Monday 23 May 2016 4:59 am

Barack Obama must nail down his free trade deals before the protectionist takeover


Tom Welsh is City A.M.'s business features editor.

Tom Welsh is City A.M.'s business features editor.

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Washington – A few years ago, in a predictably thorough fashion, the Chinese government commissioned a study of the documented historical cases where rising powers had challenged dominant powers for leadership of the international system. The currently-rising Chinese (who went all the way back in time to mine valuable lessons from Thucydides about Athens and Sparta) wanted to know what history says about how they and currently-dominant America are likely to get along in the coming decades.

Of course, the big money question – by far the most important political risk variable in today’s world – is whether China emerges as a status quo power, bolstering the current system, or a revolutionary power, determined to supplant American dominance. The answer to the sphinx’s riddle of which road Beijing takes will do much to determine the nature of the world our children inherit.

Read more: China: The end of dreams and the return of sanity

To keep an American-dominated world order intact, the US has to make the grand geostrategic choice confronting Beijing starker and clearer, making the rewards for working within the present system greater, and the penalties for trying to upend it far more onerous.

The true centrepiece of American policy in Asia is the Trans-Pacific Partnership (TPP), the region-wide free trade deal which is both a gigantic carrot and a gargantuan stick. With TPP, the US pivot to Asia, though still difficult, has a sporting chance of blunting or redirecting Chinese ambitions. However, without TPP, the whole strategy collapses, destroying American credibility in the region. This makes the battle over TPP’s congressional ratification easily the most consequential foreign policy task remaining for Barack Obama’s presidency.

The accord is such a great geopolitical weapon for America that it wins whatever the Chinese do. TPP works as an ideal carrot, as it harnesses the world-beating dynamism of the Pacific Rim, making being a member an economic no-brainer. If China does not choose to join, and rival India does in the near term as expected, Beijing has excluded itself from the most vibrant economic grouping in the world.

Read more: The US’s attempt to halt China’s rise is a blunder

If it does join, it does so on America’s terms. One of the conditions of accession is that State-Owned Enterprises (SOEs) must be liberalised. In the case of Beijing, this would subvert the inefficient pillar that helps keep the ruling Communist Party in power, forcing a more general liberalisation of Chinese society which would benefit its people as well as pose an increasing threat to the regime. TPP simply has no strategic downside for America.

If the maddeningly somnambulant Obama can’t rally a bipartisan congressional coalition to ratify TPP in between rounds of golf, populist resistance to free trade in the ongoing presidential campaign makes it unlikely his successor will – be it Hillary Clinton or Donald Trump. Ominously, Obama has been eerily quiet on the issue since TPP’s February signing. Even though the deal is the central component of the Asia pivot, there is no sign that the White House is prepared to go to the wall for it – as it obviously should – in the face of increased protectionism.


Given the compelling incentives TPP would provide China to change its behaviour in America’s favour, its ratification would be a crowning moment for Obama’s worthy strategic efforts to make American foreign policy fit for purpose in our new multipolar era. On the other hand, after the painstaking negotiations involved in concluding TPP, a failure of Washington to ratify the accord would amount to nothing less than the suicide of America’s Asia policy, as huge doubts would mount among countries in the region about US resolve and strategic direction.

It would be America’s greatest self-inflicted wound since Iraq, as well as Christmas come early for Beijing, as the countries in the region would almost certainly become more quiescent toward China because a gormless America would be seen as an ally that simply cannot be trusted.

So it is time for the President to put his golf clubs away for now. Ideally, Obama would urgently call upon Congress to ratify TPP and eloquently recommend its merits to the American people. But in an election year, the more likely pathway for TPP’s ratification is if Clinton wins the election in November. Although she now formally opposes TPP, probably precluding her direct pursuit of ratification, her past support for it suggests she might tacitly give Obama the green light to seek ratification in the lame-duck session before her January 2017 inauguration.

Whatever the specific political strategy, the first and vital step is for Obama to lock down the most important foreign policy initiative of his time in office, and to do it now.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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