COA Submits Statement to Trade Policy Staff Committee on Proposed Trans-Pac Agreement

The Council of the Americas (Council) appreciates the opportunity to provide a written statement expressing our support for the proposed Trans-Pacific Partnership Free Trade Agreement (TPP) with Australia, Brunei, Chile, New Zealand, Peru, Singapore, and Vietnam. The Council is a policy organization representing approximately 190 member companies invested in and doing business throughout the Western Hemisphere. Since 1965, the Council has been dedicated to the promotion of democracy, open markets, and the rule of law, and we are widely recognized for our policy and commercial leadership throughout the Americas.

The Council strongly supports efforts to expand trade and investment, both on the basis of U.S. economic and national security interests and in the belief that open markets and healthy investment flows are critical tools in the search for sustainable, equitable growth in the hemisphere, particularly during difficult economic times such as those we are currently experiencing.

RATIONALE FOR THE TPP

The first preference of the Council would be that the Doha Development Agenda be concluded in a manner that supports Western Hemisphere economic and development priorities, for example in agriculture. However, in light of the stalled WTO round and the lack of momentum toward reigniting discussions on the Free Trade Area of the Americas, the TPP could become the most promising driver of trade expansion in the hemisphere, given the desire of many nations in the Western Hemisphere to link more closely to Asia and the high-standards approach that the original parties have promoted through the agreement. By engaging those parties in the Asia-Pacific region who truly want to expand trade and investment in a forward-looking manner, this vehicle provides an outstanding opportunity to rebuild the hemispheric trade and investment agenda as existing trade agreements are harmonized and additional countries seek to become parties to the process or be left behind. 

In 1980, there were 22 trade agreements in force in the Asia-Pacific region. Today, there are 159 agreements in force, 17 agreements awaiting implementation, 69 agreements currently under negotiation, and 83 agreements in the exploratory stage. The United States currently has agreements with only 15 and risks being left behind should it not continue to pursuer further trade liberalization with the Asia-Pacific region. The exclusion of the United States from a number of proposed East Asia integration initiatives could lead to a situation where U.S. exporters are at a significant disadvantage, which could prove costly in light of the fact that international trade accounted for nearly two-thirds of U.S. economic growth from the second quarter of 2007 to the second quarter of 2008. The Asia-Pacific region accounts for nearly 60 percent of world GDP, half of all global trade, has markets totaling 41 percent of the world’s population, and, at least until recently, was growing faster than the world average with real GDP growth of 7.9 percent for the period 2007-2008.

U.S. participation in the TPP—particularly in light of the fact that three additional countries have come on board since the September 2008 announcement of full U.S. participation—could also create a critical mass encouraging other nations in the region to come to the table to build a broader trade integration paradigm based on a high-standards, cutting edge, comprehensive approach. This would provide rewards to those nations in Latin America that have already taken the difficult political and economic steps to reform by linking them more firmly into the international system, particularly as some in Asia seek to deepen Asian economic ties to the exclusion of parties in Latin America. Further, this approach could provide a significant incentive for other countries in Latin America to move ahead quickly with their own reforms in order to participate in the TPP, so long as the TPP is of significant economic weight as to be interesting in the first place. Finally, it would help expand trade and investment ties in the hemisphere among willing parties, allowing us to leave behind the broken hemispheric paradigm which relies on consensus with nations that are fundamentally opposed to closer links to the United States, as the last Summit of the Americas in Mar del Plata, Argentina, in 2005 clearly showed.

Despite the recent decision to indefinitely postpone the first round of negotiations, the Council strongly urges the administration to move forward expeditiously. The rise of intra-East Asian architectures, such as the East Asia Summit and the ASEAN + Three, for example, continues even as the United States wrestles with its own decisions. Should the United States decide to hold off indefinitely on engaging in negotiations to advance the proposed agreement, it will continue losing opportunities, including market share in Latin America, to Asian economies. And while the United States stands still, other countries will continue to negotiate with each other to break down barriers to trade and investment, putting U.S. products at a competitive disadvantage and U.S. strategic interests at risk. 

NEGOTIATING OBJECTIVES

Several negotiation objectives should be kept in mind in order to produce the highest-quality Trans-Pacific Partnership Free Trade Agreement.

First and foremost, as negotiations from the start include countries aligned in the presumption that open markets are mutually beneficial, the TPP should capture the most innovative aspects of existing free trade agreements and seek to make them even better. The countries involved in the negotiations are self-selected, and the TPP presents a rare opportunity to begin at the highest existing level of trade agreements such as the existing P4 agreement and improve from there, a bona fide “race to the top,” including product categories and trade disciplines that simply did not exist even a few short years ago. Such an opportunity should not be squandered but rather embraced.

The TPP would certainly be an appropriate vehicle to use to begin to harmonize rules of origin and strengthen commitments on regulatory transparency. As over 90 percent of the world’s consumers live outside the United States, simplification of the existing complex system of rules of origin, along with enhanced regulatory transparency, would greatly improve the ability of U.S. companies, and in particular small and medium-sized enterprises, to take advantage of new potential markets. At the same time, the vision for the agreement should be broader than a simple harmonization of existing agreements in force or under negotiation.

As a result, the agreement should be comprehensive, including substantially all products, services, and sectors. If the United States’ opening position in the negotiations includes sector and product exclusions, other countries would immediately follow suit. This would quickly dilute the gold standard argument for negotiating a TPP in the first place, making the ultimate agreement less useful for the purpose of improving peoples lives.

Finally, once it is concluded, the agreement should go into force quickly between and among those parties who ratify it. That way, progress in building the pan-Pacific community will not be held up by domestic politics in any individual country or countries. The agreement must also contain an accession clause allowing other countries to join at a later date, once they have met the standards of the agreement and are willing and able to take on the obligations enumerated therein. Membership in the TPP should not be limited to the 21 Asia-Pacific Economic Cooperation members. Rather, on trade, economic development, and foreign policy grounds, it should also be open in the near term to additional Latin American countries such as Colombia, Panama, and Uruguay, and others as appropriate. 

CONCLUSION

The Council strongly supports U.S participation in the TPP as it would open the door to broader Asia-Pacific regional economic integration with like-minded countries in the Western Hemisphere committed to a high-standard trade and investment agreement. Given the current standstill in multilateral negotiations, further work on trade liberalization within the Asia-Pacific may offer the best path forward. U.S. engagement in the TPP could accomplish a number of U.S. objectives, while inaction would entail economic cost to the U.S. economy and strategic costs to our national interests, both in Asia as well as in Latin America. Negotiation of the Trans-Pacific Partnership Free Trade Agreement should be prioritized.