Trade reps to work on TPP's final points

China not invited to next week's talks in Hawaii but pact allows it to join later

WASHINGTON • Trade officials from 12 governments are gathering in Hawaii next week to hash out the final details of the Trans-Pacific Partnership (TPP), a pact seven years in the making that would clear barriers to commerce among nations that produce 40 per cent of global economic output.

United States President Barack Obama has a dual goal in the Pacific-rim trade deal: to expand trade with allies and cement US influence in the region as China expands economically and militarily.

"It's first and foremost a trade agreement and has to be justified on economic grounds," US Trade Representative Michael Froman said. "It obviously has broader strategic implications as well."

China is not invited to the Hawaii talks, but its actions in the past few years has helped the US make a case for the sweeping accord.

Its assertion of control over air travel hundreds of kilometres from its coast alarmed nations such as Japan. So did China's strengthening of its military presence last year in islands in the contested South China Sea, home to some of the world's busiest shipping lanes.

WIN-WIN SITUATION

TPP can be an anti-China trade bloc or an inducement for China to behave better... In the meantime, the US wins either way.

MR EDWARD ALDEN, senior fellow at the Council on Foreign Relations, on the pact

With their Asian allies' approval, Mr Froman and Mr Obama - who sees the pact as a key element in his "pivot to Asia" foreign policy - now regularly make the case that it is a way for countries to band together and set rules before China does.

"TPP can be an anti-China trade bloc or an inducement for China to behave better," said Mr Edward Alden, a senior fellow at the Council on Foreign Relations. "In the meantime, the US wins either way."

If negotiators reach a deal in Hawaii, US agricultural exporters such as Cargill, along with pork and beef producers, will benefit from greater access to Japan's market.

On the other side, the US will drop tariffs on cars and light trucks, benefiting Japanese automakers such as Toyota.

Pharmaceutical manufacturers such as Pfizer are seeking stronger patent protection, and firms from IBM to Boeing to JPMorgan Chase could gain from proposed limits on governments' ability to throttle the flow of data across borders.

The proposed agreement reflects years of effort to woo Asian countries by arguing that they don't have to bet solely on the US or China. "All countries in Asia want a balance of partnerships and a diversification of markets," Mr Froman said. "TPP gives them that."

The talks currently involve the US, Canada, Mexico, Peru, Chile, Japan, Australia, New Zealand, Brunei, Malaysia, Singapore and Vietnam. The accord would permit China to join later, a key talking point for nations whose most important trading partner is China.

At the same time, the TPP will include rules that China would be hard-pressed to accept in areas such as free and open Internet and labour rights, and regulations for big state-owned companies, Mr Froman said.

"Not everybody shares those priorities," he said.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on July 25, 2015, with the headline 'Trade reps to work on TPP's final points'. Print Edition | Subscribe