Former Trade Negotiator Says WH Remarks Don't Change TPP Calculus Much
A day after the White House's primary spokesperson said that if there's an opportunity to renegotiate the Trans-Pacific Partnership, that's a discussion the U.S. could join, a former White House trade negotiator said the path to reentering the TPP is so steep that he doesn't think it's likely in the next few years.
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But Clete Willems, a partner at Akin Gump, said China's formal request to join the TPP "has created pressure on the U.S. to further elaborate on an economic agenda for the Indo-Pacific," which is welcomed by many business executives with interests in Asia. "They are taking that seriously and thinking about how to engage," he said in a phone interview, referring to the Biden administration.
Press Secretary Jen Psaki, during a White House press conference, continued to say that the president is not interested in rejoining the TPP without changes. "There would be a lot of steps for that to be taken in order for that to be a viable option to the President," she said, according to a White House transcript.
Willems said those kinds of negotiations this year are unlikely, and what's more likely to be the focus of trade talks in Asia is a digital trade agreement. "I think this will give greater impetus to those efforts," he said, which could boost companies that sell services that currently face non-tariff barriers in TPP countries such as Japan and Vietnam.
Even though China's announcement may push the U.S. to engage more with TPP countries in Asia, Willems said he doesn't think it's likely China could join the TPP "any time soon. It’s just very difficult to see how they could possibly meet the standards in the agreement. I think there is a long runway before they could possibly become a member," he said, and he said that TPP members such as Japan and Australia "are very clear-eyed about the nature of China's economy," that that economy conflicts with the rules in the TPP, such as disciplines on state-owned enterprises.
But, even so, he said, "if you go through the accession process it can deepen conversations on these matters. It’s imperative that the U.S. step up and do the same."
When asked if rejoining TPP is as high a priority for business executives as a more generous Section 301 exclusion process and removing some of the 301 products from the list, Willems said "most people realize that is a more achievable outcome."
Willems, who was a party to the phase one negotiations with China, said that negotiators did not envision when the first $50 billion worth of imports was identified for the Section 301 action that the U.S. would end up hiking tariffs on $350 billion worth of imports -- nearly all non-medical imports from China.
"We were never supposed to be in a position where we had 350 billion [dollars] in tariffs for perpetuity," he said. Rather, the idea was that hiking tariffs for a short period of time would get China to change its behavior.
"I do think it’s time for them to revisit the list," he said, as there are some targeted products where the tariffs "are clearly hurting China more than the U.S.," and other products where the increased costs hurt the U.S. economy, and the tariffs don't matter at all to China.
The USMCA requires the U.S. to notify Canada or Mexico if it enters trade negotiations with a non-market economy -- and Vietnam, a party to the TPP, is a non-market economy. But Willems said "Vietnam wasn't the primary concern of the Trump administration when we drafted that provision," and that getting better export access into Vietnam is necessary, both for geopolitical reasons in Asia and because, Willems said, the U.S. is now at a disadvantage to competitors in Canada and Mexico that are in the TPP.
In past conversations about the U.S. wanting to reopen the TPP, other countries have been wary (see 2009300025). Last year, Chan Heng Chee, ambassador-at-large with the Singapore Foreign Ministry, said, “The countries would like to see the United States come back, but not at any price.” She said they don't want the U.S. to make “very substantial demands again.”
Willems said that if, in the future, the U.S. wants to reopen negotiations with TPP countries, there would be a way to get around the most contentious problem, the reduced auto tariffs in the U.S., paired with looser rules of origin for autos assembled in Japan or Vietnam.
He said the U.S. could simply say it didn't want to take on the auto disciplines, and that, combined with a little more on labor, and some less controversial updates to chapters, could be sold domestically and to other countries. "I don’t think that would be a bar" to reentry, he said.