Trade Policy Can Change the Balance of Power in the Asia-pacific More than You Imagine

July 7, 2015

The recent politics of trade have been ferocious. Unions, conservative groups, and members of congress battled each other over Trade Promotion Authority (TPA) and are now licking their wounds. TPA allows the executive branch to send trade agreements to Congress for an up or down vote without amendments.

TPA has been a constant and effective foreign policy tool since 1934. It is crucial to finalizing any trade agreement because countries rightly want assurance that what U.S. trade representatives negotiate cannot be amended. With TPA legislation signed into law, our negotiators are now working to conclude the Trans-Pacific Partnership (TPP) — a free trade agreement that includes the United States and 11 Pacific Rim nations, many of which are experiencing significant economic growth and mounting security fears over a rising China. Final negotiations for the TPP are scheduled for late this month.

It is hard to silence the political commentary focused on the here and now, to look beyond the horizon, and to understand that the TPP is really about what the United States and the world will look like in 2035 — its economy, its security, and its geopolitics.

It is no stretch to say the TPP is the single most important policy decision the American government will make in the next 20 years. More than a trade framework, the TPP is the cement for the current balance of power framework in the Asia-Pacific.

The TPP has rightly been sold as something that will boost the U.S. economy by increasing exports and lowering costs on consumer goods. For example, the footwear industry, which I work with, is hit with outdated tariffs that reach upwards of 37.5 percent, 48 percent, and 67.5 percent on basic sneakers. But the TPP will do far more to support U.S. foreign policy in the Asia-Pacific than the U.S. economy. Nothing else will do more to bolster the United States’ power, its global preeminence, and the international architecture it built after World War II. This is all the more important at a time when China is trying to disrupt the fragile balance of power in the Asia-Pacific.

The TPP is a chance for Washington to set a higher baseline for the rule of law across Asia related to worker rights, working conditions, business regulations, intellectual property, and environmental protection. The trade deal, in fact, amounts to a huge step forward on these issues, especially for human rights, in a way that our standard diplomacy could never do alone because it creates a spillover effect all the way to Beijing. Changes will occur from the bottom up, rather than the top down as political pressure is often applied, as higher standards for the treatment of workers and individuals will become a norm over time as part of doing business.

In terms of geopolitics, finalizing and passing the TPP reassures our allies in Asia that we will not allow China to economically subordinate them, nor directly threaten their sovereignty and security. China’s aspiration for regional hegemony — through building military installations in the South China Sea and enacting an air defense identification zone over the East China Sea — has been met with strong statements from Washington, but to China’s smaller neighbors’ words mean little. An agreement like the TPP would mean that the U.S. government is not just talking about refocusing on Asia. Rather, Washington would be seen as putting its full weight behind its rhetoric by further increasing its interests there, thus creating an even stronger incentive to increase a U.S. military presence to protect growing economic ties and interests.

Currently more than $5 trillion in trade flows through the South China Sea, making up nearly 25% of total U.S. trade. Protecting the free flow of shoes, clothes, electronics coming to America from Asia, and our exports going to Asia, is paramount to America’s economic stability at a time of global economic uncertainty. As trade ties to the region continue to increase, Washington’s military strategy should focus on protecting U.S. businesses and consumers who would face increasing product inflation and shortages, and potential job losses across supply chains, should conflict in the region impede trade.

If the United States wants to lead without bearing heavy burdens, the TPP is the tool to help build economies that can better provide for their own growing defenses, thus decreasing the amount of military aid and manpower Washington needs to send to Asia to maintain what would become a stronger balance of power.

Conversely, should the United States fail to sign this free trade agreement, it will become the largest foreign policy failure in the 21st century.

If Washington does not help create and lead the TPP, within 20 years a free trade zone in Southeast Asia will have been established, led and governed by China’s rules. In this world, Chinese leadership would determine the flow and rules of trade, the realities of human rights (or the lack thereof), as well as the regulations governing business and protecting intellectual property throughout the Asia-Pacific. Needless to say, this would likely be disastrous for American interests and ideals in these areas. While Japan would work with the United States to try and prevent this, should it make its own free trade rules for Asia, China’s powers by 2035 would be too great for other regional powers to push back.

The physics of trade are not controlled by America; the push to liberalize trade in Asia does not halt absent the United States. China has already completed free trade agreements with Singapore and New Zealand in 2008 and two major free trade agreements just weeks ago with both South Korea and Australia, and is working towards upgrading its economic agreements with the Association of South East Asian Nations (ASEAN) to an official free trade agreement.

Without the TPP, Asian countries, faced with the need to sustain economic growth through partnering with a major economic power, will turn from Washington to Beijing and complete a regional trade agreement, even as security fears grow. By then, China’s economic pull will be too strong to oppose thanks to it rising purchasing power — current account deposits held by Chinese citizens amount to more than $27 trillion. Moreover, China controls much of the resources needed by its neighbors to complete finished products. We see this in the footwear industry, where factories in Vietnam depend on materials and components from China.

China’s heightened economic power in Southeast Asia means it will also be able to write, and re-write, the economic rules that benefit them into any free trade agreement without fear of reprisal such as sanctions. The principles of sovereignty and non-interference over the individual would dominate, and the idea of an independent marketplace would suffer. For China, businesses are a part of a national project rather than independent and virtuous enterprises on their own.

Worse, as stated before, China’s free trade agreement would create holes in the current U.S. security patchwork in the Asia-Pacific. Rather than helping manage regional disputes, America will be facing major strategic challenges. While the headaches in the region — especially in the South China Sea — seem big now, managing territorial disputes is more desirable than being on the edge of major military conflict.

Washington’s soft and hard power are both at a crossroads in Asia. We don’t get a second shot at writing the rules of the road for the global economy in the 21st century and the construction of a balance of power framework in the Asia-Pacific. If we miss our shot, China will not, and it will mark a sea change in the global economy and the security of the Asia-Pacific, the United States, and beyond.

 

Andy Polk is Vice President at FDRA, America’s largest footwear trade association. He previously worked in Congress for nearly a decade on foreign affairs and security issues, and received his masters in IR from the LSE where he studied Chinese foreign policy and balance of power theory and practice.

 

Photo credit: Hafiz343