Will the Trans-Pacific Partnership Jump-Start a Stalled WTO? Richard Cunningham's CUSLI Distinguished Lecture

By Keith Edmund White

Editor-in-Chief, CUSLI-Nexus

Not heard much about the Trans-Pacific Partnership (TPP)?  The TPP is a U.S.-led push to liberalize trade among 11 countries that is entering its 15th round of deliberations next month.   It's also, according to Salon, "the biggest trade deal you've never heard of," like a hush-hush, super-sized NAFTA in the Pacific region.

Richard O. Cunningham

But, according to Richard O. Cunningham, the TPP is much more than a long-running series of trade talks.  The TPP may not only determine the WTO's future, but set the trend lines of the Sino-American relationship in the 21st century.  And Canada may play a critical role in whether the TPP revitalizes or cripples multilateral trade liberalization efforts.

Richard Cunningham, Senior Partner at Steptoe & Johnson LLP in Washington D.C., spoke on the Doha tragedy and sized-up America’s TPP gambit at the Sixth Annual Canada-United States Law Institute Distinguished Lecture.  Cunningham delivered his speech, Trade After Doha:  The Growing Divide Between the Emerging Nations and the Developing World, last week at the University of Western Ontario Faculty of Law in London, Ontario.

Watch Cunningham's speech at Western Law's Vimeo page, or at the bottom of this post.  Below is a summary of the Cunningham's speech, accompanied with some key quotes. 

• International Trade Talks Stalled From 3-Pronged WTO Dilemma:  (1) the ‘old guard’ of the WTO (i.e. developed nations like America and leading EU member-states) need export-led growth, but are finding further multilateral trade concessions tough to swallow; (2) emerging developed nations, like India and China, have little interest in forging a new trade consensus; and (3) developing countries—whose economies are heavily hampered by remaining textile and agricultural trade barriers—believe all trade negotiations should be viewed in the greater, and far more murky, context of development.

Key Quotes: 

“[M]any people regard [the GATT and WTO] as probably, until this juncture, as the most successful of mankind’s efforts at a truly international organization on a truly international issue—that is trade.”

“Fundamental misconception of how a trade negotiation is conducted.  Trade negotiations are about doing a deal.  Yes, there can be an emphasis on greater benefits to the developing world, but to have a deal it has to go both ways.  Otherwise, look at your Parliament in Canada, look at the Congress of the United States, can you imagine the ratification of an international deal that further lowered tariff barriers and made other concessions by the United States and Canada that gets nothing in return?  Can you imagine that being ratified?” 

• America’s Trade Gambit: The TPP Plan Could Resuscitate or Cripple Multilateral Trade Liberalization Efforts.  The Trans-Pacific Partnership (TPP) is a U.S.-led effort to conclude a 11-nation trade liberalization pact.  Why does the TPP merit our attention, even though it includes a nation most readers probably have never heard of (Brunei Darussalam) and does not include Japan, India, or China?  Because America is hoping that the diverse TPP group can reach a model trade agreement that will break the Doha logjam.  But real pitfalls exist:  (1) Pressure to include more nations in the TPP—especially Japan—risks turning the TPP into a Doha Disaster 2.0;  and (2) the desire of some U.S. officials to use the TPP as a diplomatic tool to ‘box in’ China:  a strategy that risks creating two competing trade blocs, not to mention increased tensions between the world’s two top economies.

Key Quotes:

“To the curious case of the Trans-Pacific Partnership.  It is the Obama administration trade policy.  There is no Obama administration trade policy other than the trans-pacific partnership…but it’s not clear…what [the United States] is doing with it.”

“But trade gets involved with politics and geo-politics.  And if you ask…a government official who is not a trade official…they’ll say TPP sounds great for an entirely different reason.  A geo-political reason.  They will say the big issue today is China…China [has] embarked upon bringing Asian under its wing, [and] we need to setup a counter-balance to China, and therefore we’re going to use TPP to do that."

• Canada’s Key TPP Role.  So what's Canada's TPP role?  Well, Canada—along with Mexico—recently joined the TPP talks, with Canada firmly supporting America’s TPP push.  And, according to Cunningham, “Canada is viewed as a voice of moderation, a voice to be listened to” even if not always followed by the United States.  Thus, it may be Canadian nudging that ensures the TPP remains a tool to jump-start multilateral trade talks, and not let the TPP morph into a anti-China trading bloc, or--worst yet--repeat Doha's failure.

Key Quotes:

Is it in Canada’s interest to pick up the TPP banner?  “Canada, I submit, has an even greater interest than the United States to [gain] access to the emerging markets, particularly in minerals, energy, and in agricultural.  Secondly, Canada has more flexibility than the U.S. politically to seek trade accommodations with China, India, countries like that.”

“So I will leave it to you, I leave the fate of the world’s trading system where it deserves to be, namely in the hands of Canada.  And I will leave it to you to pressure your government to pressure the U.S. and our trading partners to do the right thing and get things back moving.  Otherwise, the report I gave you today has grim implications that couldn't come at a worse time for the world economy…You don’t want Balkanization of trade in a time like this.  Maybe we can do something constructive instead.” 

CUSLI 2012 Conference: Afternoon Panel #1 -- 'Trade and Jobs'

by Keith Edmund White


Chaired by Juscelino Colares, Prof. CWRU Law. This panel will discuss the proposed Trade and Jobs section of the Action Plan and determine how it addresses problems the U.S. and Canada face with trade and jobs. The discussion will then turn to other legal agreements that will influence trade and jobs in the future.

• Paul Vandevert, In House Counsel, Ford Motor Co.
• Birgit Matthiesen, Canadian Manufacturers & Exporters
• Dick Cunningham, Int’l Trade Atty at Steptoe and Johnson LLP

Below are (rough) summaries of the panelists' remarks.

Paul Vandevert:  "...I have some practical concerns" about the Beyond the Border Initiative, Namely Why Can't Our Regulations Deal With Global Supply Chains?

“To be blunt,” Vandevert stated, “I have some practical concerns [about the BTB Initiative].”  If there’s trade facilitation, the private sector will take care the jobs part.  Thus, Vandevert focused on the trade side of the Canada-US border relationship, and about the need of actually putting trade and security together—something that it appears has not happened yet. 

The job of government is to secure and keep the channels of trade often, the private sector will take care of the trade.  But, Vandevert stated, mostly from the American side we talk facilitation and trade, but “We continue to put security first…”  And when we’re done with that, “we’ll get to trade facilization.”

He noted that the plan states that a “fundamental” responsibility is to identity every shipment of ocean cargo.  For goods coming into the United States from across the oceans,Information of each shipment must be filed within 24 hours of the cargo being loaded.  From his personnel experiences in dealing with this, that every shipper and importer to fill out who shipped, who the consignee is, and description of goods.  And in a number of industries, including the auto industry, we do a number of high-volume, highly repetitive trade interactions.  So, we have continuous and routinizied goods coming in.  But when we went to customs to put that into their system ahead of time, we—Vandevert stated—were refused.

The implication I draw  from the action plan that the intention from at least the US costums side, they will apply—for security purposes..—they will apply the same transactional approach over the border.  “I don’t see how it will work.”  “They are doing a complete do-over,” he stated, “and every day is  going to be a new day…even though the same traders are doing the same thing, every day…it’s the extreme version of Groundhog’s Day.”  Is such a transactional approach really going to foster trade, and does it secure the border?  Also, as Vandevert pointed out, how will costumes build up the knowledge base to know what trade flows are normal and not.

What’s the other way?  Vandevert shared that we could give information earlier, and there is already information out there that is collected through NAFTA and other programs, “in which there have been enforcement mechanisms…that the customs authority have learned about about the trading community and should be relying on that.”

               

Birgit Matthiesen:  “I go around Washington telling people we’re not China…you know us." And  Why Aren't We Requiring All Border-Related Regulatory Changes to Be Evaluated on How They Impact Canada-U.S. Manufacturing, and Haven't We Heard All This Positive Crossborder Talk for the last 25 years?

Matthiesen noted that, beside the positive words shared earlier, that there is skepticism about whether BTB initiative will work.  We need to look at why we’re doing all these efforts, and what has changed to make this agreement so important? 

Twenty-five years ago these same plans we’re talked about, and the regulatory issues talked about today were talked about today.  And since 9/11, we’ve seen a surge of manufactured goods from Asia.  But this means that North American manufacturing has a huge challenge in our own backyard.

And this challenge, Matthiesen continued, will only grow with both nations are continuing FTAs.  And, to top things off, we’re adding fees to the Canada-US trade relationship to pay for the increased goods coming into the nations from other countries. 

We’re way past cost-shaving.  But a lot of companies are sitting on a lot of money because they don’t know where to invest to grow their production.   And we need to get these two agreements, the border and regulation, are so important.  We’re all about North American manufacturing.

Matthisen concluded with two challenges:  (1) to the government officials, I know the border has two pieces—the perimeter and the land border.  I will be looking for, at the end of the day, if the land border portion makes and supports North American manufacturing, and closer sharing along the perimeter to a competitive edge to the imported goods from aboard?  We have to do both together.  And (2), to the law students, she wants to know that if there’s one rule that practically reflects the integration of North America and supports the manufacturing of North America.  Before we do final rules, can we review regulatory rules to add another criteria:  does this support or not support North American manufacturing?  Answering these questions, Matthiesen concluded, is critical to understand the reasoning for what we’re hoping to accomplish with our security and regulatory relationship and if legal changes we’re planning to do actually do this.

Richard O. Cunningham:  How Do We Deal with the Job Problem—And Can We?

Cunningham went over the choices U.S. policy makers have to create jobs, and revealed that all the choices present downsides that can actually lead to their own job loss.  In doing so, he showed how there are not simple levers to pull when it comes to created jobs in a liberalized trading system.  And he sees this tension as perhaps coming to a head soon should the Trans-Pacific Partnership discussions yield a agreement.  If such an event occurs, the U.S. political class and general public will have to deal with the fact that the interests of multi-national, U.S. firms and the interests of the general public in quick job-growth do not align.  The outcome?  Only time will tell.

Simulate demand.  But, as Cunningham points out, such policies will lead to imports and national goods being consumed.  So, it’s a double-edged sword.

Education.  The education to simulate jobs is not academic, but rather more on the German model, Cunningham cautioned.  We need high-skilled, but not brain-powered jobs.  That is a long-term solution.

Trade—Increase Exports.  Now here its clear the administration is on the ball with goals, but how do we increase exports?  Well, the “dirty secret” Cunningham stated, is making our currency cheaper.  But, in the long-term, this may have people say this is “getting us in binds we don’t want to get into.”  And then there’s export bank initiatives, but with when Air India buys the American jets Delta announces they can’t compete and has to cut flights.  And, on top of this, it requires government funding, which Cunningham stated, is very difficult in this climate.

“The most dramatic change in trade I’ve seen in forty years of doing this," is that trade priorities are changing for U.S. businesses because businesses are changing what they want.  They don’t want to export goods from the U.S., but rather they want global supply changes to get lower labor costs and favorable regulatory changes.  One key example, Cunningham stated, was the exchange between Obama and Jobs:  Jobs made clear that Apple jobs in China aren’t coming back to America.  Why?  Mobilizing financing, workers and regulatory conditions to facilitate Apple productions.

Growth Markets in the Emerging Countries of South Asia, China, and India, but these are the countries where the trade barriers remain.  How do we fix this?  Get the developing countries to reduce their barriers, and they don’t want to play this game without major concessions on agriculture and other matters the developed countries don’t want to budge on.  And how are we trying to deal with this?  The Trans-Pacific  Partnership is focusing on the behind the border issues.  Private industry holds more hope in the TPP than Doha is resolving trade policy differences between developed countries and the emerging economies.  And, if the TPP comes up with a agreement, the body politic will have to face the difference between (1) promoting jobs and (2) promoting growth for multinational firms.