October 25, 2013 | By

TPP: United we stand, divided…

Bloomberg just reported on a dire assessment of the prospects for the Trans-Pacific Partnership trade agreement. An analysis by the Asian Development Bank said that the TPP “risks collapsing and producing a series of bilateral deals if the 12 nations involved cannot reach agreement…” The report based this concern on the apparent lack of movement in recent talks and on the launch of bilateral discussions between the United States and Japan under the auspices of the TPP.

It can be very difficult to tell just how much peril the TPP is in, given that the discussions take place behind closed doors. Nor is it uncommon to have bilateral talks before reaching a broader deal. But the failure of the Obama administration to win trade negotiating authority and public statements from participating countries like Malaysia suggest that there could be real cause for concern.

It would be very problematic to dissolve the TPP into a series of bilaterals. I have written before about the challenges of a “lite” agreement that fell short of the more ambitious goals participants have set. Among the problems with doing this in the TPP context: Critics who lambasted the Bush administration for pursuing puny trade accords with Panama and Oman could be accused of hypocrisy if they were left trumpeting bilateral liberalization with Bahrain. People have been known to live through accusations of hypocrisy, though.

There are two more serious problems with a piecemeal TPP approach. First, it likely makes a difficult political task in the United States harder, not easier. Trade votes have been politically divisive in the last couple decades; sequential conclusions would mean repeated votes. More troubling – and mystifying – is the tendency for trade opponents to focus more intensely on countries when they are involved in bilateral or trilateral agreements than when they are part of larger accords. For example, there was no particular outcry when Mexico joined the GATT in 1986, even though that was the point at which the United States committed to low tariffs toward Mexico. There were substantially greater objections less than a decade later when Mexico joined the United States in NAFTA. A similar story was repeated with Colombia – GATT in 1981, controversial entry into a bilateral FTA in 2011. For TPP, that history has implications for Vietnam.

Even more important, a fragmented TPP would fail at its overarching goal of setting the standards for a 21st century trade agreement. The United States already has bilateral deals with many of the participants; the point was to knit those together and come up with new approaches that others would have to follow on issues such as services liberalization, intellectual property protection, and the treatment of state-owned enterprises. It is relatively straightforward to apply different tariffs on different countries; it is much harder to apply different standards depending on the trading partner.

None of this is meant to downplay the serious challenges of reaching agreement among 12 countries across a broad negotiating agenda. The pressure is mounting, as those countries have set a goal of completing the agreement this year. But a move to break the agreement up into bilaterals would be tantamount to failure.

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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