Fiscal Times: The Abe-Obama Trans-Pacific Trade Deal Is in Trouble

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The Trans-Pacific Partnership, until recently background noise for many Americans, is about to become another field of battle in Washington. As of last week, when Japanese Prime Minister Shinzo Abe concluded an unusually long state visit, we’re on notice: This pact is probably in trouble.

[Reposted from The Fiscal Times  |  Patrick Smith  |  May 4, 2015]

The debate in Washington has two parts. As early as this week the Senate is scheduled to vote on a bill introduced last month that gives President Obama “fast-track authority” to sign a deal with other Pacific nations with a guarantee that Congress will not amend it to smithereens afterward.

If the fast track bill passes -- and Japan, New Zealand, and other, nations favoring the TPP accord have made this a precondition – lawmakers can say yes or no, nothing more. The fast-track legislation is expected to hit the House floor by the end of this month. 

Part 2 is the bill itself. And Capitol Hill’s divisions on fast track, which cut across both parties, are mere prelude to the splits to come when TPP goes up for ratification. The administration wants this done and dusted by yearend so as to keep the issue out of the 2016 presidential race. 

But here’s the thing: However fractious the TPP debate gets in the U.S., its most formidable problems lie at the other end of the Pacific. 

This is what Prime Minister Abe just told us, although you wouldn’t know it from the news accounts. Resistance to the TPP among Asians and other Pacific nations is far more threatening, and with much greater political clout, than what we’re in for on American shores.

The TPP’s potential fates are many. In my read the two most likely as of now are (1) it simply won’t fly other than in nations that don’t (to be blunt) matter very much, or (2) it’ll go through among the 11 other nations now onboard but won’t mean a hell of a lot in practice. 

Orrin Hatch, the Republican from Utah and the Senate’s generalissimo on the TPP question, gave a revealing interview to the Financial Times over the weekend. If Obama doesn’t get more Democrats behind fast-track very, very quickly, Part 1 of this undertaking is instantly in doubt.   

As Hatch explained, at the moment there are too many Tea Party defectors on the right side of the aisle and too few Democrats willing to vote the bill forward. He seemed to suggest that it would be easier for Obama to cajole Democrats to get behind fast track than it would be to budge the Tea Party resisters. 

That’s interesting by itself. Democrats are in for a rolling barrage of anti-TPP protest from constituencies—labor, the greens, civil society groups, the progressive wing—that matter at election time. If Democratic lawmakers are the best bet to push through fast track, the only word we’ve got for this is, Whoa!

Congress and the administration do many things Americans voters don’t want done. So let’s jump to the larger point: Whatever TPP’s fortunes in Washington, they’re worse in Japan and elsewhere in Asia. It’s time to get real about this. 

Jean-Pierre Lehmann, a longtime Japan hand and an emeritus scholar at IMD, the business school in Lausanne, Switzerland, made a key point in a commentary published at The Globalist, the Washington web daily, as Abe’s visit wound down. “Apart from Japan, Asian members of TPP are relatively minor: Brunei, Singapore, Malaysia, and Vietnam. China is excluded,” Lehmann wrote. “Thus, TPP is in essence a bilateral agreement that could consolidate the Tokyo-Washington Asia Pacific axis.” 

A couple of problems right off. One, binding the U.S. and Japan on the economic side is a lot less than the TPP accord is supposed to do. Two, even that much is in serious doubt as of Abe’s visit.

The Japanese leader couldn’t even deliver on imports of autos and farm products during his talks with Obama last week. These were stale, intractable trade issues when I arrived in Tokyo as a correspondent in 1987. We haven’t yet got even this stuff off the table? 

The TPP’s outlook in Japan is upside down from ours. U.S. corporations are thoroughly behind the pact—having helped write many parts of it, after all. But big Japanese blue chips—makers of cars, consumer electronics, and machinery—are the core of the export sector and see nothing in the TPP other than unwelcome competition. 

Flip this over and you have the weak side of Japan: rice and produce farmers and underdeveloped industrial sectors such as drugs and financial services. Long the beneficiaries of protectionist regulation (and generous supporters of the governing Liberal Democrats), these constituencies are also against the TPP—the farmers very vigorously. 

Now you can hear Abe’s message to Obama for what it was: He’s very unlikely to deliver on the TPP—and whether he can’t or doesn’t want to is among the interesting questions he left behind last week. We’ll have to see which it is.

Lehmann notes political factors, too. Abe, a through-and-through nationalist, faces resistance from rightists who nurse a longtime fear of American domination. Over his left shoulder are the democratically minded. “Like their counterparts in the U.S. and elsewhere,” Lehmann observes, “they argue that the secretive nature of the TPP talks make them inherently anti-democratic.” 

Japan’s chronically weak economy does nothing for the mood in either of these constituencies. 

I see a more fundamental problem at work, and it mustn’t be overlooked because it afflicts many of this nation’s transactions abroad. This is the importance of culture, history, and the value many other societies bestow on what we can call in shorthand localism. You see this in spades throughout Asia. 

What we’ve got in Washington and in corporate suites all over America—and let’s throw in Brussels—are technocrats well trained in econometrics but dismissive (or uncomprehending) of these dimensions of social and political organization. No rational choice argument, however cogent on its own terms, will ever change this. 

For a long time I judged that the Obama administration was blowing smoke as to the TPP’s prospects. Now I think it comes down to narrow, unrounded thinking. 

My take home, now that Abe’s back in Tokyo: The TPP could well need a tombstone before this is over, and it’ll read: One too-ambitious trade accord, stillborn, 2015.

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