The Trans Pacific Partnership (TPP): A Panglossian Endeavor

Peter Volberding, BASC Research Assistant

On December 14, 2009, President Barack Obama and USTR Ron Kirk officially notified Congress of the administration’s intention to enter into negotiations for the Trans Pacific Partnership (TPP). Currently, the TPP is a multilateral FTA composed of four members—Singapore, Brunei, New Zealand, and Chile—and endeavors to have full free trade between member countries by 2015. The United States enters into negotiation with the four current members, as well as three other nations—Vietnam, Peru, and Australia.

While the intentions of international free trade are laudable, the negotiation process is likely to be wrought with difficulties. In fact, given the heterogeneity of the eight negotiating countries, the TPP is inevitably headed to turbulent waters. Observers have noted that the current system only functions because of the small size and disparate interests of each member. However, with the addition of the United States, the world’s largest economy, Vietnam, a large export-oriented economy, and Australia and Peru, two large agricultural exporters, the prospects look increasingly grim. USTR Ron Kirk has already acknowledged that the negotiation process will take at least 18 to 24 months, longer than the average time for a bilateral FTA.

The one bright spot comes from an unlikely source—Congress. As Kirk highlighted just this week, there is surprising political will, or perhaps political acquiescence, for the US’s involvement in the TPP. This largely stems from the political cycle. Since a Congressional vote would take place following the 2010 midterm elections, there is less political risk. Moreover, broad industrial and agricultural support for the TPP has precluded immediate opposition.

Despite initial Congressional interest, the TPP faces numerous challenges. House Representatives Rangel (D-NY) and Levin (D-MI) have flagged Vietnam as a potential obstacle. They specifically cite Vietnam’s failure to adhere to international labor standards and lackluster enforcement of intellectual property rights. Rangel and Levin also note the Communist Party’s limitation of free speech as an impediment to negotiations.

Additionally, domestic industries have started to lobby Congress and the USTR for industry-specific provisions, occasionally pitting entrenched interests against one another. According to Inside U.S. Trade, an international trade news service, more than 100 submissions were made in late January by various industry and interest groups to the USTR office. Most concern was placed on rules of origin (ROO) and intellectual property rights (IPR), but the requests ranged widely.

Manufacturing groups, such as the National Association of Manufacturers (NAM), Philip Morris, and Ford have pushed for stronger enforcement of IPR in the TPP. Pharmaceutical groups, led by the industry association PhRMA and companies such as Novartis, have been particularly aggressive in pursuing IPR regulations in FTAs generally to limit foreign production of generic versions of patented drugs. However, Oxfam has voiced opposition, positing that the TPP should not impose strict IPR, which would increase the cost of medication.

The food and agriculture industry has also been extremely vocal, especially with ROO requirements and tariffs rates. For example, the National Milk Processors Federation (NMPF), the American Sugar Alliance (ASA), and the US Dairy Export Council have all proposed strong ROOs, especially with regards to New Zealand. The Corn Refiners Association and the Meat Importers Council, among others, want more liberalized trade and fewer tariffs. More specifically, ConAgra Foods and the American Potato Trade Alliance have cited the need to reduce import tariffs on US-produced frozen french fries.

Disagreements over the “yarn forward” ROO, which requires the TPP nation to use a TPP member-produced yarn in textiles in order to receive duty-free access, has pitted the National Council of Textile Organizations, who support the requirement, against the US Chamber of Commerce and Wal-Mart.

With the TPP’s mission in mind—an elimination of all tariffs by 2015—the prospect that the US will expeditiously join is simply Pollyannaish. Industry disagreements will promote inaction. US politicians will continue to exploit political issues, such as Vietnam’s human rights violations, to stall progress. In the case that a negotiated deal is signed, Congressional ratification will still be necessary. And while the 2010 elections will have already passed, the 2012 elections will be right around the corner.

50th Anniversary of the US-Japan Security Treaty comes amid strains in the bilateral relationship

Ren Yi Hooi, BASC Research Assistant

The US-Japan security treaty turned 50 years old last month, but the bilateral relationship between these two countries currently faces a critical point as a result of several spats between the US and the new Hatoyama administration in Japan.

Although US President Barack Obama and Japanese PM Yukio Hatoyama share common goals and policies, including development in the Third World, measures to curb global warming and the prevention of nuclear proliferation, Hatoyama’s call for a “close and equal” Japan-US relationship since taking office has precipitated a rise in tension between the two countries.

Under the current treaty, the US is obliged to defend Japan in the case of an armed attack, but Japan is not obliged to defend America should the attack happen the other way around. Instead, the US is given access to facilities and areas in Japan "for the purpose of contributing to the security of Japan and the maintenance of international peace and security in the Far East." While this agreement yields both nations considerable benefit, its asymmetrical relationship has long been a cause of friction, and Hatoyama’s hope to see a “more equal alliance” has placed it under further strain.

More specifically, what Hatoyama wishes to see is a reduction in the “omoiyari” budget, the costs born by Japan for supporting the US forces here, and a revision of the Status of Forces Agreement governing the operation of the US military in Japan--issues which are not negotiable from the point of view of the US. The issue of the relocation of the US Marine Corps Air Station Futenma, in particular, has fueled dispute between the two countries over the last few months, and is currently still unsettled. Neither country wishes to give in to the other's demands, and it is difficult for either to push forward without incurring strong repercussions.

In addition, the US-Japan relationship is also seeing points of contention over non-security issues. Japan’s new incentives for eco-friendly cars, for example, have raised the ire of US auto-makers who found their cars largely excluded from Japan’s subsidy program. Despite the small volume of American cars exported to Japan, the US has been putting pressure on Japan to include more American cars in its environmental incentives, leading to a new potential cause for trade disputes between the two countries.

As the two nations review the past 50 years of their security relationship, their evaluations of the past will play a crucial role in determining the future direction of their alliance. While the US and Japan both agree that their partnership is indispensible and share hopes for it to be further deepened, the question of whether there is a change in the balance of power, and how the two countries react to it, will be the key factor that determines whether their alliance will be further strengthened or invevitably destabilized.