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Friday, January 28, 2011

The Trans-Pacific Partnership Agreement

Ian F. Fergusson
Specialist in International Trade and Finance

Bruce Vaughn
Specialist in Asian Affairs

The economic and strategic architectures of Asia are evolving. One part of this evolving architecture is the Trans-Pacific Partnership Agreement (TPP), a free trade agreement that includes nations on both sides of the Pacific. The original TPP, an agreement among Brunei, Chile, New Zealand, and Singapore, came into effect in 2006. The United States, Australia, Peru, Malaysia, and Vietnam have committed themselves to joining and expanding this group. The fourth round of discussions among the nine countries took place in Auckland, New Zealand, during the week of December 6, 2010.

Other architectures, such as the Association of South East Asian Nations (ASEAN), Asia-Pacific Economic Cooperation (APEC) forum, and the East Asia Summit (EAS) have both economic and strategic aspects. They can be grouped into two categories: (1) groupings that are Asia-centric in approach or origins and exclude the United States, and (2) those that are trans-Pacific in nature and that include, or would include, the United States and other Western Hemispheric nations. The TPP is one vehicle that could be used to shape the U.S. agenda with the region. The United States, by signaling its intention to join the EAS and by working to elevate its relationship with ASEAN to a more strategic level, appears to be shaping regional architectures in a way that will be more inclusive and trans-Pacific in nature.

Asia is viewed as of vital importance to U.S. trade and security interests. According to the U.S. Trade Representative, the Asia-Pacific region is a key driver of global economic growth and accounts for nearly 60% of global GDP and roughly 50% of international trade. Since 1990, Asia- Pacific goods trade has increased 300% while there has been a 400% increase in global investment in the region. The United States has pursued its regional trade interests both bilaterally and through multilateral groupings such as APEC, which has linked the Western Hemisphere with Asia. There appears to be a correlation between increasing intra-regional economic activity and increasing intra-regional political and diplomatic cooperation. Many observers view the more recent intra-Asian Association of Southeast Asian States (ASEAN) plus three—China, Japan, South Korea—and the ASEAN plus six (also known as the East Asia Summit)—China, Japan, South Korea, India, Australia, New Zealand—groups as having attracted more interest within the region in recent years. China’s rapidly expanding economy and Japan’s developed economy have made them attractive trading partners to many Asian nations. Until recently, many regional states also viewed the United States as having been distracted by events in Iraq and Afghanistan. This had led some to increasingly look to China and Japan as key partners. China may be shifting to a more assertive posture in the region, which may affect relations in the region. Secretary of State Clinton attended the East Asia Summit in Hanoi in October 2010 and President Obama stated he plans to attended the 2011 East Asia Summit in Jakarta.

U.S. participation in the TPP involves the negotiation of FTAs with New Zealand, Brunei, Malaysia, and Vietnam. The United States currently has FTAs in force with Chile, Singapore, Australia, and Peru, although these agreements may be reopened depending on the outcome of the negotiations. Bilateral negotiations with New Zealand may focus on agricultural goods such as beef and dairy products. The possible inclusion of Vietnam has proven controversial from the standpoint of certain U.S. industry groups, such as textiles and apparel, as well as those concerned with labor, human rights, and intellectual property issues. The involvement of Vietnam could add a higher level of difficulty, yet is illustrative of the challenges associated with developing a truly Asia-Pacific-wide trade grouping. All the potential parties may face complex negotiations in integrating the myriad FTAs that already exist between some TPP parties.

Date of Report: January 10, 2011
Number of Pages: 22
Order Number: R40502
Price: $29.95

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