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Obama is betting on a new free trade bloc to help the US economy. Here's what you need to know.
TAIPEI, Taiwan — New Zealand's down with it. Singapore's down with it. Now the United States, Australia, Peru, Vietnam and Malaysia are getting down with it, too.
Still waiting for word on whether Japan's down with it or not.
There's a new trade bloc on the block, and it's called TPP — short for the Trans-Pacific Partnership. Just a few years ago it was an obscure deal between the "P4," which sounds like an Asian boy-band but actually refers to four small, free-trade loving countries on the Pacific rim: New Zealand, Singapore, Brunei and Chile.
But since the Obama administration publicly embraced it last year as a way to help revive America's zombie-like economy, TPP has shot to stardom. And joined a long list of mind-numbing acronyms.
TPP was a hot topic at the recent APEC meeting in Yokohama, and has been widely lauded as a possible stepping stone to a FTAAP.
That last one may sound like something Bill the Cat would have spat out in the 1980' comic strip Bloom County. But it stands for a Free Trade Area of the Asia Pacific, a "Mother of All Free Trade Deals" that would include the world's top three economies — the U.S, China and Japan — and APEC's 18 other members in one king-sized trade block spanning the Pacific.
Too bad it's not likely to happen in our lifetimes.
"The FTAAP is a hopeless dream at this point," Deborah Elms, a trade expert with the S. Rajaratnam School of International Studies in Singapore, wrote in an email. "I don't see the political will to launch talks on this scale. And, practically, to get the entire 21 member economies to agree to talks on liberalizing trade with one another is just not in the cards."
It's the politics, stupid
Even TPP's prospects are dubious, some analysts say. The problem, as usual, is politics. Domestic politics, to be more specific — in the U.S. and Japan, for starters.
With TPP, Obama's team is headed into a bruising fight to get Americans down with another ambitious trade deal. Republicans are typically more free-trade-minded and likely to support such deals, so you'd think a Republican-controlled House could help.
But Obama's recent failure to re-negotiate a free trade deal with South Korea doesn't bode well. In that case, U.S. auto companies and beef exporters couldn't swallow the terms of the original 2007 deal and pressed for a better one. But so far Seoul isn't biting.
With TPP, it's the U.S. dairy lobby that's gearing up for battle. It threw down a gauntlet in March by marshaling 30 senators from both parties in a show of force against TPP. The reason, the senators said in a letter: Cheap dairy imports from New Zealand threaten U.S. dairy farmers' livelihoods.
Elms, the trade expert, says objections are also likely from U.S. beef and sugar producers, and textile producers who would face cheap competition from Vietnam. She thinks these objections won't be as much of a hurdle as U.S. automakers' concerns over the South Korea deal. But the politics of TPP have others betting against Obama already.
"The net benefits to the U.S. economy are likely to be minimal and the political costs, imposed by dairy exports from New Zealand, substantial," said John Ravenhill, an expert on global trade at Australian National University. "So I would not be optimistic about its chances."
"The TPP at the moment has no significant economy involved with which the U.S. does not already have a trade agreement," said Ravenhill, with the possible exception of Vietnam. If Tokyo gets on board, TPP would become far more important, he said.
But Japan's inclusion would also sharply raise the political stakes — almost certainly sparking a fierce debate in America that would make the 1990s NAFTA fight look like a playground scuffle.