Michael Froman: Where the TPP Stands

The U.S. trade representative discusses why trade politics have been so tough

Source: The Wall Street Journal | June 19, 2016

Trade has been battered in this presidential campaign, by the left and the right. To better understand what’s happening, Jeanne Cummings, political editor of The Wall Street Journal, sat down with U.S. Trade Representative Michael Froman, the White House’s chief negotiator on trade issues. Edited excerpts follow.

CUMMINGS:Bring us up-to-date on the Trans-Pacific Partnership.

FROMAN:This deal includes 12 countries, representing about 40% of the global economy. We completed it in October, published it in November, signed it in February. And now we’re working with congressional leadership and the leadership of our committees to prepare for it to be taken up by Congress.

Hung up

CUMMINGS:It’s gotten hung up. What do you have to target to move enough votes to try to get it passed?

FROMAN:A handful of issues have been flagged as of concern, and we’re working our way through all of them. Some of the agricultural issues, for example, involving dairy or pork. I think dairy and pork are now in favor of the agreement.

There was an issue around the free flow of data and data-localization requirements for financial-services companies. We’re working our way through that right now. I think that’s trending in a positive direction.

The main outstanding issue has to do with intellectual-property rights, with biologics, pharmaceuticals. We’re working closely with Congress and industry to try and find a pathway forward.

CUMMINGS:Some members on the Hill say that’s the piece that has to be fixed to really unlock the door.

FROMAN:The agreement itself is very good on intellectual-property rights, on copyright, on trademark and, on pharmaceuticals, very importantly, on enforcement. It strengthens intellectual-property-rights enforcement across the board. This is an area where there has been division within the industry, between innovative companies and generic companies. We’ve come out with an outcome that raises the standards across the region. It all comes down to data protection and the period of years for data protection. The U.S. has 12 years. Other countries either had zero, five or eight years. We ended up at eight years. But we’ve gotten a lot of feedback from Congress that they want to make sure that eight years is real and that there’s nothing that’s going to undermine the standard in U.S. law.

CUMMINGS:Has it surprised you, given that Congress is now controlled by Republicans, how the trade issue has become more challenging?

FROMAN:Trade votes have always been difficult. We’ve had robust trade politics here since the North American Free Trade Agreement, since 1992, 1993.

What we’ve seen more recently is a real sense of anger out there after 15 years of wage stagnation, which is only beginning to turn up now, after widening income inequality, of feeling like the system wasn’t working for everybody.

Now, you talk to economists. They’ll tell you that the impact on wages and on jobs in the U.S. is more a product of automation than globalization, but both play a role.

The fact is you don’t get a vote on automation, on whether there’s going to be a new generation of computers or robots that might replace your job. You don’t really get to vote on globalization. It’s a factor of the containerization of shipping, the spread of broadband, the integration of economies like China and Eastern Europe that used to be closed and are now part of the global economy.

You do get a vote on trade agreements. So trade agreements become the vessel into which people pour their very legitimate concerns about job security, wage stagnation and income inequality.

Trade agreements give us an opportunity to open other markets to our exports and raise standards in those markets. It gives us a chance to shape globalization in a way that reflects our interests and our values. And that’s why it’s so important to get TPP done.

China’s part

CUMMINGS:How much does China inspire people’s unease with the global economy?

FROMAN:It is a significant factor, both because of the impact we’ve seen here as manufacturing has moved offshore, but also because of the perception that not all countries, including China, are perceived as playing by the same rules as we are. So the sense of unfairness people have about the global trading system, I think, becomes embodied, in part, in their perception of China.

CUMMINGS:Is that fair?

FROMAN:We have a lot of issues with China and are pursuing them through direct dialogue, from the president on down. We’ve just come back from China. Secretary Lew and Secretary Kerry led the strategic and economic dialogue that dealt with a lot of these issues.

We pursue it by bringing cases against China in the World Trade Organization. And we’ve won all the cases that have gone to conclusion. We need to continue to press them to live by their obligations and to support a rules-based trading system.

And that is why TPP is so important. Because China’s not part of the TPP. TPP allows us to help set rules for the road for this region at a time when alternative approaches are being put forward. China’s negotiating its own trade agreement in the region with 16 countries. And unlike TPP, it doesn’t strengthen intellectual-property rights. It doesn’t impose disciplines on state-owned enterprises to make sure that, if they compete with our private firms, they do so on a fair and level playing field. It doesn’t preserve a free and open internet and the free flow of data across borders. And it doesn’t deal with labor and environmental challenges and obligations and rights.

So we think it’s very important for this region, which is so critical to our economic well-being, and strategically, that the rules of the road reflect our values and interests.

CUMMINGS: Donald Trump is proposing much more punitive actions against China. What would a trade war with China look like?

FROMAN:Without commenting on any particular candidate’s proposals, if we were to impose tariffs on another country, they would have the right to retaliate and to impose tariffs on us. And there have been some estimates that something like that could cause a loss of seven million jobs, could put the U.S. in recession. Others have estimated that it would impose a cost of $6,000 for every American family. Because if you think about it, so much of what we consume comes from abroad.

And if you start putting tariffs on other countries, it’s going to immediately raise the price of consumer goods. But it’s also going to raise the price of inputs that go into manufacturing in the U.S. And we depend on these inputs to maintain our competitiveness as manufacturers.

CUMMINGS:But could this administration be tougher?

FROMAN:I think we’ve been pretty tough. But we are always looking to do more.

We’re continuing to look at their practices and practices of other countries. Wherever we find violations of WTO obligations, we bring a case. We brought more cases, I think, than any other country. We brought, I think, 22 cases now over the course of the administration. We’ve won every case that’s been brought to conclusion. More than half those cases have been against China. So we need to be vigilant. It’s also why it’s important that we focus on making sure that standards and rules of the road of the region are defined in the appropriate way.

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