Patrick Christy is a senior policy analyst at the Foreign Policy Initiative.
At a time when the U.S. economy is struggling to recover, President Obama has thrown his support behind talks for two ambitious trade deals aimed at reducing trade and investment barriers in the Asia-Pacific and Europe. While the two free-trade agreements are far from completion, both would strongly benefit the United States economically and strategically.
Friends with Economic Benefits
First, the United States and the European Union are set to start negotiations for a comprehensive trade and investment pact sometimes known as the Transatlantic Trade and Investment Partnership (TTIP). With the two sides exchanging roughly $2.7 billion in goods and services each day, American and European economies already make up the world's biggest and most prosperous market – roughly 54 percent of global gross domestic product (GDP) in terms of value, or 40 percent of global GDP in terms of purchasing power.
At a time when the 27-nation European Union is still grappling with residually high unemployment and stagnant growth, further reduction of America's and Europe's already low tariff levels and trade barriers could reinvigorate elements of both economies. A study conducted by the U.S. Chamber of Commerce suggests that eliminating transatlantic tariffs alone "would boost U.S.-EU trade by more than $120 billion within five years."
In a Wall Street Journal op-ed, Stormy-Annika Mildner of the German Institute for International and Security Affairs and Claudia Schmucker of the German Council on Foreign Relations add: "Eliminating tariffs could, in the long run, add 1.33 percent annually to U.S. GDP and 0.47 percent to EU GDP, according to the research firm Ecorys. Substantially lowering non-tariff barriers would add 0.28 percent annually to U.S. GDP and 0.72 percent to EU GDP."
Second, the United States is engaged in negotiations for a Trans-Pacific Partnership (TPP) agreement that would promote economic integration and liberalization with 11 other countries – namely, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The proposed pact would level the playing field throughout portions of the Pacific Rim for American goods by reducing tariffs from member states over a ten year period.
A number of Asian economies would also be forced to decrease support for state owned businesses, opening new markets for a number of U.S. companies. The TPP's eventual goal would be to create vast free-trade zone across the entire Pacific that would encompass approximately two-fifths of the world economy.
Friends with Strategic Benefits
In addition, these two agreements would enhance U.S. strategic interests.
The TPP is a key component of the Obama administration's "rebalance" to the Asia-Pacific. Similar to the U.S.-South Korean free-trade agreement (enacted in 2012), the TPP would strengthen long-term strategic ties with key allies and partners, and ensure America's economic presence in the region for years to come. At the same time, new market opportunities would decrease the region's overreliance on trade with China.
Equally important, the agreement would encourage further economic and political reforms among TPP nations, notably non-democratic Vietnam. Asia's post-World War II history shows that close economic cooperation with emerging nations can profoundly advance America's pro-democracy agenda – look no further than Japan and South Korea, both of which once had militaristic regimes. As President Obama stated in his November 2011 address to the Australian Parliament, "over the long run, democracy and economic growth go hand in hand. And prosperity without freedom is just another form of poverty."
The U.S.-E.U. agreement would reinvigorate relations between Europe and the United States at a time when many European leaders worry that the Obama administration's "rebalance" to the Asia-Pacific will come at the expense of transatlantic ties. Despite occasional differences on both sides of the Atlantic, the United States and Europe are bound by history, common interests, and shared values.
In particular, European nations who are aligned with NATO remain America's strategic partners of "first resort" – countries that the United States works with in concert on key international matters. Indeed, NATO's 2011 mission in Libya and ongoing efforts in Afghanistan reflect these common interests and shared values.
Rising Challenges and Opportunities
In order to realize the economic and strategic benefits of these two agreements, there are important steps that policymakers and lawmakers in Washington should take.
First, the Obama administration must genuinely lead on the trade agenda. Trade negotiations can be long, difficult and sometimes frustrating, even more so when they involve multiple countries. TPP negotiations are still behind schedule, despite President Obama's 2009 words of support for the TPP and 16 rounds of multilateral talks.
Without strong and proactive U.S. leadership on trade, talks with the European Union could get bogged down as well. French trade minister Nicole Bricq is already urging negotiators to move at a slower pace. President Obama must make clear that these two pacts are key pillars of his second term agenda. Failure to do so risks endless delays and fewer economic opportunities – and jobs – for Americans.
Second, lawmakers should use congressional oversight hearings, public statements, and even legislation to make clear to the Obama administration that these two trade pacts are top priorities. Despite political gridlock in Washington, trade enjoys broad support on Capitol Hill. For example, when President Obama finally submitted free-trade agreements with Colombia, Panama, and South Korea for congressional approval in 2011, lawmakers moved quickly to ensure their passage with bipartisan support.
Third, lawmakers should renew the White House's trade promotion authority (TPA). House Ways and Means Committee Chairman Dave Camp has argued TPA would give the President "the tools to move more job-creating trade agreements." Previous "fast-track" authority – which expired in 2007 – had authorized the President to enter into trade agreements with foreign nations and required lawmakers vote on those agreements, without amendments, within 90 days of being submitted to Congress. However, Democrats in the House of Representatives changed the rule in April 2008 in order to block consideration of President Bush's free-trade agreement with Colombia, effectively shelving the agreement for the next three years.
President Obama noted in his State of the Union address that free-trade deals with Europe and the Asia-Pacific are in America's economic and strategic interests. With Democrats and Republicans behind him, the White House should work quickly to ensure both agreements become reality.