Thank you Mr President – but no one country makes trade rules

In his 2015 State of the Union address President Obama has at last thrown the weight of his office behind the trade agenda in asking Congress to grant him Trade Promotion Authority (TPA).  This is seen as an essential pre-condition to the conclusion of TPP, but it is not sufficient in itself.   In his speech the President suggested that America rather than China should write the trade rules.  He can perhaps be forgiven in the US political environment for overlooking the fact that neither America nor China on their own can write trade rules.  The stand-off in the WTO Doha Development Agenda is clear evidence of that!  Rather trade rules need to be written collectively in the course of a negotiation.  If this sort of argument helps folks in the US to pick up the pen and join the writing effort then great.  US negotiators, and everyone else, need the assurance that Congress in the ratification process won’t unpick what has been agreed – that’s a consequence of the shared responsibility for trade in the US Constitution.  But TPA however useful doesn’t conclude negotiations.  Only negotiators can do that on the basis of a deal which is acceptable to all.

On TPP, the conventional thinking is that if TPA can be secured, this will strengthen the hand of the US in convincing Japan to show greater flexibility in agriculture, which would boost its productivity in other areas.  Other participants would then be able to be drawn in, knowing that the US and Japan are prepared to deal on market access.  That leaves finishing (but important) touches to other controversial areas including intellectual property, investment, state owned enterprises and environment.

With strong leadership from the White House, this scenario is not impossible, but the reaction of the US Congress is hard to predict.   TPP has a growing number of detractors, not the least amongst Congressional Democrats, and business is becoming weary of the time that has been taken.  Towards the middle of 2015 the early jockeying for the 2016 US Presidential election will get underway. The political environment could well change once again for TPP.

This post was written by Stephen Jacobi, Executive Director, NZ International Business Forum