In the wake of the Republican trouncing of the feckless Democrats in the midterm elections, there’s been an upsurge of calls of alarm on both the right and the left that the Administration and its big business allies in both parties will try to push the toxic trade deal known as the TransPacific Partnership through. That is in part due to Administration messaging that the talks are gaining momentum, as Obama asserted a mere two days ago. But not only do the negotiations appear to be going nowhere, but the Administration appears to be losing clout in the region as China is playing a considerably shrewder trade and investment game.
First to the TransPacific Partnership talks. It’s a fixture of negotiating to create the impression that a deal is moving forward to keep pressure on the parties involved. So statements like Obama’s about momentum need to be taken with a fistful of salt.
While the Administration may indeed be hopeful of using the Republican midterm success to steamroll largely Democratic party opposition, the state of play overseas is another matter. Japan is an absolutely essential participant in the TransPacific Partnership. And the US has completely mishandled the island nation. The Japanese have made clear that the US needs to stop trying to dictate terms and instead needs to negotiate. The US Trade Representative, Michael Froman, has instead taken the worst course he possibly could with the Japanese, that of repeatedly criticizing Japan in public (see here and here).
In addition to being able to convince prospective trade partners that the Administration could overcome Congressional gridlock and get “fast track” authorization, Obama had planned to give a big push to the TransPacific Partnership, and his Asian agenda generally, at the APEC summit last week.
Filtering what is going on in Japan through the Western media is hugely unreliable. Even so, a story in Reuters last week, that the Japanese economics minister said it would be difficult to conclude the TransPacific Partnership by year end. “Difficult” is a third-rail word in Japanese; “impossible” is a more accurate translation.
Given the riskiness of trying to calibrate what is happening in Japan from the foreign media, I pinged our Japanese-reading cultural commmentator Clive for an update. I had first asked him about the reporting in Japan on how US election results would affect the TransPacific Partnership negotiations. An article in the English language version of the Nikkei said that if the talks failed, “it could cast a shadow on global growth and security,” suggesting that there was some sentiment in Japan in favor of the TPP. Clive’s reaction:
It is interesting only in as much as it’s a good example of how the Japanese press – when targeting an English-speaking and presumably a largely U.S.-centric audience – doesn’t give the typical Japanese views but instead parries what it understands (often quite incorrectly) to be representative of conventional U.S. opinion.
From last Thursday’s edition of the same newspaper (!) but in the Japanese language version there’s this for example http://mw.nikkei.com/tb/#!/article/DGXKASGM05H1Y_V01C14A1EA2000/ .
The first paragraph references the difficulties with Japan-U.S. TPP negotiations up until now and raises the topic of whether traditionally “pro business” Republicans might be more amenable to reaching a deal but says that it is difficult to read how much, well, can be read into this supposition.
The second paragraph goes through the usual stuff about how the Republicans in Congress would now be even more confrontational (with majorities in both houses) but are in favour of “open markets” and the promotion of “free trade”.
So far, so boilerplate.
The main conclusion as far as the author of the Nikkei article goes is in the third paragraph. I’ll translate that in full:
On the 5th, Hiroshi Oe, (Japan’s) chief tariff negotiator who faces off (to counterpart) (Darci) Vetter, the U.S. Trade Representative’s chief agriculture negotiator in the agriculture tariff consultations met in Tokyo. Mr. Oe told reporters the election result meant “I do not think that there is a big change there”. But he thought that “the view is getting considerably better*” and pointed out the possibility of (TPP) negotiations progressing.
* a more colloquial translation is “you can now get a good look at things”
Oe’s first utterance is crystal-clear. In terms of the TPP negotiations, the midterms don’t really change a thing. The second statement is a little more cryptic, your classic Japanese it-could-mean-X or it-could-mean-Y, with both possibilities gloriously co-existing in the same sentence. The view of what, exactly, is getting better? One view that I can guess that Oe would be referring to is the one of Washington politicking which will now go into well-honed “red congresscritters do their level best to make lame duck Obama’s last two years as miserable as possible” mode. Certainly from the first part of his statement, he’s not expecting any magical TPP-enabling developments.
The next paragraph in the Nikkei article explains how GOP politicians would be expected to be in favour of the TPP due to its potential to add impetus to U.S. agricultural exports to Japan.
But the final paragraph takes delight in regaling Japanese readers with a litany of recent outrageous displays of shamelessly partisan Republican troublemaking in Congress and points out that, outside of trade, any notion of bipartisan cooperation is – as the Japanese would say – just wind in the horse’s ear.
U.S.-based readers do often seem to discuss the possibility of “grand bargain” type manoeuvres from Obama, but outside the U.S. (and this includes Japan), not wishing to tempt fate, we’ll believe it when we see it.
I then pinged Clive a few days later to see if Xi had indeed upstaged Obama at the APEC summit as badly as it appeared. My queries:
Just wanted a sanity check.
1. US press has a lot of coverage of what Obama is saying he wants to achieve from his visit. But I see nothing regarding any Asian leaders affirming his priorities. I assume that silence is real and telling.
2. Am I also correct to assume that China has trumped Obama by:
a. The Xi-Abe meeting? I assume that dominated headlines in Japan and also puts a focus (again) of the importance of playing a clever game between the US and China. Which clearly takes the wind out of Obama’s sails at a time when he wanted to push the US agenda
b. Its efforts to get its own regional trade deal? Even though the US appears to have stymied that, I would assume it has spent what little political capital it has on that, and thus has even less remaining to push the TPP through. In other words, the China effort may or may not have been serious on its own, but it looks to have checkmated any dim hope of reviving the TPP.
From the top….
1. Yes, pretty much everything I’ve been reading in the Japanese press since the mid-terms is about the changes in the congressional make up. Obama, if he’s mentioned at all, is only talked about in terms of how difficult it is for a lame duck president to do anything useful. For the Japanese coverage of APEC conference, Obama’s profile is way behind China and barely on a level with Putin.
2. Oh yes, definitely!
a) The APEC conference has got a tonne of press coverage in Japan. Much of it favourable e.g. http://www3.nhk.or.jp/nhkworld/english/news/20141111_27.htm (Abe’s reported comments there are interesting). The APEC announcement really is a masterstroke, clearly long planned and China has pulled off the stage-management superbly. The optics play well both in China domestically and also regionally.
China has done everything right… the Entente Cordiale from China to Japan stops sniping about petty Senkaku Islands / Shrine visits / air-defence identification zone grievances (for a while)… the sales pitch by China on a regional trade agreement offers an alternative to the TPP… cosy talk about resolving border/territorial disputes makes China look like everyone’s New Best Friend… the timing is perfect too, taking maximum advantage of the waning ability of the U.S. to take effective action in the Asia-Pacific region (and this was a bit of luck for China but also a bit of judgement; no-one could tell exactly how the U.S. midterms would pan out, but it was fairly predicable that the Dems would get whacked thus weakening Obama; China had obviously made plans to capitalise on the Congressional thumping, which when theory turned into reality China was all ready to implement.)
The U.S. would need to be really – really – smart to regain influence but even if the USTR and the U.S. Department of State had brain transplants, everyone in the region knows that a dysfunctional Washington means that even then, it is virtually impossible for Obama to get anything done.
b) And the pitch from China for a regional trade deal is very sensible: “we’ll do it if it is of genuine benefit to the countries concerned and we’ll do it on a case-by-case basis”. So if you don’t like restrictions on (say) SOEs, fine, we won’t make SOE reform a precondition.
The approach for China’s trade pact is seemingly NOT a slavish adherence to some increasingly discredited economic theorems (like the lines the TPP has been run along) but instead on a practical, cement-on-the-ground basis. There’s a big emphasis on infrastructure. You’ve got goods which you’d like to export to China but no deep water ports capable of handling the next generation of container ships? No problem, we’ll both lend you the capital to finance them and help you build them. Crappy transport links hampering rural development? Let us leverage our experience of high speed rail construction.
And this isn’t just China trying to muscle in on buying up chunks of foreign assets. It’s promised to spread the love in terms of placing the juicy contracts with local and regional suppliers. Oh, and China can diversify its investments into something more akin to a sovereign wealth fund.
Of course, we can be justifiably cynical and point out the problems which could emerge with all of this (there are many, the potential for graft and corruption top my list). And I don’t suppose any of the countries in the region are so naïve they can’t see what China is up to and how it might not all be quite as nice as it sounds. But compare and contrast China to the U.S. when it comes to regional trade deals. The U.S. is offering a miserable bowl of neoliberal gruel to the TPP participating countries and a bizarre take-it-or-leave-it attitude to negotiating. China is offering the promise of an apparently unlimited supply sweeties – without the calories too. Which is the easier sell?
China isn’t my favourite country by a long, long way. But it has demonstrated here how it knows how to make the U.S. look utterly inept. Certainly from the JP press coverage, China has stolen the APEC show.
The remarkable thing about this is that the Administration so believes its own PR that is it almost certainly incapable of admitting how it is making it easy for China to end run the US in the region, the exact opposite of what Obama’s famed “pivot to Asia” was meant to achieve. The big thing that the US had going in its favor was China’s belligerence as far as its territorial claims are concerned. That made China look reckless and dangerous enough for the US to look like the less bad hegemon. If China can manage to contain those impulses, it is positioned to score lasting gains against the US.