US accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership would improve US trade with major regional economies and strengthen its efforts to compete with China. US President Joe Biden should make it an urgent priority.
TOKYO – Former US President Donald Trump’s isolationist and protectionist policies, summed up in the phrase “America First,” severely damaged the United States and its global leadership role. The increase in tariffs on imports entering the United States, especially those from China, only succeeded in prompting other countries to impose reciprocal tariffs on American products. Trump’s trade policy, therefore, ended up hurting the majority of Americans, affecting everyone from farmers to middle-class consumers.
During the Trump administration, the United States also unilaterally abandoned its global role, which would have allowed it to tilt the formulation of international rules on international trade and climate crisis management in its favor. The United States withdrew from the 2015 Paris climate agreement, the World Health Organization, and the Trans-Pacific Partnership (TPP), and launched a disparaging attack on the World Trade Organization by refusing to accept any appointment to fill vacancies on the WTO Appellate Body.
Trump’s isolationism was especially painful for America’s main allies in Europe and Japan. When the United States abandoned high moral standards in the realm of free trade and rules-based multilateralism, it also threatened the values of those key allies.
The administration of President Joe Biden quickly reversed many of Trump’s economic, environmental, and Covid-19 policies, including reinstating US participation in the Paris agreement and reversing US withdrawal from the WHO. However, Biden has been slow to reverse the protectionist measures of his predecessor. Nearly a year into Biden’s term, some of Trump’s tariffs are still in place.
There is no talk about the United States joining the TPP’s successor: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, or also known as TPP11). And while the Biden administration is talking about reviving the WTO, it still has a pending task to turn rhetoric into action.
Biden’s inaction is puzzling. He has been outspoken about his political goals with regard to China, a country he sees as America’s most serious competitor. In December, Biden invited more than 100 world leaders to the Democracy Summit, a virtual event whose purpose was to discuss the challenges posed by authoritarian states, mainly those posed by China and Russia. Given this, why isn’t your government moving quickly to join the CPTPP?
The original TPP was signed in 2016 during the presidency of Barack Obama, it was signed by 12 Pacific Rim countries, including the United States, and it conspicuously excluded China. It was envisioned as a regional economic alliance aimed at comprehensively promoting free trade and investment, as well as an alliance that would protect intellectual property rights, regulate digital trade, and prevent signatory states from gaining an unfair competitive advantage through through the actions of its state-owned enterprises (SOEs). The pact was a thinly veiled attempt by the major Pacific economies, with the exception of South Korea, to compete more effectively with China. And its successor agreement, the CPTPP, has increasingly grown in influence in the Asia-Pacific region, despite the fact that, to date, the United States refuses to join it.
It’s not hard to see why. Many countries that depend on the Chinese market have long had to swallow the conditions established by China in terms of trade and investment. For example, Chinese authorities often require foreign companies making direct investments in China to form a joint venture with a local partner, rather than establishing a wholly-owned subsidiary. In addition, the rapid growth of Chinese exports occurred thanks to state-owned banks financing SOEs, leading other countries to complain about excessive subsidization in China. The TPP was supposed to expand free and fair trade and rules-based investment among its members, but it was also supposed to establish rules of engagement to prevent China from taking unfair advantage of its trading partners.
After Trump withdrew the United States from the TPP in January 2017, Japan’s then-Prime Minister Shinzo Abe took the lead in forging the CPTPP agreement, or TPP11, among the pact’s remaining members. Some of the clauses in favor of which the United States had exerted pressure during the negotiations for the signature of the original TPP were shelved, but they could be reintroduced, in case the United States decided to adhere to the new treaty. TPP11 is working well, but it still misses the US presence.
Furthermore, while the United States wasted the last five years by withdrawing from the emerging Asia-Pacific trade and investment framework, two other important developments occurred. First, China, Japan, South Korea, Australia, New Zealand and the ten member states of the Association of Southeast Asian Nations (ASEAN) signed the Regional Comprehensive Economic Partnership (RCEP) agreement, (India withdrew from this agreement in the last phase of the negotiations).
The RCEP agreement, which entered into force on January 1 of this year, negotiates foreign trade operations worth 2.5 trillion dollars between its members, that is, a figure that is approximately 13% of the total value of world trade in goods, and its 15 signatories represent 30% of world GDP. It is the first free trade agreement between Japan and China, and is expected to deepen the bilateral trade relationship between these two countries.
However, to accommodate ASEAN’s emerging market economies, average tariffs under the Regional Comprehensive Economic Partnership (RCEP) agreement will remain higher than those under the TPP11 agreement, and the coverage of investments is more limited.
The second development is that China and Taiwan separately applied to join TPP11 in September 2021, which poses enormous challenges for the Japanese government. For starters, can existing TPP11 members negotiate with China to keep the bar high for entry into the deal, or could they end up divided over how tough a stance they should take?
Moreover, while China is expected to take a tough stance against Taiwan joining the deal, the TPP11 countries may find that welcoming Taiwan, a world leader in high-end semiconductor manufacturing, would be of benefit to them. additional financial security. This could provoke harsh reactions from China.
Given the uncertainty surrounding Japan’s willingness to play a tough game with China and Taiwan over TPP11 in the political and economic arenas, strong American leadership is needed now more than ever. The rapid accession of the United States to the agreement would improve US trade with major economies in Asia and the Pacific, and strengthen its efforts to compete with China. Biden should make adherence to this deal a matter of urgent priority.
Professor of the Practice of Economic Policy at Harvard Kennedy School and a senior fellow at the Peterson Institute for International Economics, he was chairman of President Barack Obama’s Council of Economic Advisers.