This article is part of our special report Free Trade for Growth.
SPECIAL REPORT / A fledgling trade agreement between the United States, Latin America and Asia threatens to derail Europe’s attempts to create free trade agreements with Japan and the US and casts doubt on the EU’s lack of strategy towards Asia, trade experts say.
The fears emerged at a Brussels seminar on the Trans-Pacific Partnership (TPP) (see background) organised by the European Centre for International Political Economy (ECIPE), a think tank.
The TPP aims to create an ambitious trade network, encompassing goods and services, but including areas not usually covered by trade agreements, such as common rules for intellectual property rights and standards, as well as environmental protections and labour rights.
TPP, like a Spielberg trailer
Since negotiations underlying such agreements are conducted behind closed doors, few solid details about the TPP are known.
“The TPP is being trailed like a new Spielberg film. Everyone is hoping that their favourite actors will be in it, we hear that it will be full of special effects, but what is unclear is whether it is going to be a blockbuster or a flop,” Lutz Guellner, an EU official, told the seminar on 28 September.
Deborah Elms, head of the Singapore-based Temasek Foundation Centre for Trade and Negotiations, said Canada and Japan could signal a desire to join the TPP negotiations next year.
The “big elephant in the room is who will be the new members and what would happen if Japan joined,” Guellner said.
Race on for influence in Japan
The EU is currently trying to negotiate a trade agreement with Japan, but “there may be a race on” for influence in Japan – with its interest in the TPP, said Hosuk Lee-Makiyama, director of ECIPE.
The TPP also raises doubts about the EU project – currently under way – to negotiate an ambitious free trade deal with the US itself.
“How can the US be equally ambitious both on the TPP and Atlantic [European] side of negotiations,” is one of the questions under consideration by policymakers, Guellner told the seminar.
The EU will also have to be careful to avoid any perceived slight against China in its reaction to the TPP. Many within Chinese government circles suspect that the TPP represents an attempt by the US to contain Chinese power in the region, by encircling the nascent superpower with a large trade bloc.
TPP seen as counterweight to China
“The TPP is a US reaction to China’s rise. It is not, however, an attempt to contain China, but rather to meet the concern that the US itself feels in being shuttered out of the Asean groups. So it can be seen as a counterweight,” Elms told the seminar. Asean is the 10-member Association of Southeast Asian Nations.
There are doubts about whether the agreement is a deal about trade or about trade and security, Guellner said, adding: “There is a real question what will be the impact on China and China’s interests.”
He said the Commission is eager to know more details about the TPP, “from the point of view of our own negotiations with Asean and other partners”.
“I don't think that Europe has any strategy about the TPP, and even if there were no TPP – with the rapid integration of the regional trade architecture in the Asia-Pacific region – Europe risks being left behind,” Lee-Makiyama told EurActiv afterwards.
The countries involved in the TPP are already integrating quickly on a cross-border “company-to-company” basis, “much as Europe expanded its cross-border trade between member states during the 1960s”, Lee-Makiyama said.
“The regional trade architecture is closing very quickly and unless Europe gets its foot in the door, it will be much more expensive for it to obtain market share in 10 years time,” he said, warning that the tide of events – with or without the TPP – poses “an existential threat” to Europe.
"We are continuing to focus on concluding this agreement as quickly as we can," chief US negotiator for the TPP talks Barbara Weisel said at the end of the 14th round of negotiations on the proposed Trans-Pacific Partnership pact (15 September).
"We think there is momentum coming out of this meeting that gives us hope that we can move toward conclusion of the agreement," Weisel added.
“The United States and Europe have never been more strategically aligned than we are today,” said Julianne Smith, the US deputy national security advisor, said on 24 Septemebr of US “rebalancing” of its trade negotiations towards Asia.
“This is the result of a deliberate and conscious strategy to invest in a partnership with the world’s most advanced, military-capable, and democratic peoples who share our values and ideals – our Atlantic partners,” Smith said, adding: “Rebalancing is not at Europe’s expense, but rather improves our ability to address 21st century threats and our collective security together.”
The Trans-Pacific Partnership (TPP) agreement is now being negotiated between Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam.
The pact is supposed to solve many of the problems that have come from overlapping trade deals in the past decade. Specifically it is a response to the breakdown of the Doha round, the stalled global trade framework agreement.
South Korea, Taiwan and the Philippines have all expressed interest in joining. Japan has observer status in the negotiations and is regarded as a potential future member.
The TPP has modest roots, and started as an agreement between Brunei, Chile, New Zealand and Singapore in 2005.
- By end of 2012: EU-US High Level Working Group on growth and jobs to deliver report on whether or not launch negotiations for a transatlantic trade and investment agreement
- 2013: Japan may join TPP
- Office of the United States Trade Representative: Pages on the TPP
- European Parliament: The WTO and the International Trading System (July 2012)
- European Commission: A common international Trade policy