Shadow Government

Post-game analysis of the Obama Asia trip

In Bangkok on November 18 President Obama explained that it was "no accident" that he chose Asia for his first overseas trip after winning re-election. Well, actually, it was. The East Asia Summit, which the president attended in Phnom Penh just before Thanksgiving, had been on the calendar for some time. That it happened to fall on a date just after the U.S. election was perhaps propitious, but it was not because of presidential design. 

The president's hyperbole in Bangkok is somewhat typical of the rhetoric surrounding the "pivot" to Asia. This same hyperbole caused trouble with European and Middle East allies, who did not want to be pivoted away from, and with China, which did not understand why the president was claiming credit for a series of seemingly minor but somehow nefariously connected defense decisions like transferring a few thousand Marines from Okinawa to Darwin, Australia.

Hyperbole aside, though, the president can claim credit for something quite substantive with this trip: He has now established that future American presidents will regularly attend two annual summits in Asia each year, once for APEC and once for the ASEAN-centered East Asia Summit.  Clinton, meanwhile, has become the first secretary of state to score a perfect attendance record at the ASEAN Regional Forum of foreign ministers. While these meetings can appear dreadfully boring on the surface, they are becoming intensely important behind the scenes as Beijing attempts to assert its own agenda on the region. When the United States is there, the smaller countries usually take heart. In Phnom Penh, China pressured the Cambodian hosts to cut-off discussions on the South China Sea, but with the American president watching, the Philippines and other countries continued raising their legitimate concerns about Beijing's heavy-handed approach to the region's territorial disputes. Woody Allen argued that 9/10ths of success in life is just showing up -- an appropriate maxim for U.S. diplomacy in Asia and one Obama and Clinton have followed.

The president also did fairly well in Burma and Cambodia, two countries with deeply troubling human rights records. I was worried that he would downplay these concerns and instead focus on switching two erstwhile Chinese proxies over to the U.S. camp to score PR points for the pivot. The administration had already moved too fast in lifting the import ban on Burma, which only helped the crony-run Myanmar Oil and Gas Enterprise. However, a White House blog on Burma policy by NSC Senior Director Samantha Powers just before the trip laid out a more balanced approach going forward that would praise President Thein Sein for his reforms, and be clear that further U.S. support depended on the heavy lifting that still remains. The president appears to have done just that (though he somehow managed repeatedly to garble Nobel Peace Prize laureate Aung San Suu Kyi's name, which she took stoically as always). He also did not shrink from pressing Hun Sen to halt systematic repression and violence against civil society groups and the democratic opposition in Cambodia. These were encouraging moves, given how detached the pivot has been thus far from historic American foreign policy values.

That said, the president's trip did little to answer three big questions troubling American friends and allies in Asia. First, will the fiscal cliff undercut the economic basis of American power in the Pacific or end up in defense cuts that have an equally deleterious impact on regional security?  Second, will the administration move beyond its unambitious approach to trade now that the election is over and inject some energy into the Trans-Pacific Partnership? And third, will the United States go wobbly on China after the balance-of-power conscious Hillary Clinton leaves office? It is no accident our friends are asking these questions.


Shadow Government

Accepting the Drezner challenge

A relentlessly-optimistic Dan Drezner has thrown down the gauntlet! (Well, more like a dinner napkin, really, but same idea). He defends the prospects for trade progress in President Obama's second term and descends from generalized good cheer into specifics. With a meal on the line, he writes:

"I'm willing to bet that at least two out of the following four things will happen during Obama's second term: 

1)  A Trans-Pacific Partnership that is ratified by Congress;

2)  Bilateral investment treaties with India and China;

3) A transatlantic integration agreement;

4)  A new services deal within the auspices of the WTO."

I accept.

Now, for those of you wagering at home -- not that Foreign Policy condones such behavior -- the question is not just which of us has the clearer crystal ball; you also want to think about the point spread. Over at Cato, Simon Lester offers some initial guidance to eager bookies:

"I would rate the chances of seeing completed China/India investment treaties or a U.S.-EU FTA at close to zero; a ratified TPP at around 10 percent; and a WTO services agreement at around 25 percent."

While I like the implication -- a 97.5 percent chance that I feast at Drezner's expense -- I would differ a bit on the odds.

The challenge of handicapping these events is that they are not precisely defined. A "transatlantic integration agreement" could run anywhere from an accord that promises modest services integration and regulatory cooperation to a full-fledged free trade agreement between the United States and the European Union. A bilateral investment treaty could range from a new consultation mechanism to adoption of the complete U.S. model BIT.

Thus, a central question: How readily can the Obama administration push through a minimalist version of any of these trade measures? There is a clear incentive to do so. Agreements ought to be easier if you can drop the hard parts. Signed and passed agreements constitute a legacy. Only quibbling trade geeks will ever weight the virtue of those agreements by the extent of their coverage. This is one reason for the long history of bilateral or plurilateral trade agreements around the globe that delivered very modest amounts of liberalization: they all delivered a signing ceremony for leaders.

Yet there are some significant obstacles to "going lite." Here are four:

1. Commercial significance. It would be dramatically easier to negotiate the TPP if issues such as intellectual property or state-owned enterprises were omitted. Those issues are divisive both within the United States and between participating countries. Yet they are on the agenda because key industries care about them and see opportunity in regulating the behavior of trading partners. While the Obama trade legacy will not be significance-weighted, there needs to be a minimum level of business enthusiasm to get an agreement through.

2. Balance. Any agreement has to offer something for each party. The narrower the agreement, the less likely all the participants come away with something they like. This is a problem with a services-only deal within the WTO: Usually developed countries are demandeurs for services market access while developing countries are demandees. Of course, the developed countries could go off on their own and sign a plurilateral services agreement among themselves (still under WTO auspices), but that poses some problems. It does not win domestic services firms the market access they crave, it ticks off the developing countries who have been circumvented, and it may limit negotiating space for any future, broader WTO agreement that might draw the developing countries in.

3. Leverage. In the early days of post-war trade talks, agreements came along every couple years. If your industry's concerns were not taken up in one round, you could be reasonably confident you could push for them in the next. In the last forty years, though, there have been only two completed global trade agreements (the Tokyo and Uruguay Rounds). FTAs have been concluded more frequently, but generally only one per country pair. Now suppose you're a U.S. agricultural producer with longstanding concerns about European agricultural practices. How do you react to the prospects of a limited U.S.-EU trade deal that leaves out agriculture? You hate it. You probably think that this is your moment of maximum leverage to reform EU policies; a limited agreement gives that leverage away. The argument would be similar for a modest BIT with India or China; anyone with investment concerns might see a limited agreement as worse than no agreement at all, since the chances of revisiting the topic would be small.

4. Precedents/Congress. The United States has been relatively formulaic in its approach to trade agreements, moving from the NAFTA model, to "NAFTA+" to "Chile+" - the same basic structure, with a few improvements. No major deviations from the same 'high standards' model of a trade agreement. That was one of the attractions of the TPP -- it was a group of countries who had committed to a fuller, deeper version of trade liberalization, matching the U.S. standard of depth and breadth. A standardized approach solves two particular challenges for U.S. trade policy. First, the country undertakes multiples negotiations, spread over time. Second, any administration must reach an understanding with Congress, which has constitutional authority over trade. A fixed template makes it harder for successive trading partners to try to exempt sensitive sectors. It also means that carefully negotiated understandings with Congress need not be reworked with every agreement. While an FTA- or BIT-lite may ease external negotiations, it can complicate discussions with Congress and with future trading partners.

So a 'lite' approach may be hard to swallow.

There is certainly more to chew on as we think over trade prospects for the next term. I have yet to cook up a full alternative set of odds. But am I confident in my skepticism? You bet.

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