Xi Upstages Obama, Puts Another Nail in TransPacific Partnership Coffin

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 Clive:

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.

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  1. damian

    Excellent read of the tea leaves.

    In the land of the Poseur as POTUS or as Paul Singer says: Fake UE rates, Fake CPI, Fake Growth Rates is inevitably………. Fake Everything!

    1. Greenbacker

      lol, Paul Singer is a traitor to America. Plutocratic, usury abiding shrill. Fake my backside. Either understand it or don’t post.

  2. wbgonne

    Very interesting. If I read this correctly, Japan and China are effectively rejecting the U.S.’s demand for pure neoliberalism and fashioning a practical ad hoc approach instead. Perhaps this means that the world is awakening to the evil of the neoliberal ideology. A practical, i.e., empirical, view makes neoliberalism’s failures plain. And after all, unlike America, China has no deep historical or cultural obsession with capitalism and certainly not with its ideological offspring.

    1. susan the other

      This is a fun thing to watch. When Xi received Obama’s handshake he smiled warmly and reached out with his left hand to pat him. When Xi received Abe’s handshake, Abe gave him a personal greeting with a smile and Xi completely shunned him leaving Abe to look totally puzzled. Xi turned away and stared stone-faced toward the photographers and Abe was totally one-upped by Xi’s inscrutableness. Which leads me to think Xi is certainly a good actor. And maintained his own composure impeccably. Xi was playing the Japanese off against America as much as Abe was playing America off against the Chinese. If my suspicions are right, there is a lot of unspoken saber rattling going on here and it’s the real underlying business but pretends to be about free trade (US) and/or whatever trade works best including allowing SOEs (China). Japan is the American outpost to be sacrificed in any hostilities and China knows this as well as Japan does.

  3. lakewoebegoner

    “the exact opposite of what Obama’s famed “pivot to Asia” was meant to achieve. ”

    for whatever reason (probably pure corporate greed-driven tunnel vision), Obama + Co. have been even more tone-deaf to the cultural, historical sensitivities of Asia than what’s par for the stereotypical insular American.

    1. NotTimothyGeithner

      Obama and his ilk are neoliberals. They don’t respect other cultures. Yes, they might deem themselves to be hip and more worldly than a poor American, but the message from neoliberals is other cultures should change to reflect “American values.” Oh sure, they might know the language morphed from pictographs, but there isn’t any genuine respect for how even that might change how people think.

      Democrats have been contemptuous of rural whites for years despite rural whites approving of Team Blue more often than suburban whites who go to Starbucks. Do Democrats try to help poor, whites or reach out to them? Nope, they want the vote of surburban jerks. Oh sure, they might name drop Davey Allison as their favorite Nascar driver*, but I think the Democratic treatment of Hispanics is telling. TeamBlue promised the Dream Act in 2008 and received overwhelming support. They then proceeded to support growing wealth inequality policies, dumped all over immigrants, and embraced Dubya’s pro-corporate immigration policies, and while they did this they smugly expected Hispanics to worship at the feet of TeamBlue because they have better celebrities? Why would these neoliberals be any different abroad? Neoliberals are contemptuous of others.

      After all, red state types don’t get out very often, but ugly Americans are everywhere.

      *I’m going to hell.

  4. jgordon

    In a way, it’s a good thing that the Obama regime is so sublimely incompetent. If it were actually good at accomplishing its evil ends, the world would surely be in a much deeper crap pile than it is currently.

    On a deeper level this seems to be a rather profound axiom of human nature: the bigger and more powerful a particular social group becomes, the more incompetent and clueless its leadership becomes–thus imposing some sort of hard practical time limit on the life span of large scale social organizations (such as governments) in human societies. And perhaps we could find a second axiom in all this, that like a star, the scale and mass of a system has some direct correlation to how quickly it burns itself out.

    1. Mel

      It’s a matter of complexity, as the Archdruid is saying lately. The Washington players who have jobs are the ones who didn’t take their eyes off the Washington Politics ball. People who look up for a glance at the world get defeated.

    2. ifthethunderdontgetya™³²®©

      On the other hand, jgordon, let’s not forget that Obama squandered the best hope for change we’ve had in this country. We’re going to continue being ruled by short-sighted greedy plutocrats until global warming brings us the kind of change we’ll regret living to see.

      1. wbgonne

        Yes, the squandered opportunity costs will be what Obama is remembered for in history. The last real chance to avoid worldwide environmental calamity and Obama betrayed us. That he did it cynically and duplicitously — and continues even now — shows the depths of his ideological depravity. He is a monster.

    3. susan the other

      I like your axiom analogy to a big star going nova. We can actually see it happening. We became so big and powerful and unbalanced we’re kinda goin off like a quasar. Because what do you do with all that synthetic money and all that ruthless power when you have to keep reinvesting in your national interest and your national interest can only be satisfied by a return on investment in power. We have become more and more ruthless just to maintain our position.

  5. C

    Yves, the Guardian is now reporting that Abe is prepping for snap elections next year. I would be curious to know what Clive thinks this will do to the TPP. On the face of it, it seems that this would prevent him from doing anything substantive with it before the election and likely before Obama’s term ends.

    1. Clive

      This will be an interesting thing to watch. Obviously for some big Japanese business interests, they will lobby for the TPP to remain a plank of the next administration’s industrial policy (regardless of whether Abe, or, indeed, the LDP figure in that next administration).

      But public opinion in Japan is, at best, ambivalent about the TPP and at worse actively hostile. The LDP might consider it to be an electoral toxic substance and quietly drop it from any campaigning. Or they may try doubling down on the neoliberal snake oil. That could go either way and it’s a question which goes to the heart of a lot of pretty profound considerations for Japan, its place in the region and how it thinks it should relate to both its friends and its foes — I’ll report back in NC with what emerges!

      Abe could quite easily drop the TPP and no-one would miss it in terms of it being an electoral asset, like I say, if anything it’s a liability but overall it’s a big “ho-hum” for Japanese voters. The election will be dominated by 1) nuclear reactor restarting (or not) post-Fukushima 2) the sales tax and 3) endless bribery / abuse of office scandals.

  6. Another Gordon

    One aspect not covered here is how this might play out in Australia. I assume – and this is purely a guess – that China will not be happy to see a major raw material supplier drawn too tightly into the US fold. So, it might drop heavy hints that doing so would be very bad for key Australian exports like coal. Oh wait … they already did that with selective coal tariffs imposed very recently. Tony Abbott could find himself caught in the jaws of a vice pretty soon; it really couldn’t happen to a more deserving person.

    1. susan the other

      I wondered about China limiting its imports of AU coal because it was such interesting timing. It was announced before China and Russia actually did the first natgas pipeline deal. And combine that with Obama’s generous offer (and Xi’s to Obama) to match China in CO2 emission reduction by 2030 (even knowing he would be trashed by the entire American oil lobby) and then combine that with the sharp drop in Saudi prices… we live in interesting times.

  7. grayslady

    Thanks to Clive for his always informative analyses.
    The Chinese are among the most aggressive business people in the world–whether in mainland China, Taiwan or Hong Kong. It’s almost as if business savvy is in their genes. They also seem to have government programs available to help independent businesses. Back in the 1980s when I traveled to Taiwan and Hong Kong on business to feel out what capabilities they had that might help my company, their universal response was “tell us what you need and we can get it done”.

  8. ProNewerDeal

    Yves, great news that TPP is unlikely, at least soon. Thanks Yves! Your unique reporting on this topic, “mainstream news” like the PBS Newshour or MS-DNC or Faux are not covering this topic competently, if at all.

    Perhaps a pro-USian economic rights/social insurance groups (like the PCCC, Social Security Works, unions, Nader’s consumer rights group, etc) should lobby Chinese PM Xi to also kill the Grand Ripoff? On the grounds of Macro Econ 102 understanding that if the Grand Ripoff is passed, the already weak US consumer demand (the C in the GDP formula) will worsen, as 99% (or at least 80%) of USians will have no/little discretionary income in an eliminated/crapified/voucherized/or age 75’ized scenario for Medicare/SS. Without Medicare, the portion of USians that are fortunate enough to be able to save, need to stack a huge rainy day fund ($200K minimum?) earmarked for future “known unknown” Sickcare Industrial Complex/Mafia’s Extortions. Decimating USian discretionary income will hurt Chinese manufacturers, 1 of their major customer segments being the USian consumer & their discretionary income.

    Perhaps given Citizens United, Xi could fund an PAC with some generic funders-obscuring name (“Americans For America PAC” or “Real ‘Mericans Support Medicare4All PAC”, etc) devoted to lobbying/purchasing venal US poli-trick-ians, for increasing US social insurance w Medicare For All, not crafifying/eliminating it like ObaMaconell are attempting to do.

    Could this be a case where the cliche “the Enemy of the Enemy is My Friend” may hold? I guess we “live in interesting times” like the other, Chinese, cliche says.

  9. psychohistorian

    I encourage folks thinking about this to stand back and take a broader view of the past 15 years.

    America has become a rogue nation guilty of numerous war crimes (way beyond anything China or Russia has done in the same period) and continues to bully the world with drones and the US dollar. Because the sociopaths in charge of the US are able to initiate nuclear winter and since we are the ones that had the audacity to use nukes in the first place, we are viewed as quite dangerous. And now the US empire is in crisis down from its own internal inconsistencies and fighting hard to keep all the parts from blowing into smitherines….a cornered rat.

    It is no surprise to me that non-aligned nations are working together to develop alternatives to the vice grips that the US has on economic functions. A realignment of global power is now on the world’s event horizon and we are marching toward it. Will that realignment take us to nuclear winter? I sincerely hope not. But, I for one, think it is good that the rest of the world is standing up to the sick bully America has become, even to its own citizens.

    1. JerseyJeffersonian

      Particularly to its own citizens, and particularly so as it goes down the chute. When US power internationally goes down, and our Elite swinging dicks start to get cut out, in this country neofeudalism is in a direct line from neoliberalism. I see the signs around me; if you want to have a life-style, hell, if you want to eat, increased loyalty to your local latifundia is your only course. Of course, loyalty only runs one way.

      But maybe not. If people finally begin to see how government really and truly has for the most part become captive to the interests of the 1% who use it as a bludgeon to compel compliance with their strip mining of the citizenry for their own aggrandizement, and this development is accelerated by the loss of agency of US neoliberal institutions on the international stage, things could go sideways for the Lords of Finance.

    2. Nathanael

      I for one welcome our new Chinese overlords.

      Given how unhappy most Americans are with our sick, war-criminal, lawless torturing government at this point, I actually anticipate that things could go *relatively* smoothly. Empires collapse from the outside in; eventually we will get a democratic revolution in the US, but *first* the US will have all of our foreign outposts cut and we will be driven out of the rest of the world. I’m not sure what alliance will do that. But I see the parallels to the past collapses of other empires run by dangerous madmen. The alliance will form and it will succeed.

  10. Clive

    Apologies to all, the NHK link referred to above is broken (NHK are terrible for not keeping links valid) and I can’t now find the exact original but this link is an abridged version (it now says Abe is “believed” to have made the comment so I guess there was some doubt about what he actually said). Abe seems to be moving away from a TPP-only approach towards something much more multilateral.

  11. Rosario

    Some form of TPP will get shot out of a cannon regardless of political posturing. Most (if not all) of the countries involved have passed the mandatory protectionism phase to develop native economies and, as is inevitable with Capitalism, they seek to tear down tariffs/subsidies to either build consumer cultures or perpetuate them. It’s only interesting because China may be involved (and I’m sensing their growing 1% strongly desire it). Besides I’m not hearing the alarm this article is speaking of. With the exception of the few sane politicians left. Note the current senate majority leader and the president are on the same page regarding TPP, and it is one of the only things they are going to agree upon.

    1. flora

      maybe. but China is declaring that it controls the sea lanes in the South China Sea, vital trade routes. The US ability or willingness to defend those open waters is waning. Control and guarantee of trade routes is an important and under-appreciated aspect of the TPP negotiations. I think it enters the calculations of the affected countries.

    2. Clive

      I agree on the broad thrust of this argument but not narrowly. In order to get a deal everyone involved in the TPP must come to some sort of agreement. Japan has indicated as explicitly as it can and with 100% consistency that it cannot / will not acquiesce to U.S. demnds about dismantling agricultural tariffs. Other countries are similarly insistent on their pet areas of concern such as SOEs or patent protections for medicines. So even if the U.S. can get its political act together to continue meaningful TPP negotiations, unless the U.S. negotiating team can drop its bone-headedness, there will never be a deal as far is the other countries go.

      Quite why the U.S. Has made itself such a hostage to such othodox economic dogma is beyond me, but it has.

  12. Jay M

    Obama is the worst case of branding misuse that you could imagine. The guy could of lead a soft revolution. Instead he gets rolled by the torturetariate.
    Change you don’t hope for.
    Now the demi-mode, lizardly deals proclaimed as bipartisanship while the billion dollar prize moves closer as the heaven moves along.

  13. Demeter

    One my left, Obama and his neoliberals, offending everyone on the planet, at home and abroad.

    On my right, the Tea Party, seeking to make sure that Obama’s agenda is DOA, no matter what it is, and Obamacare is going down, too. After that, the Federal Reserve….I hope they can get it all done in two years!

    It’s a win-win, IMO. Nothing horrible can happen because of it, because only the Horrible is on the agenda.

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