Obama mulls trade partner change-up

The Obama administration is locked in an internal debate over whether to negotiate a new Asian-Pacific free trade partnership.

If the White House decides to go forward, it would amount to the first new free trade arrangment launched by President Barack Obama in a part of the world leading the global recovery.

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The Trans-Pacific Partnership Agreement (TPP) would create a free trade arrangement between the U.S. and Chile, Singapore, Australia, Peru, Brunei and New Zealand. The U.S. already has free trade deals with the first four countries, meaning the TPP would essentially give the U.S. two new free trade partners.

It’s unclear how comprehensive the TPP would be, but business groups that support it think it could serve as a platform for free trade in Asia that could eventually include other countries, such as Japan.

Sources familiar with the internal debate said an announcement could be made when Obama attends the Asian Pacific Economic Cooperation (APEC) ministerial Nov. 10-11. An administration official said no decisions have been made.

The move would come as the U.S. increasingly battles with China over influence in Asia. A driving force behind the TPP, several business sources said, is fear that the U.S. could be left out if China takes the lead on setting up an architecture in Asia of trade deals and strategic relationships.

One source said he believed the administration was headed toward an announcement on the TPP at APEC, but emphasized that no decision has been made.
Others believe the administration may not be ready, and that the TPP could wait so that the White House can form a larger strategic initiative for Asia.

The healthcare debate is also a factor. When Obama made plans to attend the APEC summit, it was not clear the divisive fight over reforming healthcare would still be taking place. Some in the administration argue Obama should not take his eye off healthcare, which will have a much greater impact than a trade deal on elections in 2010 and 2012.

Senate Finance Committee Chairman Max Baucus (D-Mont.) and ranking member Sen. Chuck Grassley (R-Iowa) moved to bolster those arguing for a TPP last week.

In a letter, they urged the White House to move forward, arguing the Asia-Pacific region held “tremendous potential” for commercial interests and that it could provide economic and strategic benefits to the U.S.

By moving forward, Obama could launch a positive trade agenda for his administration, which so far has been defined by a decision to impose tariffs on Chinese tires, and “Buy American” provisions in the $787 billion economic stimulus bill meant to ensure funds were not allocated to foreign companies.

Obama inherited three trade deals with Colombia, Panama and South Korea from President George W. Bush. The three deals are opposed by much of the Democratic Congress in part because of their association with the former administration.

Cal Cohen of the Emergency Committee on American Trade said another benefit of the TPP is that it was devised by several Asian countries. As such, it fits in well with the multilateral approach to international issues taken by Obama.

It could also serve as a platform for a broader free-trade grouping in Asia, said Monica Whaley, president of the National Center for APEC. Vietnam could be an observer nation in the initial talks, and some think it’s even possible Japan could someday be a member, though negotiations  with both would be difficult.

The National Association of Manufacturers supports the TPP, but also wants the pending trade deals to move forward, said Doug Goudie, the group’s director of international trade policy. “I think it’s a great idea. Asia is where the significant growth will be,” he said.


Pressure on China


Rep. Tim Ryan (D-Ohio) and other members of Congress are pressing the administration to take a firmer stand with China on its currency policies.

Ryan said he was disappointed with the recent determination by the Treasury Department that China is not manipulating its currency. This is the second time Obama’s Treasury has made the finding.

“It was a ridiculous analysis when Bush did it and it’s even more ridiculous now,” Ryan said in an interview. He’s circulating a letter to other members of Congress reflecting their disappointment.

Ryan’s legislation punishing China for devaluing its currency has gained little momentum in this Congress, even though criticism of China’s currency policy has increased in recent weeks.

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China pegs the value of its currency to the dollar, meaning both have lost value during the dollar’s drop over the past several months.

This has led to new charges that China’s policy is undermining the world economy. Ryan worries about cheap imports from China, driven down by the value of China’s currency.

Steel companies have asked Obama administration officials to raise the issue during Cabinet-level trade and commerce talks with China that begin Wednesday in Hangzhou.

And in a move that Ryan believes will bolster the cause, Nobel Prize-winning economist Paul Krugman criticized Treasury’s recent report.

Krugman wrote in his New York Times column that China was stealing jobs from other countries and that its policy was particularly indefensible as its economy grows amid a worldwide recession.

Lobbyists backing Ryan’s bill say they haven’t undertaken a hard push for it given the crowded congressional agenda. In that environment, the Fair Currency Coalition decided “it didn’t make sense to push hard,” said Charlie Blum, the group’s executive director.

Ryan said the healthcare debate has made it difficult to move forward, but he expects more attention to be paid to the issue as soon as healthcare is finished.

He also thinks it will be easier to move the legislation forward as the economy shows signs of improving. The Commerce Department on Thursday is expected to report that the economy grew in the third quarter.