Now that the president’s own party has denied him special trade promotion authority to finalize a deal with 11 Pacific Rim nations, experts warn it could leave an opening for China to exert greater influence in Asia and on the global stage.
The United States stands to lose leverage over a major trading partner following the House of Representatives’ vote Friday to derail President Barack Obama’s ability to conclude negotiations to create the Trans-Pacific Partnership, of which China is not part.
It’s on the outside looking in, and it is separately leading an endeavor to create an Asia-wide zone of freer trade between 16 nations. These talks, started in November 2012, would create the Regional Comprehensive Economic Partnership, short-handed as RCEP, a market of 3 million people.
And that’s precisely where China could exert greater influence over its neighbors in Asia should the U.S.-led negotiations falter.
“We would in a sense leave the door open for the RCEP to go ahead and write rules that would be more to their liking,” said Fred Bergsten, director emeritus of the Peterson Institute for International Economics, a Washington-based think tank, and a former U.S. trade official.
The parallel China-led negotiations are less ambitious and do not seek to raise worker standards or environmental protections. They involve talks between 10 countries that already make up a trading bloc known as the Association of Southeastern Asian Nations, or ASEAN, and six countries with which ASEAN has individual trade agreements: China, Australia, Japan, India, South Korea and New Zealand.
Losing the vote on trade promotion authority, thus threatening the long-running U.S.-led negotiations, would at a minimum be a public relations blow to the United States. It would weaken the credibility of the Obama administration’s pivot on Asia.
The adjustment seeks to shift the U.S. diplomatic and military attention away from Europe and the Middle East and onto Asia. Implied in this shift is a desire to contain China, or at least have some influence over its rise as a global power.
“The failure of the United States to move on this ( the Trans-Pacific Partnership) will be a huge blow to its capacity to give substance to the pivot,” said Joseph Caron, a former Canadian ambassador to China and Japan. “My own sense is it will be more a blow in that respect than the Chinese will walk in and invent multilateral rules.”
China already seeks to have its currency, the yuan, used by the International Monetary Fund as a reserve currency. And it is challenging the World Bank with its own development bank. These are examples of why the United States must preserve its status as leader of the trade talks, said Caron.
“I think the U.S. will pay a huge cost in the short, medium and possibly the long term,” he warned. “It certainly is forcing most other capitals to do some rethinking. Most capitals want the U.S. to play an active role.”
If Obama doesn’t win the trade promotion authority granted to his predecessors, it wouldn’t necessarily derail the talks. It would, however, probably lower their scope.
“The other TPP countries have already been negotiating with us for a lot of years . . . having gone this far, I’m not sure they would withdraw from the TPP,” said Bergsten.
The more likely occurrence, he said, is that participants would yank back some of what’s already on the table.
“They might withdraw some of their offers,” Bergsten said, “so the TPP could become less ambitious.”