August 24, 2016
Washington — With both presidential candidates running on their opposition to President Obama’s proposed Trans-Pacific Partnership free trade agreement, the White House is gearing up for one last, desperate push to get the deal through Congress. The pitch, which will begin in a few weeks, will rely on what President Obama thinks is his ace in the hole: the argument that, regardless of its economic merits, the deal, as a counter to China’s rising influence, is essential to America’s national security.
This administration, like previous ones, has played this card repeatedly, and it’s one reason the TPP has gotten as far as it has. But the national security case has always been weaker than the president and his allies insist.
In the fall of 2009, I was invited to the White House with a few other think-tank analysts to discuss the deal, then still in its early stages. I pointed out that among the seven other countries then in discussion, we already had free trade deals with all but Brunei, New Zealand, Malaysia and Vietnam, and that these were all tiny economies that didn’t seem to offer much potential economic gain to America. Moreover, all of these countries were members, along with the United States, of the Asia-Pacific Economic Cooperation group, which was committed to free trade in the Asia-Pacific region by 2020. What was the point? I asked.
The response from the administration officials in the meeting was, in essence, “geopolitics”: that many of our friends in Asia were feeling neglected by America, and that it was being pushed aside in the region by China. Without a sign of American strength in the area, China might step into the vacuum.
But, I replied, the United States had never left. The Seventh Fleet has been patrolling the waters of East and Southeast Asia since World War II, and America has had at least 100,000 troops based in Asia for just as long. And, trade deals or not, America had enormous, chronic trade deficits with most countries in the region, guaranteeing economic and political engagement for decades to come. If the combination of the American military presence and their trade surpluses with the United States weren’t enough to mollify Asian leaders, no free trade deal would significantly change the situation.
What was true then is even truer today. The president often speaks of the TPP as a tool that will prevent China from writing the rules of trade for the future. But even as we negotiate the TPP, China is negotiating its Regional Comprehensive Economic Partnership with all the Asia-Pacific TPP countries, as well as South Korea, the Philippines, Cambodia, Laos, Thailand, Indonesia, Myanmar and India. That deal may not be as sophisticated or comprehensive as the TPP, but that isn’t preventing all the Asia-Pacific countries from rushing to sign up, just as they have for China’s new Asian Infrastructure Investment Bank. It’s already clear that the TPP is not going to stop China from writing some of the future rules of world trade.
A key reason is that Washington no longer has a great deal to offer. In the days of Pax Americana, America could use trade deals to buy allies and geopolitical influence. Offering free and largely nonreciprocal access to the huge American market, coverage under the American defense umbrella and American foreign direct investment — along with transfer of production and technology by major American companies — all in return for geopolitical cooperation was a great deal.
But those days are over. The American market is open to virtually all comers; what tariffs remain are small hurdles for countries looking for American consumers. The United States still has significant technology and intellectual capital, but it’s no longer alone in that category. And whereas all trade roads once led to (or through) the United States, today it is just one part of a global network of supply chains.
If anything, America is too often at the end of those chains, as the global consumer of last resort. It’s not investing in domestic, let alone global, infrastructure. It is the world’s largest debtor, and its role in the world economy is primarily to borrow and consume. It is hugely dependent on China to fund its borrowing. Were it not for the fact that the dollar is the main global currency and that Washington can still borrow in the dollars it prints, the country would have gone bankrupt long ago.
In comparison to this, China is now by several important measures the world’s largest economy, with about $4 trillion of reserves that it is investing in global infrastructure like the One Belt, One Road project, a multidecade, multitrillion-dollar effort to better connect China with markets in the Middle East, Europe and other parts of Asia. It is now the biggest foreign investor in most of the developing countries of Latin America, Africa and the Middle East. It is also the biggest foreign investor in Australia and much of Europe.
In other words, the administration is absolutely right that America needs tools to counter China’s growing influence in Asia and around the world. But until America can come close to matching China’s dynamism, it has no hope of countering its economic and geopolitical influence with old-fashioned trade agreements, no matter how monumental they are said to be.
Clyde Prestowitz, the founder and president of the Economic Strategy Institute, served in the Commerce Department under President Ronald Reagan and was vice chairman of President Bill Clinton’s Commission on Trade and Investment in the Asia Pacific Region.
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