Looking East: The Future of Asia and Free Trade

Charlene Barshefsky Charlene Barshefsky

Wikiemedia. The U.S. faces a massive geostrategic opportunity in Asian markets.

Wikiemedia. The U.S. faces a massive geostrategic opportunity in Asian markets.

Octavian Report: Given the bitter fight the U.S. has seen over TPP, do you think that the difficult politics surrounding free trade are going to worsen, or do you think that the bipartisan, moderate consensus around it will remain?

Charlene Barshefsky: The politics of trade have always been challenging. Even before NAFTA, when the U.S. was pursuing a free trade agreement with Canada, the authority to do that agreement barely squeaked by the Senate Finance Committee -- even though the committee was known as highly internationalist in view. That agreement is one of our oldest free trade agreements. The politics have never been positive. This is because there has long been a view -- incorrect, I believe -- that trade agreements damage the U.S. economy.

While I think it is the case that trade agreements can put wage or job pressure on lower-skilled workers in import-sensitive industries, trade in the aggregate is clearly a winner for the U.S. economy if one looks at the relationship of trade to GDP. The key for a politically palatable trade policy is to ensure that trade agreements are coupled with provisions to assist workers who might be dislocated by trade, recognizing that aggregate wealth in the U.S. is substantially enhanced by trade. Indeed, a third of the growth in our GDP is directly trade-related. I should also add that about 80 percent of job dislocation in the U.S. is due to technology, with the remainder being due to trade and many other factors.

OR: This doesn't seem to you a more difficult time?

Barshefsky: Look, these agreements are difficult to get through the Congress. Depending on the year, you're looking at a narrow band of votes that is slightly bigger or slightly smaller, but the band of votes for pro-trade Democrats has been very small for a very long time. The 28 votes for TPA in the House on the Democratic side came as something of a surprise to many observers; conventional wisdom was that the vote count would be lower. What has made the difference here is an extremely active Republican leadership that has pushed its members as far as those members could be pushed to vote with the President's agenda. But for that strong Republican push, this would have been a failed effort without question.

OR: This victory, then, could be seen as much as a political vindication of House Majority Leader John Boehner as much as anything else. Is that a reasonable interpretation of it, in your opinion?

Barshefsky: I think it's a reasonable interpretation. He's had to push his folks. He has a large coalition that is against trade and/or against taking any vote that would be viewed as favorable to the Obama administration. Boehner has had to work quite hard to get the votes and to compensate for the paltry number of Democratic votes.

OR: How do you see the TPP playing out now?

Barshefsky: It will conclude. There's no question about that, I believe. The administration will work hard to finish it quickly because the legislation poses quite a long notification requirement and a waiting period before actual votes on the trade agreement itself. The goal now is to get this done as quickly as possible before election season comes into full swing. They're going to be hustling to finish this agreement. I think there's no question about that. Trading partners will feel the pressure to complete it as well, because they don't want to jeopardize eventual Congressional passage of it. I think everyone will double down, concentrate, and make final trade-offs relatively quickly.

OR: When do you think there would be a conclusion? This year?

Barshefsky: Definitely this year. It has to be, in my view, or you bump the trade vote way too close to the 2016 presidential election.

OR: Do you think there will be a similar fight over that vote?

Barshefsky: There's always a fight. I would not expect to see the Democratic vote count change very much. Boehner again is going to be called on to ensure that his pro-trade caucus remains fully intact. He can't afford to lose any votes. Nor can the Democratic vote count fall.

OR: What do you think the current outcome means for the bigger political and policy aspirations of the Warren-Sanders wing of the Democratic party?

Barshefsky: It will remain as active as ever. Its members are of a firm view that trade agreements have been a negative for the U.S. I think this is a demonstrably incorrect view, but it appears to be their view, nonetheless. That view, which is also held by Big Labor, has become bedrock for many Democrats. I don't see that changing anytime soon.

I do think anti-trade Democrats will need to do some soul-searching. As this vote demonstrates, to the extent that Democrats take themselves out of the conversation by opposing agreements that will pass -- even if it’s by a narrow margin -- they will become more marginal players in an area and a field where being a marginal player is very dangerous. If Democrats want to ensure trade agreements appropriately respond to legitimate concerns, they need to play ball. Simply saying no, regardless of the provisions you do achieve -- such as robust labor and environmental provisions -- becomes counterproductive.

OR: What do you think will be the biggest effect of TPP?

Barshefsky: I think the single biggest effect will be to substantially strengthen and cement U.S. strategic interests in Asia, particularly as against a resurgent China. Reinforcing our relationship with our allies is critical to stability in the region. To me, the single most important aspect of TPP is anchoring the U.S. in Asia in a way beyond security alliances, and in a way that enhances the U.S. economy and the Asian economies -- and providing, in addition, something of a counterweight to China.

OR: Do you think that China should have been invited to join the partnership? Will it eventually join?