The much talked about Trans-Pacific Partnership (T.P.P) to be signed between the US and its allies in the Pacific region, has undoubtedly acquired central position in the US’ “Asia Pivot” policy. Given the scale, range and extent of this agreement, it would not be an exaggeration to contend that the US is trying to create a new ‘Europe’—-that is, a chain of allies knitted together economically and strategically— in the Pacific to meet the challenges of the twenty-first century: an economically and politically burgeoning China. This is not the era of cold war, therefore the ‘old Europe’ does not have that much importance for the US; and because the ‘old Europe’ is not that much important for the US in check-mating China in Asia, the US needs a chain of allies in the Pacific that would play a role for the US which would not be much dissimilar to the specific role Europe played during cold war—hence, the Trans-Pacific Partnership.
The second reason for this new strategic alliance is that the battle ground is not Europe; it is Asia and the core objective of this alliance is to dominate Asian markets in the 21st century. Trans-Pacific Partnership and Asia Pivot are, therefore, a logical response of the US to the notion of “Asian Century.” Another important reason for this deal the reason for why the US is pushing so hard for it is that China has already overtaken the US or the Western hegemony in Africa. This being the case, the US is fully vent upon denying China, using all possible means, any free space in the region nearby i.e., the Pacific Ocean.
Basically, and apparently, the Trans-Pacific Partnership (TPP) is an ambitious 21st century trade agreement that the US is negotiating with 11 other countries throughout the Asia-Pacific region (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam). Apparently, this is purely an economic partnership that would provide new market access for Made-in-America goods and services, strong and enforceable labor standards and environmental commitments, groundbreaking new rules on state-owned enterprises, a robust and balanced intellectual property rights framework, and a thriving digital economy. On the other side of the picture is the fact that the trade rules of the proposed Trans-Pacific Partnership (TPP) between the US and 11 Asian nations would cover nearly 40 percent of the world economy. However, the intriguing aspect of this proposed partnership is that access to the text of the proposed deal is highly restricted and classified at the moment, adding further to its already dubious nature.
Notwithstanding the suspicions surrounding this deal, the US administration has argued that the deal will allow lower tariffs for American exports, in an environment of increasing competition, especially from China. At the heart of economic war between the US and China is currency battle and its impact on imports and exports balance. A number of countries — China most prominent among them — have long acted to hold down the value of their currencies against the dollar, helping their industries by keeping exports to American consumers cheaper and making goods from the United States more expensive. And while every US president from Bill Clinton onwards has repeatedly criticized this particular practice, none have ever taken formal action against China or any other nation to try to stop it. It is for this very reason now that many in the US government, as also in Congress, are pushing for including a robust attack on international currency manipulation against the US dollar. The US administration has, as such, been trying diplomatically to ‘convince’ the partner states into accepting provisions related to currency manipulation as a benchmark for finalizing the deal. As a matter of fact, according to some credible reports, for years, the US has endured a large, chronic trade deficit, intensified by China and some other trading partners that have deliberately kept their currencies cheap relative to the dollar. The Peterson Institute estimates that currency interventions—particularly by China— have cost the United States as many as five million jobs over the last decade.
Corporate America is badly split over this question. Some industries, including automobiles, steel and textiles, are standing with Congress. Ford Motor has threatened to oppose the Trans-Pacific Partnership if it lacks a currency chapter. Other companies, better positioned to take advantage of growing globalization, are perfectly happy to buy components from Asia that are artificially cheapened by currency manipulation. The Obama administration fears that prohibitions on currency intervention could boomerang on Washington, allowing trading partners to challenge policies of the independent Federal Reserve Board and possibly even basic fiscal policies, like stimulus spending in times of recession. Should such a scenario take place, it would nullify the potential advantages the US currently is seeking to obtain from this deal. Significantly, it would not help America in stemming the tide of China, which obviously is not a part of the deal although she is a pacific nation too.
On the contrary, China is, as said earlier, a potential target of this deal. The Obama administration’s focus on the TPP is part of its “pivot” to Asia — former national security adviser Tom Donilon went to the extent of calling it the “centerpiece of our economic rebalancing” and a foundation for “regional economic integration” — after too many years of US foreign policy being bogged down in the Middle East. Scholars such as Columbia University’s Jagdish Bhagwati are skeptical that the TPP goes further, as an effort to “contain” China and provide an economic counterweight to it in the region. Many of the TPP’s current provisions have been specifically designed, many believe, to deliberately exclude China, like those requiring yarn in clothing to come only from countries party to the agreement, and could possibly invite retaliation.
Corollary to this is the reason for why 60 senators have asked for the final agreement to address “currency manipulation”, which wouldn’t directly affect China as a non-member, but could certainly create a framework for broader geo-economic and political action. Furthermore, it would help restrict accumulation of foreign exchange reserves by other states. As a matter of fact, despite the fact that the US has the largest or second largest economy in the world, it holds fewer foreign exchange reserves than Thailand, Algeria, and Saudi Arabia, among others. Most importantly, China has 25 times as many foreign exchange reserves (nearly $4 trillion) as the US ($126 billion), adding further insult to the economic injury the US has been inflicted with as a result of currency manipulation.
The TPP has, therefore, emerged as the linchpin of Mr. Obama’s strategic shift to Asia, giving the US a way to counter the economic inroads made in the region by a rising China. The deal is supposed to be followed by the Trans-Atlantic Trade and Investment Partnership with Europe, though those talks have much farther to go. Top-most priority of Obama administration is certainly the TPP, said a US Congressman. And to counter Chinese manipulation, regulations in TPP are not, however, the only option for the US. Last week, the US lawmakers from both parties and across the ideological spectrum introduced legislation that would allow companies in the US to petition for relief from foreign competitors benefiting from currency manipulation, setting off a mandatory Commerce Department investigation. That investigation could lead Washington to impose duties on imports that benefit from depressed currencies. Legislation would also allow the government to counter manipulation with manipulation: If China spent $1 billion to buy United States dollars to drive up their value, the United States could buy the same amount of Chinese currency to negate the move. Such legislation passed the Senate in 2011 by a vote of 63-35. The year before, the legislation passed the House 348-79, with one sole underlying objective: “containment of China.” The notorious cold war “containment policy” is, as such, being re-deployed, albeit in a context and a manner different from that of Cold War.
Salman Rafi Sheikh, research-analyst of International Relations and Pakistan’s foreign and domestic affairs, exclusively for the online magazine “New Eastern Outlook”