Asia-Pacific | November 15, 2016 at 8:01 pm

Holding It Together: The TPP’s Reception Abroad

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In 2008, the Bush administration notified Congress that it would negotiate a free trade agreement with Brunei, Chile, New Zealand, and Singapore. Over the course of President Obama’s two terms in office, the negotiations that President Bush initiated snowballed. The original five countries became 12. At the end of 2015, their efforts culminated in a trade deal dubbed the Trans-Pacific Partnership.

Representatives of each nation met in New Zealand this past February to sign the 5,000 page agreement. If passed by each country’s respective government, the TPP would unify 40 percent of global GDP into one free trade zone.

Donald Trump spent much of his campaign attacking the agreement, claiming he would not support it as president. If he is true to his word, the impact of his decision to block the TPP in the United States would ripple across the other 11 signatories.

These signatories span four continents and both ends of the economic spectrum. Among the 12 are Japan, the third largest economy in the world after the United States and China; Vietnam, which stands to gain the most from the trade zone; and Chile, one of three Latin American countries in the pact. Each of these three countries perceives the TPP through a distinct lens, and each can help us form a holistic understanding of the global agreement.

Japan

The last 20 years have been difficult for Japan’s economy. After the destruction of World War II, Japan rose meteorically from poverty to wealth and watched its GDP grow at double digits during the 1960s. Then in the 1970s, the economy slowed, and after a recession in 1990, it simply stopped growing.

In 2012, Prime Minister Shinzo Abe ran on a three-pronged economic platform of fiscal stimulus, monetary easing, and structural reform, dubbed “Abenomics.” While adjustments to fiscal stimulus and monetary policy were implemented within two years, structural reform has been a slow, uphill battle against entrenched interest groups. As Japan’s population shrinks, there is an imperative not only to overcome years of stagnation, but also a contracting workforce.

Here, the TPP kills two birds with one stone. “Japan has no free trade agreement with the United States, so there are some economic benefits for Japan,” said Kent Calder, director of Japan Studies at John Hopkins University in an interview with the HPR. “I think the most substantial benefit, however, is domestic political—leverage with protectionist groups like agriculture in generating pressures for trade liberalization.” The TPP’s appeal is both as an expansion of trade itself and as an engine to drive much needed structural reforms that have been difficult to pass.

Though most Japanese support the TPP, the agricultural industry has been a strong opponent. With high production costs, it is especially dependent on protective tariffs that the TPP would eliminate. The government has worked hard to mitigate the concerns of farmers, however, and the Diet (Japanese Parliament) continues to work towards ratification of the agreement. The rest of Japan’s mostly urban population doesn’t share the same concerns as the farmers, and passage of the TPP seems likely. As one Japanese citizen told the LA Times, “many farmers are resigned to [the TPP].”

To Japan, the TPP is not only about trade, though. Tensions over territorial disputes have increasingly shifted Japanese public opinion against  China. As the Chinese continue to construct new international institutions, both Japan and the United States worry China’s burgeoning clout in the Asia-Pacific comes at the cost of their own.

It is ultimately a question of control. “[Shinzo Abe] talks largely in terms of TPP being a continuation of the support for norms and the rule of law. He wants to see the leading liberal economies of the world, who do protect labor and do have certain protections for the environment, lead in the integration of the global economy,” said Sheila Smith, senior fellow for Japanese studies at the Council on Foreign Relations in an interview with the HPR.

Abe has suggested that, down the road, China could join the partnership. By excluding China from the initial negotiations though, Japan and the United States guaranteed themselves almost exclusive control over the details of the deal. Had China had a seat at the negotiating table, its interests would have shaped the final agreement. If China does want to join down the line, it will be entering an agreement whose terms reflect American and Japanese interests.

Abe has pressed for an accelerated passage of the TPP, hoping that its approval by the Japanese Diet will pressure the U.S. Congress to do the same. It is unclear if that strategy will have any effect. If the deal does not pass in the United States, Japan will have to explore alternatives for boosting both its economy and its regional influence.

Vietnam

While Japan and the United States may be the most important signatories, as the poorest signatory, Vietnam has the most to gain.

The Communist Party of Vietnam has been liberalizing its economy in fits and starts since the late 1980s, but, confronted with debt-ridden state industries and a lingering currency crisis, the party continues to see economic liberalization as essential.

As part of this broader push for free trade, Vietnam has pursued a number of trade deals, with the TPP being only one of several. Vietnam has also nearly finalized a free trade agreement with the European Union. In addition, since 2015, Vietnam and nine other Southeast Asian countries have been part of the ASEAN Economic Community, an agreement that lowers trade barriers among countries in the region.

Even with ASEAN and the pending EU agreement, the passage of the TPP would still be a leap forward. Research by the Yusof Ishak Institute estimates that, with the help of the TPP, GDP in Vietnam may increase by 11 percent in the next decade. Over the same time period, its exports would increase by 28 percent.

However, the same study predicts that these gains would come at the cost of the Vietnamese agricultural industry, not unlike Japan, and the government has acknowledged this. In an otherwise supportive speech to the national congress, General Secretary Nguyen Phu Trong echoed concerns for “small to medium sized enterprises” which, stripped of protective tariffs, would now need to compete in a global market.

To the majority though, the benefits outweigh the costs. Vietnam is an authoritarian state, and so a detailed portrait of attitudes in the country is difficult to piece together. There are signs, however, that there is broad-based of support for the TPP. A Pew poll found that 89 percent of Vietnamese people surveyed supported the deal and only 2 percent opposed it.

Even traditional opponents are at least begrudgingly supportive of the TPP. The constituents of the Vietnam Network of People living with HIV, for instance, will be negatively impacted by extended intellectual property laws, which may make life-saving medicine more expensive. In an interview with The Diplomat, Nguyen Anh Phong, a coordinator for the organization, said that they “had indeed hoped for the death of the TPP.” However, they “now know Vietnam desperately needs the TPP. Its benefits for the future of the entire country should outweigh the damages sick people stand to suffer.”

Undiscussed is one of the party’s most difficult concessions. In theory, the TPP mandates freedom of association for labor unions. For an authoritarian regime, organized non-government groups pose a threat. “They’ve gone along with it so far,” says Joshua Kurlantzick of the Council on Foreign Relations, “but we’ll see what that really means in practice.”

Though far less important than economic growth, foreign policy is still relevant to Vietnamese attitudes towards the TPP. While China is Vietnam’s largest trading partner, anti-Chinese sentiment continues to surge in the country as Chinese aggression in the South China Sea continues. On the other hand, despite the country’s troubled mutual history, 78 percent of the Vietnamese population has a favorable or somewhat favorable view of the United States.

As the American and Vietnamese militaries’ pull themselves closer together in response to China, the TPP would pull their economies closer together as well. That is, of course, if it passes. The deal has yet to be ratified, as the Vietnamese government waits for the United States to lead the way. If that never occurs, Vietnam will face a tougher road ahead.

Chile

The industrialization of China drove a commodities boom in Latin American countries, and Chile was no exception. Starting in the 2000s, Chile rode a wave of Chinese demand for copper, which boosted both the economy and government revenue. In 2013, current president Michelle Bachelet ran on promises of ambitious—and expensive—reforms, education chief among them, with the goal of creating a more multidimensional market. When the economy slowed down, she was not able to deliver.

Now, Chile is adapting to a sluggish commodities market. The country is not singularly dependent on China, but the Chinese slowdown has bruised its output. If Chile wants to move forward, it is clear it will need more than just Chinese demand for copper. The metal makes up 49 percent of total exports, half of which are bought by China. With copper worth half what it was in 2013, Chileans are well aware of the importance of diversification.

The TPP therefore has broad appeal and is championed by both the center-right and center-left. For the pro-trade center-right, support is natural. For the left, support is more cautious. They sympathize with those who will be affected negatively, but recognizes that free trade is best for Chile as a whole. It was Bachelet herself, the head of the socialist party, who was in office as the TPP was negotiated, and her government argues that they have effectively defended Chile’s interests.

“TPP is made up of a diverse repertoire of propositions that both left and right can tap into,” Professor Francisco Gonzalez of Johns Hopkins University explained in an interview with the HPR. “Each side can emphasize the side that they believe in, the side that their supporters believe in. There’s a bit for everyone.”

There are fringe parties in Chile that do actively oppose the Trans Pacific Partnership, and it is possible that they could make the TPP an issue of debate. The Communist Party for one has spoken out against the deal. And although each fringe party holds less than 2 percent of offices, during the upcoming presidential campaign, they will have airtime, and the TPP may be among their complaints.

Deadlines

If at least six countries do not ratify the TPP by February 2018, the agreement becomes null. Those six countries must make up 85 percent of the group’s economic output, which means the United States and Japan will have to both be among them. Ultimately, some view the partnership as a trade deal between the United State and Japan, and as the largest economies in the pact, there is some truth to that. Ten other nations however are deciding for themselves if the TPP is the best path forward.

Image Source: Flickr/AFGE

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