Failure of Obama’s Trans-Pacific Trade deal could hurt US influence in Asia

With President Obama’s trade agenda in jeopardy in Congress, the nations of Asia are weighing the potential impact of a failed deal on local jobs and exports, but also something else: American influence in the region reports The New York Times.

For many here, the defeat of a sweeping trade and investment pact being negotiated between the United States and 11 other Pacific Rim nations would weaken Washington’s already strained claim to leadership in Asia and undermine a commitment by Obama to devote more attention and resources to a group of countries contending with the growing power of China according to The New York Times.

Congress rejected legislation on Friday that is crucial to completing the trade deal, the Trans-Pacific Partnership, throwing its future — and its potential to bind together countries friendly to American interests — into doubt.

“If this collapses, Pacific Rim countries will be aghast,” said Shunpei Takemori, a professor at Keio University in Japan, the largest economy in the would-be trade zone after the United States. “China is pushing, and if the US just stands aside, it would be a tragedy.”

The New York Times reports, the White House and its Republican free-trade allies in Congress are searching for ways to revive a bill that would extend aid to workers displaced by global trade agreements. By rejecting that measure on Friday, Obama’s fellow Democrats in the House effectively scuttled legislation granting him the power to negotiate trade deals that cannot be amended or filibustered by Congress.

Without such trade promotion authority, analysts in the region said, it may be impossible for Obama to persuade governments to make the concessions needed to close a deal that would affect 40 percent of the global economy.

The death of the Trans-Pacific Partnership would be a new setback for American economic diplomacy in Asia after a failed attempt to thwart a Chinese state-run infrastructure investment fund that some see as a competitor to American-dominated institutions like the World Bank says The New York Times.

The Obama administration has also struggled to respond to blunter assertions of Chinese power, such as Beijing’s efforts to strengthen its territorial claims by building islands out of reefs in the South China Sea.

“If you don’t do this deal, what are your levers of power?” Singapore’s foreign minister, K. Shanmugam, asked in Washington on Monday. “The choice is a very stark one: Do you want to be part of the region, or do you want to be out of the region?”

He argued that “trade is strategy” and that without economic leverage, the United States was left with only military clout in Asia, “and that’s not the lever you want to use.”

“It’s absolutely vital to get it done,” he added, referring to the bill’s passage.

In Japan, Prime Minister Shinzo Abe has presented the imperiled trade pact as key to his nation’s ambitions, and he has pushed back with unusual vigor for a Japanese leader against the country’s influential farm lobby, which has long opposed lower barriers to imports of rice and other agricultural products. He has made the case that Japan needs trade liberalization to bolster its stagnant economy, but his arguments have been as much about diplomacy as economics.

“It is also about our security,” he said of the proposed trade deal in a speech during a joint meeting of Congress in April. “Long term, its strategic value is awesome.”

Ichiro Fujisaki, a former Japanese ambassador to the United States, described the Trans-Pacific Partnership as “economic glue to cement ties with like-minded countries,” including emerging economies such as Vietnam that are only partly integrated into the global economic order shaped by the United States, reports The New York Times.

“It’s an important time for rule-making in Asia, and T.P.P. is central to establishing the right rules,” Fujisaki said.

China is conspicuously absent from the list of 12 countries negotiating the agreement. The group comprises Australia, Brunei, Canada, Chile, Mexico, New Zealand and Peru, as well as Japan, Malaysia, Singapore, the United States and Vietnam. But the Chinese government has taken pains not to criticize the deal, and has even suggested it may eventually ask to join.

For now, the pact’s wide-ranging rules on intellectual property, investor protections and workers’ rights are seen as a step too far for the ruling Communist Party in China.

“China knows that T.P.P. is one of the pillars of US rebalancing strategy in the Asia Pacific, and it is trying to create a club that excludes China,” said Song Guoyou, a professor at the Center for American Studies at Fudan University in Shanghai. The collapse of the deal, he added, would be “a huge blow to Obama’s effort to build an integrated trade system” in the Asia-Pacific region.

Professor Song said the United States should work with China to offer a “more ambitious and more inclusive” agreement, and he held up as an alternative the separate, less comprehensive regional trade deal that China is negotiating with countries in Southeast Asia as well as Japan, South Korea and other nations.

Negotiations over that pact could gain momentum if the Trans-Pacific Partnership fails, as could potential bilateral deals, including one between Japan and the European Union that Tokyo deferred while it focused on the Trans-Pacific trade deal.

South Korea, a crucial American ally and one of China’s top trading partners, has expressed interest in joining the Trans-Pacific Partnership talks, but its enthusiasm has been muted. Some have accused the government of trying to use the Chinese proposal to secure better terms from the United States. A bilateral trade agreement with the United States that came into force in 2012 set off large, prolonged protests, and the South Korean government has been wary of entering another grueling round of politically charged trade talks with Washington.

In terms of tangible economic benefits, the stakes are higher for some nations than for others. Countries like Australia and Singapore already have highly open markets and bilateral trade deals with important trading partners, meaning the potential for gains is relatively small, experts said.

At the other extreme is Vietnam, the only Communist country in the group. Vietnam has played an outsize role in the debate over the deal in the United States, with US. Obama arguing that Vietnam would be required to improve worker safety and to allow the establishment of independent labor unions, something it currently forbids.

The region’s smaller economies are increasingly bound to China’s. China is the largest trading partner for countries in the Association of Southeast Asian Nations, for instance, accounting for 14 percent of the bloc’s external trade last year, almost twice as much as United States.

In Japan, the failure of the Trans-Pacific Partnership would relieve pressure on US. Abe to open up the agricultural sector and other protected industries.

Japanese negotiators had sought to preserve import barriers on some politically delicate farm products, including rice — a battle that had been the biggest obstacle to a deal until the House Democrats revolted. Japan was nonetheless preparing for painful concessions.

A collapse in the talks could thus offer a political silver lining for US Abe. “The agricultural lobby would have been furious,” Professor Takemori of Keio said.