With President Obama’s trade initiative on fast-tracking TPP (Trans Pacific Partnership) being in jeopardy in the US (United States) Congress, the nations of Asia are weighing the potential impact of a failed deal on local jobs and exports, but also something else: America’s dependability as a trade leader that can help them realise their respective economic goals. These likely Asian partners, Japan, Singapore, Vietnam, South Korea, and others, unlike the Americans view trade as a strategy rather than a mere commercial exercise and therefore are naturally upset on what they view as an American let down. What they are asking the USA today is that does it really want to be a part of their region or not? Over in Tokyo, the Prime Minister Abe sees the TPP as necessary to bolster his nation’s economy and has virtually risked his political carrier by taking on the country’s influential farm lobby, which has long opposed TPP and lowering of barriers. Now failure on part of the US to reciprocate puts him in a very awkward cum delicate position at home. More importantly, for the US, as its reputation takes a dent the Chinese reputation instead gains in stature. Not only China has played its publicity card very cleverly by signalling that it favours enhanced global trade, but has also gone on to practically sign some important FTAs (Free Trade Agreements) in recent period with South Korea and Australia.


The dilemma that the US lawmakers face over the TPP is by no means easy. In the intense debate that took place in the Congress, it was rather ironic that one town, Galesburg, Illinois, was quoted both by the pro and opposing parties in putting forward their arguments. And this precisely illustrates the US trade quandary: one story two interpretations. While it is hard to miss the costs of global trade in Galesburg where post signing of NAFTA (North American Free Trade Agreement) almost all factories have shut down (including Maytag, one of the largest American refrigerator making facility), but at the same time even in this city of abandoned factories, it is easily possible to pinpoint some of the benefits the US reaps from increased foreign trade. At its rail yard boxcars of bargain-price Asian goods are routed to American consumers; at its slaughterhouse meat is packaged for the global markets; and at its Knox College, where now about 15% students come from foreign countries.


The question of whether or not to liberalise trade has always been a tricky one for any country. What is making TPP such a difficult call is not only due its magnitude which dwarfs that of NAFTA in economic size and geopolitical importance – TPP encompasses 12 nations spread on 4 continents – but also because it is set to come into effect at a time of great global change: A prolonged period of slow economic growth in the United States, China’s re-emergence as a regional power, and a new economic order in which the developing countries of the world produce more goods and services than North America, Europe and Japan combined. Many of the political left and right of developed economies these days oppose the liberalisation of trade as a national policy, even more strongly than the NAFTA days (1990s), arguing instead for protectionism and resurrection of manufacturing at home. However, what they need to realise is that ‘Free Trade’ is not the enemy here and free trade agreements like the trans pacific partnership will eventually help the US products gain space in the foreign markets, in-turn helping jobs and wages at home.


There is no path to the US middle-class prosperity without tearing down barriers to American exports. By 2030, the world-economy is expected to grow by $60 trillion, with almost 90 percent of the growth occurring outside the United States. The US success will depend on how much of that new wealth is spent on American products. Today out of the 40 largest economies of the world, the United States ranks 39th, based on the share of GDP (gross domestic product) that comes from exports. This is because its products face very high barriers to entry overseas in the form of tariffs, quotas and outright discrimination. When these barriers will disappear the US as a result will prosper. The nay-sayers should remember that in the 17 trade deals the US has concluded since 2000, its balance of trade in the blue-collar-goods sector went from minus $3 billion to plus $31 billion. And as for the argument about eroding of Americans’ wages due to liberalisation of trade, the actual figures on ground do not support it. According to the ITA (International Trade Administration) body of the United States, export-related jobs pay 18 percent more than similar jobs in the same sector.


Lastly, the TPP also makes a lot of sense for the US from a foreign policy perspective, as it can be crucial in helping the USA maintain its global influence and leadership mantle. If it does not take the lead today to set the rules for commerce in the Asia-Pacific region, China will. Since 2000, China has concluded trade agreements with 23 countries, Hong Kong and Macau and is now drafting its own Asia deal that cuts the US out. The Chinese norms in reality may be more appealing to the developing economies as they omit any mention of labor rights and environment standard common in modern American-led deals. If this happens then just like the AIIB (Asian Infrastructure Investment Bank) in the world of finance, these new rules being proposed by China could become a game changer in the world of global trade, since the tapered down rules would essentially reflect the inner grouse of emerging nations where they feel that most American or western led rules have merely been framed to ensure their own dominance rather than due to any larger global good. Essentially, what this implies is that in TPP now also lies a submerged question for the US policymakers on whether they would still like their country to continue to guide a huge section of the world economy according to their own laid down standards for commerce or not? Their decision in the negative can have far reaching consequences for their country and ones that spread beyond the ambit of trade!