The US’s economic and geopolitical reasons for joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are stronger than five years ago when it signed the trade pact’s ill-fated predecessor, the TPP. But domestic divisions and other signatories’ unwillingness to bend to US demands create an uphill battle for president-elect Joe Biden.
In his first few days in office, president Donald Trump withdrew from the TPP, which was a pillar of the Obama administration’s pivot towards Asia. The remaining 11 Pacific-rim countries — Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam — have since reframed the agreement as the CPTPP, and Mr Biden’s commitment to rebuilding relations with allies has sparked speculation about the US returning to the fold.
“I don’t think it’s out of the question, but I’m not optimistic that the US is going to re-join in the early part of the Administration,” says Wendy Cutler, a US negotiator of the TPP who is now a senior policy consultant at Akin Gump.
The original pact faced heavy criticism in the US by the likes of trade unions fearing job losses to lower-cost jurisdictions and businesses worried about competing with cheap imports. “The rhetoric in the US was that TPP was the latest in a series of deals that served corporate interests and sold out working people,” notes Edward Alden, a senior fellow at the Council on Foreign Relations.
This year’s recession and discontent following the US election mean pushback today would likely be just as strong. Mr Biden’s pledge to prioritise domestic issues may delay his re-engagement with the CPTPP — which lowers tariffs and other barriers to trade and investment among member countries — but it could boost success in the long-term. “If we can address a lot of these economic anxieties, economic equalities and other concerns through domestic measures, that takes pressure off trade agreements,” says Ms Cutler.
The economic case for uniting the US with the existing CPTPP members is compelling. Together they account for 40% of global output, up from the 13% covered by the pact today and more than the region’s other mega trade deal, the recently-signed Regional Comprehensive Economic Partnership (RCEP).
Studies by the Peterson Institute found that under the original agreement, US real income would have grown by $131bn annually, representing 0.5% of GDP. The US industries standing to gain the most are tech, agriculture and manufacturing. For the other 11 countries, accession of the world’s biggest economy would be a boon. “The US has a lot of barriers to trade, so it would be giving firms access back into that market, which is partly why they did CPTPP in the first place,” says Deborah Elms, executive director of the Asian Trade Centre.
Economics aside, the CPTPP is a way for the US to expand its dwindling presence in the region and offset China’s influence, which has been boosted by its membership of RCEP. In this sense, it has a ready-made ally in the CPTPP.
“Japan shares the same desire to impose new rules and disciplines on China,” says Kazuhito Yamashita, research fellow at the Canon Institute for Global Studies and a former trade negotiator for Japanese government. “To cope with China’s increasing presence in the Asia Pacific, it is advantageous for Japan to entice the US to the CPTPP to enhance its influence.”
President Xi Jinping’s recent suggestion that China is considering joining the pact has been met with scepticism, but the US intended the TPP as an open platform and hoped China joining would be a way to contain its actions.
In speaking with a dozen current and former trade officials from CPTPP countries, Ms Cutler reports “a resounding ‘yes, we want the US back’, but we have a limited bandwidth for revisions and updates.”
Ms Elms, who helped negotiate the CPTPP, holds similar doubts about receptiveness to US changes. “These countries were basically jilted at the altar and then had to spend a very difficult year — and use a lot of political capital — to resurrect the agreement,” she says.
During the presidential race, Mr Biden reportedly said he would renegotiate the pact. In light of objections to the original TPP, he will have to show it has changed to get political backing. “It will need updates, it will need revisions and some of those revisions may not be trade liberalising,” says Ms Cutler.
The best example is rules of origin, which determine if a product benefits from the pact’s perks. Today 40–50% of materials must come from CPTPP countries, while in the renegotiated Nafta — the United States–Mexico–Canada agreement (USMCA) — the US secured a 75% threshold. Given the strong bipartisan support for the latter, it is thought Mr Biden might push for stricter CPTPP rules of origin.
“Obviously, it’s up to the member countries to negotiate, but I don’t think the Trump administration’s rules-of-origin standards should be welcomed by the CPTPP members as they dampen free trade goals,” says Mr Yamashita. Indeed, resistance is tipped to be strongest from Japan, whose automakers’ supply chains involve China. “The US and Japan are miles apart on this, and I don’t know how you get past that,” says Mr Alden.
Another USMCA-inspired change could be stronger enforcement of labour rules to appease trade unions and middle-class concerns. In requesting any revisions, Mr Biden must consider the perceived risks posed by the US’s intense political division. “There is no assurance who will be in the White House in four years, nor that they won’t tear up a renegotiated agreement,” says Ms Cutler. “That will be a challenge for the Biden administration in restoring credibility and trust with allies and partners.”