Bloomberg News

Obama Envoy Kirk Says 2013 Key for Asia-Pacific Trade Agreement

September 02, 2012

A trade agreement among about a dozen Asia-Pacific countries that is the centerpiece of President Barack Obama’s plans to increase exports will require tough choices to be completed in 2013, his envoy said.

The Trans-Pacific Partnership is poised to expand to 11 nations later this year after Mexico and Canada were invited to join, which would represent about a third of global economic output. Leaders of the 21-member Asia-Pacific Economic Forum, who have called for a wider agreement that would include both the U.S. and China, meet later this week in Vladivostok, Russia.

“All of us want to get this agreement done because all of our economies are operating in a world now in which we realize there are just very few bright lights in terms of economic activity,” U.S. Trade Representative Ron Kirk said in an interview in Hanoi yesterday. “If we can work as smart as we have worked hard, and we are willing to make some of these difficult decisions, 2013 could be a pivotal year for us.”

The U.S. and China are pushing separate regional trade talks that exclude each other as they compete for political and economic influence in one of the world’s fastest-growing regions. Obama last year called on negotiators to complete the agreement by November, when he faces re-election against Republican presidential nominee Mitt Romney, who has also signaled his support for the deal.

“If you skip over his statement about a timeline that could never be met, the talks are actually proceeding at a decent pace,” Deborah K. Elms, head of the Temasek Foundation Centre for Trade & Negotiations in Singapore, said of Obama. “The big political decisions have all been postponed until early next year.”

Sensitive Issues

Trade negotiators will meet this week for the 14th round of talks since March 2010 in Leesburg, Virginia, while the Democratic National Convention is taking place. The APEC meetings will occur at the same time, with Secretary of State Hillary Clinton the highest-ranking U.S. official in attendance.

Besides Canada and Mexico, which have yet to formally join, the agreement includes Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the U.S. and Vietnam. The U.S.’s ability to compromise on sensitive areas is limited because the deal must be approved by Congress, Kirk said.

“We are willing to show some flexibility, but for the United States it would be difficult for me to go back and sell to Congress and the American public a Trans-Pacific Partnership agreement that wasn’t at least as forward-leaning as some of the agreements we have recently concluded,” he said, referring to deals with Panama, Colombia and South Korea that were completed under President George W. Bush and only approved by U.S. lawmakers last year.

Election ‘Non-Factor’

The U.S. election is a “non-factor” in the talks, Kirk said. “There will be great political support both in our Congress and among our business community” for the trade agreement if it opens markets, ensures a level playing field and contains provisions on labor and the environment, he said.

Romney will seek to complete the Pacific trade deal if he takes office, adviser and former Commerce Secretary Carlos Gutierrez said last month. In Romney’s speech at the Republican National Convention last week, he cited expanding trade as part of a five-step plan to create 12 million jobs.

“We will make trade work for America by forging new trade agreements,” Romney said. “And when nations cheat in trade, there will be unmistakable consequences.”

Vietnam Garments

Congress signaled its discontent with the TPP negotiation process in June, with 132 lawmakers led by Representatives Rosa DeLauro of Connecticut and George Miller of California telling Kirk in a letter they were “troubled that important policy decisions are being made without full input from Congress.”

Fifty-two lawmakers called for negotiators to restrict Vietnam’s ability to sell garments to the U.S., noting the country’s “non-market economy status and the subsequent inherent advantages provided to its textile and apparel sector.” The country was the second-largest seller of textiles and apparel to the U.S. in 2011 after China, according to data from the U.S. International Trade Commission.

U.S. exports reached $2.1 trillion last year, according to the Department of Commerce, 14 percent more than in 2010, when Obama pledged to double overseas sales by 2015. The biggest gains came in agriculture sales.

China, South Korea and Japan agreed last week to start talks on a separate preferential trade agreement that may be expanded to include the 10-member Association of Southeast Asian Nations. Both are possible templates for a wider Free Trade Area of the Asia-Pacific that would include all 21 APEC economies.

Japan, China

Japan is also considering whether to join the TPP talks, a move opposed by Ford Motor Co. (F:US), General Motors Co. (GM:US) and Chrysler LLC who say the country’s auto market needs to be more open to international competition. While both trade agreements would boost the economy, the biggest gains would come from an agreement that includes China and the U.S., according to Peter A. Petri, a professor of international finance at Brandeis University in Waltham, Massachusetts.

“In the Pacific, unless you have the U.S. and China in a large overall global system cooperating and trading intensively, you are way short of the potential of the benefits that trade can bring,” Petri said. “These two countries are so interdependent and have so much to gain from cooperation that we have to simply work through the fact that they are competitors.”

To contact Bloomberg News staff for this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net; Nick Heath in Hanoi at nheath2@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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