March 25, 2015 12:26PM

Will the TPP Strengthen U.S. Foreign Relations?

The Obama administration wants us to believe that even while the Trans-Pacific Partnership is shaping the global economy in favor of U.S. interests, it is also furthering U.S. foreign policy by strengthening alliances and containing China’s influence in the Asia-Pacific region. 

Alan Beattie of the Financial Times has written a scathing rebuttal to this line of argument:

This is an appealing fall-back for those who don’t like the deal’s content, but is at best one of the weaker arguments in favour. Whether or not agreements help strategic alliances, the intrusive and one-sided nature of pacts negotiated with the US can arouse resentment as well as cooperation.

. . .

The participation of countries in the TPP has less to do with enthusiasm for importing the US economic model than a grudging acceptance that yet more tribute has to be paid in order to retain access to the US market. Negotiating a trade deal with the US is not a particularly pleasant business, and nor is it becoming happier over time. You are essentially presented with a US model agreement that contains a decreasing proportion of actual free trade and an increasing proportion of intellectual property protection, and invited to sign.

It’s not clear that a country’s affection for the US will increase after being required to rewrite its patent and copyright law every few years on a model dictated by, respectively, the Pharmaceutical Research and Manufacturers of America and the Recording Industry Association of America. The US itself does not offer much liberalisation. It is highly unlikely to substantially dismantle its agricultural subsidy and protection regime to allow Australian and New Zealand farmers abundant access to its dairy market or stop its rice subsidies disadvantaging Vietnamese rice exports in world markets. America’s trading partners are thus on a permanent treadmill of enforced policy change in order to keep their trade access to the US.

. . .

At the moment, the US is essentially using its huge domestic market as a tool to remake other economies in its image. It is likely to work for some time to come, given the prize on offer. But Washington should not delude itself that trade deals which inflict political pain on the US’s negotiating partners will necessarily function as durable and positive elements of a wider diplomatic relationship.

Of course, trade agreements can and should be a tool to build good foreign relations.  Protectionism breeds conflict while trade enables cooperative wealth creation.  Free trade is an eminently friendly policy, and to the extent trade agreements liberalize trade, they reduce the potential for conflict between governments. 

One of the most pressing problems in U.S. trade policy is that policymakers constantly misstate and misunderstand the purpose of trade agreements.  Trade agreements have the potential to overcome political barriers to trade liberalization in a win-win scenario for all countries involved.  Tariffs, quotas, subsidies, and protectionist regulations harm everyone except the cronies that lobbied for them.  Trade agreements reduce or eliminate these harmful policies.

Unfortunately, the Trans-Pacific Partnership has largely been conceived and shaped by a different set of motivations.  According to its architects, the TPP is supposed to be a “21st century” agreement that will set the rules of trade in ways favorable to the United States.  In other words, favorable to politically powerful U.S. constituencies.  What U.S. policymakers are touting as the great achievements and aims of the TPP are better understood as distortions—issues added to agreements to make them more politically appealing at the expense of the agreement’s core economic function of opening markets to competition.

If the United States truly wants to use the TPP to strengthen relations in the region, the agreement should look a lot different.  For starters, stop pushing for unpopular rules on intellectual property, investment arbitration, and labor and environmental protections.  The United States could also offer more meaningful liberalization of the U.S. market in textiles, sugar, and shipping.  A truly “ambitious” agreement would do a lot to improve U.S. international relations, but it would look very different from the TPP as it has been presented.