December 10, 2013 | By

The TPP and Evel Knievel – Up in the Air

Last night, as part of the Chicago and the World Forum, Ian Bremmer proclaimed that the most important region of the world for US foreign policy was Asia. Further, he said, the most important US undertaking in Asia was the Trans-Pacific Partnership (TPP) trade agreement. At roughly the same time that he was speaking, TPP ministerial negotiations in Singapore were coming up short. The disappointment came on the heels of a successful weekend WTO deal in Bali that had led some to proclaim a Trade Renaissance. The twelve assembled TPP ministers didn’t admit defeat, of course. They heralded “substantial progress.” In a briefing, USTR Michael Froman said, “If I had to describe the outcome of the meeting, I would say 'great momentum.'” No doubt progress was made. But it can be notoriously difficult to figure out just how much. Herewith, some points to consider:

  1. We’ve been here before. We haven’t been at this level of progress, with this set of participants, exactly. But in November 2011, the United States was hosting the APEC meetings in Hawaii, TPP negotiations had been active for almost two years, and there were serious hopes that the agreement among the nine participants would be concluded then and there. Participants knew that beyond those meetings lay a US election and few deadlines that would force tough choices. As it happened, the negotiations could not conclude and the leaders were left praising themselves for good progress.
  2. Are they 65% done? Japan’s Vice Economy Minister just gave that figure as the degree of agreement among TPP participants. But what does that mean? Appropriately cautious, Amb. Froman reminded that “the thing about trade negotiations…is that nothing is agreed to until everything is agreed to.” To see the issue, think of the late daredevil Evel Knievel. He would pull off stunts like jumping his motorcycle over 15 cars parked in a row. To do so, he would rev his motorcycle along a straight-away, ride up a ramp, then, if all went well, fly over the cars and land on the other side. For Knievel, would 65% done mean the straightaway, before he mounted the ramp? It was certainly important for him to pick up speed that way, and that would have been 2/3 of the measured distance. But it would hardly have counted as 2/3 of the difficulty of the task.
  3. Ambition vs. Conclusion. In 2011, there were nine participants in the TPP negotiations. Since then, Canada, Mexico, and Japan all joined, bringing the number to twelve. When Japan joined, one former USTR privately predicted that the negotiations would now not conclude during the Obama presidency. Reportedly, delegations in Singapore were upset with Japan’s limited offers of liberalization. The 2011 delay posed a dilemma, however. As long as the negotiations were to conclude soon, it was reasonable to ask allies like Canada, Mexico, and Japan to wait to join. As the talks dragged on, such a stiff-arm seemed undiplomatic. Further, the three countries’ admission undoubtedly raised the level of ambition of the talks and the potential economic impact of the TPP. But when they were allowed in, the talks became significantly harder to conclude.  Now, as a 2013 deadline passes, S. Korea has expressed interest in joining…
  4. This is level one of two. Robert Putnam helped clarify the difficulty of international negotiations by describing “two-level games.” International negotiators need to reach agreement among themselves, and among critical constituencies at home. So far, the Obama administration has neglected the consensus-building at home on trade. One indication of this is the domestic drumbeat for enforceable measures against ‘currency manipulation.’ There is no indication such measures are on the TPP agenda, nor would the other countries likely accept them.

None of this implies that TPP is a lost cause. However, it does imply that President Obama will need to make TPP a top priority for the new year and devote substantial time to the project if it is to have a chance. Given the centrality of TPP for Asian relations and the centrality of Asia in this administration’s foreign policy, that’s not an unreasonable prioritization.

About

Phil Levy is senior fellow on the global economy at The Chicago Council on Global Affairs. Previously he was associate professor of business administration at the University of Virginia’s Darden School of Business. He was formerly a resident scholar at the American Enterprise Institute and taught at Columbia University’s School of International and Public Affairs. From 2003 to 2006, he served first as senior economist for trade for President Bush’s Council of Economic Advisers and then as a member of Secretary of State Rice’s Policy Planning Staff, covering international economic matters. Before working in government, he was a faculty member of Yale University’s Department of Economics for nine years and spent one of those as academic director of Yale’s Center for the Study of Globalization.

His academic writings have appeared in such outlets as The American Economic ReviewEconomic Journal, and theJournal of International Economics. He is a regular contributor to Foreign Policy magazine’s online Shadow Government section and writes on topics including trade policy, economic relations with China, and the European economic crisis. Dr. Levy has testified before the House Committee on Foreign Affairs, the Joint Economic Committee, the House Committee on Ways and Mean, and the US-China Economic and Security Review Commission. He received his PhD in Economics from Stanford University in 1994 and his AB in Economics from the University of Michigan in Ann Arbor in 1988.

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