asia-Pacific.
alan.beattie@ft.com
Source: Economy - ft.com
