Obama Pursues Nine-Nation Pacific Trade Agreement

President Barack Obama is pursuing an international trade agreement with eight Pacific nations, from Chile to Vietnam. Obama and leaders attending the 21-nation Asia-Pacific Economic Cooperation conference in Honolulu this weekend will report on their efforts to forge a Trans-Pacific Partnership.

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Any accord with Pacific rim nations would be the first signed rather than inherited by Obama, and the biggest for the U.S. since the North American Free Trade Agreement with Canada and Mexico took effect in 1994, and the administration has ambitions to make it still bigger.

“We obviously got into this not just for those eight economies because we have trade agreements with half,” said U.S. Trade Representative Ron Kirk at the U.S. Chamber of Commerce in Washington on October 26. “We really believe that this has the potential to become the free-trade agreement of the Asia-Pacific, at least those 21 member economies.”

Any agreement would help Obama meet his pledge to double U.S. exports by 2015, from 2009 levels. Though deals with South Korea, Colombia, and Panama were pushed though Congress last month after Obama won approval for his revised versions of the deals, they were originally negotiated under President George W. Bush.

Any Pacific rim deal would be “uniquely this administration’s,” said William Reinsch, president of the National Foreign Trade Council in Washington and a Commerce Department official during the Clinton administration. “Its shape has taken form under this administration.”

Talks are currently centered on Australia, Chile, Peru, and Singapore, all of which already have separate free-trade agreements with the U.S., as well as Malaysia, Vietnam, Brunei, and New Zealand. However, Obama is looking beyond them to the prospects for adding Japan and China. Two-way trade between the U.S. and the eight aforementioned nations totaled $171 billion last year, while trade with China last year totaled $457 billion and trade with Japan totaled $181 billion.

Japan’s Prime Minister Yoshihika Noda said on October 28 that lawmakers were weighing their options, and would submit their opinions on whether Japan should join the talks by November 9. Noda plans to announce Japan’s decision on November 10 before he heads to the APEC conference.

Meanwhile, China’s commerce ministry said today that any regional agreements should not replace wider trade regimes, while South Korea’s ambassador said his nation is interesting in expanding trade opportunities once its assembly approves the pending free-trade agreement with the U.S.

The U.S. exports more than it imports from the eight nations currently in trade negotiations, resulting in a $7.6 billion surplus last year. However, trade with China last year resulted in a $273 billion deficit, while trade with Japan resulted in a $60 billion deficit and trade with South Korea resulted in a $10 billion deficit. The Pacific partnership the U.S. is advocating would help to remedy that imbalance.

China’s trade practices include currency manipulation and giving advantages to state-owned businesses, both of which violate standards being advocated by the U.S. Negotiating the accord without China could allow the U.S. to set new ground-rules for Pacific trade, according to Michael Moore, a professor at George Washington University in Washington.

“The United States needs to be aggressive,” said Moore, who served as an economist in the Bush administration. “You want to get the rules of the game solidified as a counterbalance to China and also so if China wants to join, they come in under our rules.” China has not yet received an invitation to accede to the Trans-Pacific Partnership.

Negotiations with Vietnam, a closed-market economy, will give the U.S. a chance to work through some of the issues it could face with China. “It’s useful because it shows we can expand this beyond just open-market economies and democracies,” said Michael Green, a senior adviser with the Center for Strategic and International Studies in Washington.

Japan is a better bet to join the negotiations in progress, said Kevin Gallagher, a professor of international relations at Boston University, adding that, “Japan changes the equation…If they’re not in it, there’s not much in it for the United States.”

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Prime Minister Noda’s Democratic Party of Japan is split over whether to promote trade to boost economic growth as the population declines, or to protect the nation’s farmers who might be hurt by lower tariffs and increased competition. Japan currently has some of the world’s highest agricultural duties, including a 778% tariff on rice. If Japan wants to enter into the Pacific partnership, it would have to sign on to the trade agenda already in development.