Rejoining TPP

Matthew P. Goodman

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MEMORANDUM FOR THE PRESIDENT

FROM: The National Security Adviser

SUBJ: Rejoining TPP

DATE: January 21, 2021

Last November’s signing by 15 Asian countries of a far-reaching trade agreement put a spotlight on the U.S. absence from major economic initiatives in the vital Indo-Pacific region. It raises the question of whether the United States should reverse President Trump’s decision to withdraw from the Trans-Pacific Partnership (TPP) despite economic and political challenges at home.

The Issue

For more than 25 years, between its co-founding of the Asia-Pacific Economic Cooperation (APEC) forum and bringing TPP to a successful conclusion in 2016, the United States was a champion of economic integration in the Indo-Pacific region. This advanced U.S. interests in several ways: it opened up new markets for U.S. exporters in a region accounting for roughly half the world’s population and economic activity, it advanced U.S.-preferred rules and norms, and it supported U.S. strategic goals in a vital and contested region—one in which China is trying to supplant the United States from regional leadership.

Even before President Trump withdrew the United States from TPP on his third day in office, the agreement faced severe political headwinds at home. Although TPP had been a priority of the Obama-Biden administration, Hillary Clinton ran against it in 2016, on the grounds that it did not do enough to support U.S. workers. Despite growing support for trade among Democratic voters, assembling a congressional majority for trade agreements has been increasingly difficult.

But other countries in the Indo-Pacific are moving ahead with regional trade agreements, and the United States risks having rules, norms, and trading patterns develop that do not serve our interests. If your administration were to contemplate a return to TPP’s successor agreement (known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP), the required modifications would need to pass muster with both key constituencies at home and the 11 CPTPP countries.

The Opportunity

Asian allies and partners understand that your administration will need to prioritize the pandemic response and domestic rebuilding in your first months in office. However, they will have high expectations for an early U.S. return to active engagement in regional economic affairs, including trade agreements. Every country in Asia wants good relations with China, but none wants to live under Beijing’s thumb; they would welcome a revitalized U.S. presence in the region across all domains, economic as well as military and diplomatic. Were you to signal interest in putting the United States on a path to joining CPTPP, existing members of the agreement would likely be willing to accommodate some of the changes needed to win your approval.

The Decision

Allies and partners in the Indo-Pacific will be looking for an early signal of your administration’s plans for reengagement in the region, and specifically your intentions with regard to CPTPP. You could repeat the position you articulated during the presidential campaign—that you are open to joining the agreement but expect important changes to the text designed to protect U.S. workers. Alternatively, you could make clear that you are focused on domestic priorities and will defer a decision until at least the fall of 2021, when you join the annual Asian summits. Or you could offer an alternative economic strategy for the region that includes more limited objectives on trade, such as building out rules and norms for the digital economy.

Should you choose to signal interest in joining CPTPP, you will want to begin laying the groundwork by indicating which provisions you want modified and consulting with key allies and partners that are members of the agreement, notably Japan, Australia, and Singapore. Among other changes, you will want:

Improved labor and environmental provisions built upon the standards in the United States-Mexico-Canada Agreement (USMCA)—some CPTPP members like Japan and Australia may be supportive of these changes, while others such as Vietnam are likely to resist;

Rolling back investment protections for multinational corporations that were in the original TPP; and

Strengthened currency provisions, which will be met with resistance from Japan.

Deferring a decision risks undermining the credibility of your claim that the United States is back in Asia and committed to allies and partners there. In our absence, regional players will move ahead with other trade arrangements: China has indicated an interest in joining CPTPP (not likely in the near term but an important signal to Southeast Asia); Japan and Australia are interested in pulling other U.S. allies—such as the United Kingdom, South Korea, and the Philippines—into CPTPP; and on the back of the megadeal that the three Northeast Asian economies all signed last November, Beijing is likely to seek to reenergize China-Japan-South Korea trade talks.

Proposing a major push to advance digital rules and norms, building on the disciplines included in USMCA and the U.S.-Japan digital trade agreement of September 2019, could offer some comfort to regional allies while your CPTPP decision is pending. This could be complemented with other economic incentives, such as credible offers to support regional infrastructure investment—including loans from the new U.S. International Development Finance Corporation—as well as enhanced capacity building for less-advanced countries in Southeast Asia.

Whichever option you choose, you should mandate organizational changes in your administration that better connect domestic and international economic policymaking. In addition to its strategic benefits, trade policy can support domestic rebuilding by generating new sources of growth and better rules, but it is only sustainable politically and economically with the right investments at home—particularly in a prosperous, resilient workforce and in sharpening the U.S. innovative edge. The silos that currently exist between domestic and international policymaking should be broken down in the interest of a comprehensive economic strategy that delivers for U.S. workers and affirms American leadership in the world.

Your decision:

_____ Signal early interest in joining a modified CPTPP

_____ Defer decision until fall Asia meetings

_____ Develop alternative economic strategy with more limited trade goals