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Last week, I was in Hanoi for the meeting of the APEC Ministers Responsible for Trade. As I described during my recent testimony to the Senate Foreign Relations Committee’s Subcommittee on Asia, the Pacific and International Cybersecurity, the clear takeaway from our allies abroad was disappointment that the United States has withdrawn from the Trans-Pacific Partnership Agreement (TPP).
Asian countries want an active American presence in the region, and they want robust trade with the U.S. But Asian economies are not waiting or standing still after the U.S. withdrawal from the TPP. They are moving forward across a number of different fronts, from trade and aid to investment and infrastructure.
According to the Asian Development Bank, Asian countries have signed 147 bilateral or regional trade agreements, and 73 more are under negotiation or concluded and awaiting entry into force.
Japan and New Zealand, the only countries to have ratified the TPP, are pushing forward with a possible “TPP-11” arrangement—i.e. one without the U.S. It is clear their objective is to advance the TPP in some form, so that the strong rules and high standards they fought so hard to achieve will survive.
Sixteen Asian economies – China, Japan, Korea, Australia, New Zealand, India, and the 10 ASEAN countries – are accelerating efforts to conclude negotiations on the Regional Comprehensive Economic Partnership (RCEP), a less ambitious and lower-standard agreement than the TPP. Both the TPP and RCEP are possible pathways toward the longstanding APEC goal of a Free Trade Area of the Asia Pacific (FTAAP).
This lost opportunity cannot be overstated. The Asia-Pacific region is critical to current and future U.S. economic growth, competitiveness, and job creation. Unfortunately, we’re falling behind. U.S. exporters need access to these fast-growing economies and their increasingly wealthy consumers in order to increase sales and hire more workers at home.
Following the withdrawal from the TPP, the U.S. is party to only three FTAs in all of Asia: Australia, Singapore, and South Korea. Trade within Asia is surging, but even as total Asian imports have risen more than three-fold in the past 15 years, the U.S. share of the pie has dropped dramatically, from 12.2% in 2000 to 6.6% in 2014 according to the think tank Third Way. As indicated in the charts below, China – not the U.S. – has become the dominant trading power in the region.
In Hanoi, Ambassador Robert Lighthizer, the new U.S. Trade Representative, reiterated the administration’s intent to negotiate bilateral free-trade agreements (FTAs) in the region at some point. In an era of global value chains, the TPP had the advantage of cutting through the “noodle bowl” of divergent trade rules under multiple agreements.
In any event, the U.S. is running out of time. Bilateral FTAs, even with small economies, will take years to negotiate and enter into force.
Meanwhile, the challenges the TPP was designed to address remain:
- The Asia-Pacific region is growing, and it will soon be home to two-thirds of the world’s middle class consumers.
- Made-in-America products are too often shut out of those promising markets by steep tariffs and other barriers.
- U.S. exporters’ disadvantages in the region are likely to mount as other economies clinch new trade pacts that benefit their exporters but shut us out.
The implications of RCEP, TPP 11, or other bilateral agreements that exclude the U.S. from the fastest growing region of the world are dramatic. American exporters who don’t have the same tariff advantage as their competitors will suffer immediate and serious commercial losses. Case in point: U.S. beef exporters face a 38.5% tariff on their product, while those from Australia pay a 27.5% tariff because of Australia’s FTA with Japan.
More broadly – and significantly – if the U.S. is not leading to shape the rules and set the standards for 21st Century trade, it will damage our long-term competitiveness in the region even more.
The Trump administration will need to devise a strategy to address these challenges – and soon. The U.S. Chamber of Commerce is committed to working with the administration and Congress in that effort. The U.S. business community supports trade agreements, whether bilateral or multilateral, that will open markets and allow our firms to compete as long as they conform to Trade Promotion Authority (TPA) guidelines and procedures. Ultimately this is about growth and jobs, and we need new export markets and a level playing field to increase both and reduce our trade deficit.
Time is of the essence, as every month that goes by gives our competitors an even greater long-term advantage. We cannot afford to be on the sidelines: we need to be in this critical trade game.