Forging the Trans-Pacific Partnership: An Insider's Take

By Ankit Panda

June 10, 2015

http://thediplomat.com/2015/06/forging-the-trans-pacific-partnership-an-insiders-take/

Francisco Sanchez discusses the Trans-Pacific Partnership and U.S. economic relations with major Asian economies. 

The Diplomat‘s Ankit Panda spoke with Francisco Sanchez, former under secretary of commerce for international trade at the Department of Commerce in the Obama administration, about the Trans-Pacific Partnership and the United States’ economic relations with major Asian states.

The Diplomat: The Trans-Pacific Partnership (TPP) has been described as the “economic” leg of the Obama administration’s ongoing rebalance to Asia. Could you describe how, in concrete terms, a concluded TPP would aid long-term U.S. strategic goals in the Asia-Pacific?

Sanchez: In recent history, economic ties have proven to be some of the best ways to cement global relationships. One example of this is the relationship between the United States and Vietnam. In the past 40 years, our two nations have gone from a state of war to one of commercial partnership. Annual trade between the U.S. and Vietnam currently stands at over $36 billion and a 2014 Pew poll found that over 75 percent of the people Vietnam view the United States favorably.

In my time in government, I saw first hand how commercial agreements offer leaders a way to improve the livelihoods of their people, while also building crucial interpersonal relationships. As the Asia-Pacific continues to grow in economic and political importance, I see the TPP as a way for the U.S. to strengthen ties with the four Asia-Pacific nations that are part of the agreement and also with those that may join it in the future.

What, if any, effect do the TPP negotiations have on the United States-China Bilateral Investment Treaty negotiations?

While China is not currently part of the TPP, Secretary of Commerce Penny Pritzker has made it clear that the deal is open to all in the Pacific region, including China. To date, China has decided to pursue its own trade initiatives. Regardless of the Chinese decision on TPP, however, the Bilateral Investment Treaty (BIT) stands on its own as a common sense policy for both China and the United States. It will establish binding rules to guide future of investments between the United States and China that are beneficial to both parties. As the United States and China share the most important economic relationship in the world, with trade between them totaling over $550 billion every year, such rules are needed to maintain stable commerce in the future. I think that both the U.S. and China recognize this. At Secretary [of State John] Kerry’s recent meeting with China’s Foreign Minister Wang Yi, Wang stated that both sides should move more quickly to finalize BIT. I am optimistic that this will happen soon.

Though the United States and India cooperate on a range of issues, the U.S. government has been critical of New Delhi’s approach to intellectual property. Is this an area where Washington and New Delhi will “agree to disagree” or do you expect some sort of concession from one side to the other’s approach?

In the near term, I think that intellectual property will continue to divide the United States and India. This is an unfortunate situation, but I do not see it as permanent. Through the leadership of Prime Minister Modi, India is at the beginning of shift in its economy, unleashing the immense human capital present in its over one billion people. It will build on its already robust services economy and it will also begin to grow its manufacturing sector, which has lagged historically. As it begins a shift, I suspect that India’s leaders will see greater value in the rigorous protection of intellectual property rights because they will have so much of their own to protect. Intellectual property rights drive entrepreneurs to develop their ideas into a reality and spur industry leaders to invest the time and energy to create new technologies that will make their businesses better. In the future, I do not envision India closing the door on these possibilities.

China’s new counter-terror law, revealed at the National People’s Congress recently, imposes considerable restrictions on how foreign technology companies are allows to handle Chinese user data. As a result of this law, U.S. firms may be forced to exit the Chinese market. What can the United States government do to protect the interests of U.S. technology firms in the lucrative Chinese market?

Fundamentally, the United States and China share more overlapping economic interests than divergent ones. It should be the role of leaders in both countries to find areas of cooperation, but also to express when certain policies are unacceptable. The new Chinese counter-terrorism law is an example of a Chinese law that goes too far in its scope and threatens to unfairly undermine American technology companies in China.

This fact should be communicated to Chinese leadership from the highest levels of the U.S. government. The Chinese government must understand that this law will hurt their own economy, by making international investors — not just those from the United States — wary of conducting business there. To his credit, President Obama has made this a priority. He has mobilized the members of his cabinet to speak to key Chinese ministers and also spoken out himself on the issue.

The Trans-Pacific Partnership has been criticized for favoring the interests of a concentrated economic elite over the interests of the middle- and working-class. How does the U.S. Trade Representative manage the influence of different interest groups pursuing an agreement like the TPP?

The most important thing the U.S. Trade Representative can do to influence the discussion surrounding TPP is lay out just how much it will help the American people. History shows that American workers are the most productive and creative in the world. When American products compete on the international stage, they are some of the best received, with “Made in the U.S.A.” standing as a mark of quality internationally. Better access to 11 other national markets means that America’s workers and middle class will be better able to compete on the world stage in the areas in which they can excel. For these reasons, the TPP will generate both growth and jobs for ordinary Americans. In my mind, the various opponents of TPP fail to see the huge potential that the deal represents for the larger American economy and are more focused on representing the interests of specific industries.