The good and bad news about TPP

The Trans-Pacific Partnership (TPP) seems to be in deep trouble. Earlier this month, negotiators in North America tried to resolve differences over auto parts which were - along with issues on dairy and sugar - among the key obstacles to the deal which was meant to be finalised last month in Hawaii.

But as the weeks tick by, the chances are dwindling that these obstacles can be overcome in time to get the agreement to the United States Congress for approval before the US presidential primary elections begin in earnest in February next year.

And everyone seems to agree that once the primaries begin, the TPP is off the agenda indefinitely.

How much does that matter? That depends on how you look at the TPP. For many people it is all about economics, and for them the TPP's failure would be regrettable but not disastrous. Despite the hype, the TPP is primarily a preferential trade agreement designed to boost trade flows by lowering protective barriers. That is always worth doing, but protection is already so low on most trade that the benefits of further lowering are rather marginal. Nice to have, but not transformative.

However, the TPP is not just about economics. It is also about power politics.

Ever since President Barack Obama made it a centrepiece of his "pivot to Asia" back in 2011, the TPP has been seen by Washington primarily as a central move in its increasingly intense competition with China over the future leadership of Asia.

So if the TPP fails, many people will assume that the Obama administration will have taken another fall in this competition.

That is certainly a real worry in Washington itself. The administration has tried to sell the TPP to a sceptical Congress and a hostile electorate, by arguing that it is essential to the success of the "pivot". If it fails, therefore, the "pivot" will be seen to have suffered another body-blow.

But is this right? That depends on whether you think a successful TPP would really do much to bolster US strategic leadership in Asia.

The idea that it does rests on two assumptions. The first is that China's challenge to US regional primacy is fuelled by its growing economic weight in Asia, which increasingly gives it the key role in the economic plans and ambitions of its neighbours. That makes them ever more susceptible to Chinese diplomatic pressure, more willing to countenance a bigger Chinese leadership role, and less willing to offer support when America stands up to China and reasserts its own leadership.

The second assumption is that the TPP can fix this problem by displacing China from its new position at the centre of Asia's economic order.

Its promoters in Washington believe that the TPP would, if it can be achieved, fundamentally reverse the economic trends which have worked in China's favour over the past decade or two. It would restore America's place at the apex of the Asian economy, and rewrite the rules of Asian trade and economic integration in ways which give American firms an entrenched advantage over their Chinese competitors.

The first of these assumptions is undoubtedly correct. One only has to look at Australia's policies towards China over the past 10 years to see how China's swift rise to become Australia's most important trading partner has affected Canberra's positioning between Washington and Beijing.

As a staunch US ally, Australia has been willing to endorse the pivot and host new US Marine deployments. But it has become careful to avoid any suggestion that these measures are directed against China, and to ensure that its criticism of China's assertive policies is muted enough to avoid offending Beijing. No wonder people in Washington start to doubt Australia's reliability as an ally against China.

But can the TPP solve this problem? This is where doubts about the second assumption arise. Could the TPP possibly make a big enough difference to the structure of Asia's economy to displace China from its central position and erode the political influence that China has now accrued? The answer is almost certainly that it couldn't.

China's economic weight in Asia is already so preponderant that it would take a truly immense shift in the patterns of trade to displace it.

After all, to take an Australian example again, its exports to China are now almost 10 times larger than its exports to the US. The TPP has no chance of making any kind of serious difference to that.

Indeed, the reality is that even with its serious economic problems and at reduced levels of growth, China will remain by far the most promising source of new economic opportunities for countries throughout Asia for many years, even decades, to come.

And China is taking its own steps to consolidate and perpetuate its position at the apex of the Asian regional economy through initiatives like the Asian Infrastructure Investment Bank (AIIB) and the One Belt-One Road infrastructure concept which is aimed to ensure that in future all roads in Asia lead to Beijing. Compared to these grand plans, the TPP would just tinker at the edges of the regional economic order.

The good news for Washington is that this means the failure of the TPP would not be as big a loss for US leadership in Asia as many have feared. The bad news is that America has, yet again, set up a test of its regional strength and resolve which it seems likely to fail. US credibility has already been dented by its failure to derail the AIIB and its inability to back tough talk on the South China Sea with effective action.

Now, no matter who is to blame for the actual negotiating impasse, a TPP collapse would be seen throughout the region as a major blow to Mr Obama's Asia policy, a serious setback for US regional leadership, and hence, in the zero-sum game of power politics, a win for China.

And if that happens, Mr Obama himself will deserve much of the blame, because it has been his choice to put so much weight on an initiative which will do so little to serve US objectives if it succeeds, and so much to damage US credibility if it fails.

The writer is a professor of strategic studies at the Australian National University in Canberra

This article was first published on August 25, 2015.
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