President Barack Obama, with fast-track negotiating powers in his back pocket, managed to seal the biggest trade agreement of the World Trade Organization era this month.
The passage of fast-track, agreed by Congress in June to allow a straight up-or-down vote on trade deals, means the Trans-Pacific Partnership (TPP) agreement involving the United States and 11 other countries stands a strong chance of passage, at least in the United States.
The TPP encompasses 40 percent of global trade, links the United States with mostly Pacific countries including Singapore, Japan, and Australia, and is the biggest U.S. trade deal since at least 1995.
But large, much-trumpeted trade agreements like the TPP and the Transatlantic Trade and Investment Partnership (TTIP) with Europe belie a troubling trend: U.S. trade with the world, and the Pacific in particular, has been declining. Is it too late to turn the tide?
A Steady Decline in Trade
The U.S. share of the Asia-Pacific region’s imports declined about 43 percent from 2000 to 2010. Clawing that back would mean the need to export an additional $600 billion annually by 2020.
Meanwhile other countries have filled the gap. Part of the problem is that the United States has a history of being reluctant to enter into regional trade agreements.
The U.S. oldest trade agreement is with Israel, an accord that celebrated its 30th anniversary last month. Since then, the United States has signed just 14 regional trade agreements involving about 20 countries (18 more are currently being deliberated).
But during the same 30-year period, the world has seen 256 new trade agreements, as registered with the World Trade Organization (see chart), with 132 of them being implemented just in the last decade.
These regional trade agreements, when the United States is not involved, create barriers and constraints that have an effect on market opportunities and profits of U.S. companies. It is common to see tariffs that are five times higher in foreign markets than the U.S. average.
Another way to look at it is that the United States ranked 130 of 138 nations in terms of the amount of “tariffs faced“ by the country’s exports—that is, U.S. companies face higher tariffs than nearly all our trading partners.
Trade’s Familiar Battle Lines
The battle lines on TPP—which still stands a chance of being blocked by Congress—seem to be the same as for most trade agreements. Special interest groups don’t like the potential undermining of U.S. regulations. Labor unions argue that jobs will be lost to low-salaried countries. And many argue that these agreements help only large corporations.
