TPP, multi-party deals, best match for complex global economy
President-elect Trump and his cabinet picks have stated a clear preference for bilateral trade agreements over those that include a group of countries, like the Trans Pacific Partnership (TPP). As a former trade negotiator who has worked on both types of deals, I urge the incoming administration to give regional trade deals a serious second look.
“The problem with regional trade agreements is you get picked apart by the first country, then you negotiate with the second country, get picked apart. You go to the third one, get picked apart again,” Secretary of Commerce-designate Wilbur Ross said.
In a one-on-one setting, the logic goes, the United States has more leverage to pressure a country to do what it wants them to do. While there’s some truth to that, things actually aren’t that clearly defined.
The reality is that bilateral deals are based on one side “paying” for concessions from the other. The U.S., which already has a largely open market, has fewer concessions to offer.
{mosads}But, in multi-party talks, countries sell the deal at home based on concessions they receive from all participants, not just from the U.S. As a result, the U.S. is able to gain more from others while paying less.
Additionally, in a multi-party negotiation, you can build coalitions with countries with similar objectives. As a senior negotiator for the TPP, which involved 11 other parties, I found that through coalitions, the U.S. was often more effective in getting a country to do what we wanted it to do.
After all, responding to a request from a group is often easier politically for certain countries in order to show it was not just responding to U.S. pressure. In the TPP negotiations, for example, the U.S. partnered with Japan to convince others to strengthen the agreement’s intellectual property protections, which would benefit U.S. manufacturers, programmers, researchers, and musicians.
The importance of multi-party trade deals goes well beyond negotiating tactics, however. One of the major reasons the U.S. moved to multi-party deals was to reflect the way business is conducted today.
More and more, products travel from country to country through global value chains before they reach their final destination. Bilateral trade deals fall short in addressing this reality. But an agreement like TPP, which includes common rules among a group of countries, is well positioned to address this phenomenon.
Furthermore, bilateral deals — each with distinct rules — are difficult to utilize in practice. Who has the time, in this fast moving world, to study each deal to figure out the best way to secure its benefits?
As a result, companies often choose to forego applying for the tariff benefits of bilateral deals. This is particularly true for small and medium-sized enterprises, which don’t have the resources to navigate through a maze of different trade agreements.
Finally, it’s unclear how TPP countries would respond to an overture by the U.S to negotiate bilateral deals. Each of those countries spent a great deal of political capital at home selling the deal, which included many U.S. priorities.
They took on vocal and influential opponents, who criticized U.S.-backed provisions on intellectual property, digital trade, labor, and agriculture. Prime Minister Shinzo Abe of Japan, for example, took on powerful agricultural interests in order to pass TPP through the Diet — Japan’s legislature.
Don’t forget Congress. Each bilateral deal would require a separate Congressional vote. Trade votes have never been easy, even with the same party in the White House and Congress.
Would Japan and other nations now be willing to put the TPP aside and enter into long, bilateral negotiations with the U.S. with no certainty of Congressional approval?
Across the Asia-Pacific, our trading partners understand the benefits of a multi-party trade agreement. Without TPP, they are left with no choice but to gravitate to the other big trade negotiation in the region, the Regional Comprehensive Economic Partnership (RCEP).
The sixteen Asian members of RCEP, including China and India, are now working hard to conclude these negotiations next year. As an outsider, the U.S. would not receive the benefits of this deal, making our products and services less competitive in the fast-growing Asia-Pacific region.
Bilateral deals are not everything they are cracked up to be. Multi-party deals, like TPP, are critical in advancing U.S. economic and strategic interests.
Our new president has already changed gears on certain issues. This is one that deserves a second look.
Wendy Cutler, former acting deputy U.S. Trade Representative, is vice president of the Asia Society Policy Institute in Washington, D.C.
The views expressed by contributors are their own and not the views of The Hill.