TPP: Do We Need a Plan B? - Global Trade Magazine
  August 12th, 2016 | Written by

TPP: Do We Need a Plan B?

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  • In economic terms, the TPP is mostly a U.S.-Japan deal.
  • A deal with a high-wage country like Japan would face less political opposition than does TPP.
  • Japan may have to accept tighter rules in a Japan-U.S. FTA.

The 2016 U.S. presidential campaign may be thought of as the funeral for the Trans-Pacific Partnership.

The presidential candidates both say they oppose the accord and congressional support for the pact is shrinking. President Obama has said he will press for TPP’s ratification during a lame-duck session of Congress, after the November election, but that exercise looks to become the last gasp for a morbid agreement.

Should there by a TPP Plan B?

Edward Alden, a senior fellow at the Council on Foreign Relations, argues in the affirmative.

One response to the failure of TPP could be that that Japan and other Asian countries will join a Chinese-led Asian trading bloc in Asia.

China’s economic pull is such that some move in this direction is inevitable if the TPP collapses,” Alden wrote on the CFR website.

On the other hand, Asian countries, including Japan, have an interest countering China’s economic hft in the region. “The best plan would be for Japan to propose a bilateral free trade agreement with the United States,” wrote Alden. “Six of the other ten TPP partners already have FTAs with the U.S. In economic terms, the TPP is mostly a U.S.-Japan deal.”

The TPP dealt with some thorny U.S.-Japan trade issues, Alden noted, but additional negotiations may be required to bring the next president to a signing ceremony. “Japan may have to accept stronger restrictions on currency manipulation,” according to Alden, “and tighter rules of origin on auto trade to ensure that the U.S. and Japan gain more than China from lowering tariffs. But a deal with a high-wage country like Japan would face less political opposition than does the TPP.”

A bilateral U.S.-Japan Plan B “is a distant second best,” as far as Alden is concerned. One of the merits of TPP could have been “to pressure China into playing more by agreed trade rules.” A U.S.-Japan FTA, obviously, would have more limited implications for the region as a whole.

But Alden believes the landscape has changed for trade in U.S. politics. Whatever Donald Trump’s rhetoric on the subject, he will favor new trade rules if elected. Alden believes that the same applies to Hillary Clinton, despite her past support for TPP.

“Asia has to be at the center of defining and shaping that new U.S. approach,” he concluded, “one that preserves as many of the gains made in the TPP as possible.”

And he advises Japan to move quickly. With the UK exiting the European Union, a U.S.-UK FTA is popular in Congress. “The danger is that Asia gets left out,” Alden warned. “Instead, Japan should make sure it is first in line.”


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