Natasha Kovalova American influence is waning in Asia and the Pacific, and the way to reverse the trend is to reenter the trade agreement that was formed by the Obama administration but antagonized by both parties in 2016. Congress never fully ratified the Trans-Pacific Partnership, and President Donald Trump withdrew the
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Natasha Kovalova[/caption]
American influence is waning in Asia and the Pacific, and the way to reverse the trend is to reenter the trade agreement that was formed by the Obama administration but antagonized by both parties in 2016. Congress never fully ratified the Trans-Pacific Partnership, and President Donald Trump withdrew the U.S. from the agreement on his first day in office.
Concerningly, China has considerably increased its influence in the Indo-Pacific region, including its entry into the Regional Comprehensive Economic Partnership, the largest trade agreement in the world. This agreement allows for tariff cuts, establishes rules for trade among its 15 member countries, and makes it easier for those members to buy Chinese products and link with Chinese supply chains. RCEP makes it harder for the U.S. to promote its core national values, including its market-based economic model, environmental protection and workers’ rights.
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Eamon O’Connell[/caption]
The Biden administration should be focused on increasing the U.S. presence in the Indo-Pacific region and working on resilient supply chains, the digital economy, clean energy and creating new trading partnerships with tariff cuts. These steps will aid in shifting supply chain decisions, promoting U.S. agriculture and manufacturing exports, and will encourage other countries to embrace our values, rules and standards. There are, however, a number of misconceptions undermining support for large trade agreements such as the Trans-Pacific Partnership in the U.S.
The first is that trade agreements will hurt jobs and wages and widen income inequality in the U.S. and elsewhere. Trump once wrote in 2016 that “the number of jobs and amount of wealth and income the United States have given away in so short a time is staggering, likely unprecedented. And the situation is about to get drastically worse if the TPP is not stopped.”
This argument fails to consider the difference between the impacts of increased global trade and those of trade agreements. Yes, income inequality has widened to economically and socially harmful levels. But it is globalization, technology, and flawed educational and tax systems that are driving this trend, not trade pacts.
A second myth is that the TPP would degrade labor and environmental standards and raise drug costs. However, there are protections within the International Labour Organization; there are no new accords that would affect environmental protection; and the effect of the new protections for drug companies would not automatically lead to higher drug costs.
A third myth is that the TPP is flawed because it won’t prevent countries from competing unfairly by devaluing their currencies to stimulate exports. Member nations of the TPP issue their monetary policies hoping to spur growth, not start a trade war. And China, widely seen as a notorious currency manipulator, isn’t part of the TPP. The International Monetary Fund is well positioned to intervene in cases where a government would use monetary policy to illegally decrease the value of its currency.
Tensions with China are rising, with the U.S. military beefing up operations in the Pacific. Uncertainty is high with Russia and its allies due to the war in Ukraine. The U.S. needs more than just military operations in the region; it needs economic partnerships that will solidify itself as a major player in economic operations across the Pacific. As China moves away from cheap manufacturing in factories and more toward a service economy such as the U.S., competition will rise. Low-cost countries now have more options when deciding who to do business with. Without a trade deal that lowers tariffs and increases market access, they will all go to China, the powerhouse of the region.
If the U.S. wants to maintain any influence in the area, it will have to compete with China, which means large, comprehensive trade deals to increase market access instead of these isolationist policies that have become popular in Washington. Bilateral trade agreements can get the U.S. some better deals occasionally, but to be politically powerful, it needs the negotiating power of being in a large trade deal in the region.
Natasha Kovalova and Eamon O’Connell are pursuing MBAs at the University of Rhode Island’s College of Business. They both have extensive corporate experience in the pharmaceutical industry.