issue: Trade

Gerwin for CNBC: How the US economy could suffer-bigly-under Trump’s trade agenda

Posted on by The Progressive Policy Institute

The Trump administration recently released a trade pronouncement that goes beyond the president’s preferred 140-character format. The 2017 Trade Policy Agenda is a report, required by Congress, that highlights Administration priorities on trade.

An earlier, leaked version criticized aspects of the global trading system as “untethered from economic realities.” That wonderful phrase is missing from the final report—perhaps because it’s an apt description of many aspects of the Administration’s trade agenda itself.

The Administration’s report mentions several broadly supported objectives, including enforcing trade laws and opening markets. But, at its core, the new agenda is a fundamental departure from America’s decades-long support for rules-based trade that benefits Americans and the world.

Continue reading at CNBC.

PPI Statement on President Trump’s Executive Order to Withdraw the U.S. From the Trans-Pacific Partnership

Posted on by The Progressive Policy Institute

The Progressive Policy Institute issued the following statement in response to President Trump’s decision to withdraw the United States from the Trans-Pacific Partnership (TPP):

In announcing his decision today to withdraw from the TPP, President Trump claimed that this step was a “great thing.” We strongly disagree. The President’s hasty action on the TPP is bad news for American businesses and workers, for the American economy, and for America’s global influence.

Abandoning the TPP is hardly good news for American exporters and their workers. The TPP would have slashed thousands of high foreign duties and other serious trade barriers, making it significantly easier to sell ‘Made in America’ goods and services to a rapidly growing Asia-Pacific middle class.

Withdrawing from the TPP isn’t good news for hundreds of thousands of American small business exporters, who would have boosted their exports under TPP rules that would “democratize” trade—making it easier for them to connect with customers, make sales, and deliver their goods and services.

Walking out of the TPP is bad news for the digital economy and the future of global commerce. The President’s order risks the loss of years of American-led progress in writing strong rules for digital trade, which is vital to all types of American business and is an area in which America is a global leader.

Cutting and running from our TPP allies is, perhaps most significantly, very bad news for America’s influence in the Asia-Pacific region.

Under the TPP, the United States was a leader in setting strong rules that reflect American values on such key issues as environmental protection, labor rights, and intellectual property protection. Equally important, our Asia-Pacific allies saw America’s participation in the TPP as tangible evidence of our strong geopolitical commitment to their region.

The President’s action raises the risk that countries like China—which often don’t share our values or interests—will now have much greater influence in this vital region.

For America to grow, support good jobs, and generate more broadly shared prosperity, we must expand our trade and enhance our global connections. Walking away from the TPP will do neither.

Tax Reform and the App Economy: The Example of Colombia

Posted on by The Progressive Policy Institute

We in the US have been understandably obsessed with the outcome of the presidential election. But the rest of the world keeps moving forward. For example, last week Colombia ratified a historic peace treaty between the government and the rebel movement. PPI was privileged to be in Bogota just this October, where we held a widely publicized App Economy event, describing how Colombia’s App Economy has generated over 80,000 jobs.

Colombia’s President Juan Manuel Santos should be congratulated for his success. At the same time, he has introduced an important tax reform measure that simplifies the corporate tax system, while raising new funds. Not surprisingly, the tax reform measure is controversial. For example, franchises of the Subway sandwich chain are complaining that higher taxes will drive them out of business.

More consequentially, the Santos tax reform takes direct aim at Colombia’s digital sector and App Economy in particular. It would raise the VAT on devices (phones, tablets and computers) from 16 to 19% – only the least expensive tablets and computers would be exempt from the VAT. The tax reform would raise VAT on mobile data services from 16 to 19% and add an additional 4% consumption tax (total of 23%). Finally, the tax reform would charge VAT on all digital content and services provided by suppliers based overseas.

These tax measures could potentially restrict continued growth of Colombia’s App Economy, which depends on affordable devices and mobile broadband, and access to apps from all over the world. Moreover, this could hamper competitiveness in the rest of the economy, since the App Economy is far more than just entertainment and game apps. In fact, apps are developed and used by major multinationals, banks, media companies, retailers, and governments.

The future importance of the App Economy goes even further. We quote from our October 2016 paper “Tracking Colombia’s App Economy:”

One of the biggest changes coming is the Internet of Things, which is the use of the Internet to help control physical devices and our physical environment. Farmers will increasingly use apps to aid their agricultural production, nurses and doctors will use apps to manage patient care, and manufacturers will use apps to control their factories.

Globally, digitally-successful countries such as Vietnam and China apply relatively lower VAT rates to mobile data and services to boost uptake (See this recent report on digital inclusion and mobile sector taxation).

Finally, as we note in our October 2016 paper:

If policymakers are serious about fostering a dynamic startup ecosystem and App Economy, then continuing with the types of policies that facilitate App Economy growth will allow Colombia to participate in the global mobile revolution as a producer rather than a consumer. Putting too many costly restrictions on Colombia’s App Economy could divert the growth elsewhere. (emphasis added)

The Thucydides Trap, Updated

Posted on by The Progressive Policy Institute

Last year Graham Allison of Harvard wrote an article for the Atlantic entitled “The Thucydides Trap: Are the U.S. and China Headed for War?”  Allison noted that

in 12 of 16 cases over the last 500 years in which there was a rapid shift in the relative power of a rising nation that threatened to displace a ruling state, the result was war.

He goes on to examine the probability of a US-China clash, and points out that

And yet in four of the 16 cases that the Belfer Center team analyzed, similar rivalries did not end in war. If leaders in the United States and China let structural factors drive these two great nations to war, they will not be able to hide behind a cloak of inevitability. Those who don’t learn from past successes and failures to find a better way forward will have no one to blame but themselves.

It’s a great article, and well-worth reading.

 

 

Gerwin for U.S News: Populists Like Trump and Sanders Ignore How Trade Benefits Workers

Posted on by The Progressive Policy Institute

Jobs have been the focal point of 2016’s populist campaign against trade.

Trade skeptics like Donald Trump and Bernie Sanders have railed against open trade and deals like the Trans-Pacific Partnership (TPP) as schemes to benefit global elites at the cost of millions of jobs for hardworking Americans. They claim that American workers would be better served by upending NAFTA, rejecting the TPP, and—in Trump’s case—slapping import taxes of 35 percent or more on trade from China and Mexico.

But populists’ single-minded focus on trade and “lost” jobs has obscured a larger and often-ignored reality: the fact that trade supports—both directly and indirectly—tens of millions of good jobs for middle class Americans. And protectionist policies would put many of these jobs at risk, while offering only the cruel illusion of support to many workers who need greater help.

Continue reading at U.S. News.

China Poised to Fill Economic Void Left by U.S.

Posted on by The Progressive Policy Institute

Few Americans paid attention last week as Malaysian Prime Minister Najib Razak traveled to China to witness the signing of a host of business agreements between Chinese and Malaysian companies. They should have, because Razak’s pilgrimage to Beijing is likely to be repeated by other Asian Pacific leaders if Washington lets President Obama’s proposed Trans-Pacific Partnership die.

In addition to more than 20 agreements covering a range of activities including e-commerce, solar panel manufacturing, agriculture and education, Malaysia wants to buy 10 littoral warships from China for $300 million. Just last month, Malaysia announced it was scraping joint development of an amphibious force with the help of the U.S. Marine Corps as part of a big defense budget cut.

This would be the first major defense contract between China and Malaysia, despite continuing tensions in the South China Sea. And it’s not an isolated incident. Philippine President Rodrigo Duterte recently rankled Washington by calling for a “separation” between the long-time allies. He called for the withdrawal of all U.S. troops from the Philippines within two years, despite his country’s contentious dispute with China over its actions in the South China see. In July of this year an international tribunal declared China’s military development of a Philippine island illegal.

Both of these developments suggest America’s standing in the region is waning, leaving Pacific Rim countries to be sucked into Beijing’s orbit. But as U.S. Defense Secretary Ash Carter has said, the United States does have a potent “soft power” option to counter China’s flexing of its economic and military muscles. It’s the TPP agreement, which he has called the commercial equivalent of having another U.S. carrier in the region. Other Asia leaders have echoed this assessment.

Singapore’s Prime Minister Lee Hsien Loong has said economic investments are inseparable from defensive commitments. In March, he told the Wall Street Journal “if you are not prepared to deal when it comes to cars and services and agriculture, can we depend on you when it comes to security and military arrangements?” New Zealand Prime Minister John Key agreed, warning that if the United States “abdicates leadership in the region” by failing to sign the TPP regional governments will have to pursue other options. China is already prepared to offer a replacement called the Regional Comprehensive Economic Partnership (RCEP) that includes all Asian TPP signatories in its ongoing negotiations.

Our friends and allies in Southeast Asia are actively seeking increased economic opportunities in the form long term commitments. Through the TPP they have signaled our government, businesses, and ideals as their first choice. If the U.S. does not follow through with this commitment that enforces open competition, higher labor standards, and better environmental protections, these governments have demonstrated clear evidence they will be forced to pursue options with a power that respects none of these ideals while it actively infringes upon their sovereignty. The TPP opens up not just fair economic opportunities, but demonstrates the U.S.’s commitment to the welfare of the region.

The Hill: Protectionist trade policies would damage economy, cost jobs: report

Posted on by The Progressive Policy Institute

Protectionist trade policies would throw the U.S. economy into turmoil and lead to the loss of millions of middle-class jobs, a new report said on Monday.

The Progressive Policy Institute (PPI) concluded that trade policies that cut off the United States from the global economy would do more harm than good in boosting job creation and wages for the majority of Americans.

“We explain why protectionist policies that supporters claim will ‘bring back’ American jobs would, instead, likely throw America into an economic tailspin and destroy millions of good middle-class jobs in manufacturing, services and farming,” said Ed Gerwin, the report’s author and director of the Trade and Global Opportunity Project at PPI.

Continue Reading at The Hill.

Trade and Good Jobs for the 99 Percent: Debating Trade, the Elites, and Jobs

Posted on by The Progressive Policy Institute

Opponents of trade and trade agreements like the Trans-Pacific Partnership (TPP) often frame the trade debate as a battle between “the elites” and average Americans, especially American workers.

Trade skeptics charge that America’s pursuit of rules-based, open trade is essentially an exercise that’s by and for big multinationals and the Wall Street one percent, while leaving everyday American workers holding the bag. Critics like Donald Trump and Bernie Sanders claim that Americans would be better served by upending trade pacts like NAFTA, scrapping proposed deals like the TPP, and jacking up tariffs—including Trump’s proposed duties of 45 percent on Chinese imports and 35 percent on goods from Mexico. These tactics, they argue, would pressure trade partners and U.S. multinationals and “bring back” American jobs

But would a shift toward protectionism really help the 99 percent? Would such policies support more and better jobs for middle class workers? Guarantee a more prosperous and inclusive economic future for everyday Americans? If not, what policies would?

 



 


			


	

			




			
				


	

		
PPI President Will Marshall Takes on Trump Senior Policy Advisors in Trade Debate

				

			Posted on  by The Progressive Policy Institute		

			


	

		


In a new special series published by RealClearPolicy, PPI President Will Marshall squares off against Wilbur Ross and Peter Navarro, senior policy advisors to the Trump campaign, on trade policy in the next presidential administration.




 


“Donald Trump  calls  the U.S. economy a ‘disaster’ and blames trade for sapping America’s industrial might,” Marshall writes. “Neither claim is true, but it’s hard to refute someone who offers no evidence or economic analysis to support his hyperbolic assertions. For that we must turn to his campaign’s economic advisers, Peter Navarro and Wilbur Ross. Unfortunately, their defense of what they grandly call the ‘Trump Trade Doctrine’ is rife with dubious logic and funny numbers.




 


“The ‘Trump Trade Doctrine’ is profoundly reactionary. It looks back nostalgically to the industrial order of the 1950s, promising to ‘bring back’ yesterday’s jobs. It takes no account of the central role economic innovation plays in accelerating productivity growth, which is the key to raising U.S. wages and living standards. And its adoption as national policy would be a calamity for the tens of millions of U.S. workers whose well-paying jobs — in manufacturing, services, and the digital economy — depend on open markets and trade.”






 


Will Marshall, ” Detoxifying the Trade Debate. “




 


Wilbur Ross & Peter Navarro, ” The Trump Trade Doctrine: A Path to Growth & Budget Balance. “




 


Will Marshall and Wilbur Ross & Peter Navarro, ” Marshall v. Ross & Navarro: The Authors Respond. “


			


	

			




			
				


	

		
A Note From PPI President Will Marshall on Obama’s “Way Ahead”

				

			Posted on  by The Progressive Policy Institute		

			


	

		
I’d like to draw your attention to this extraordinary essay by President Obama in The Economist. It stands out for two reasons. First, it provides what has been sorely missing from the bizarre 2016 presidential race – a progressive roadmap for restoring America’s economic dynamism.






Second, President Obama’s approach to reversing nearly two decades of slow economic growth is uncannily parallel to the Progressive Policy Institute’s policy blueprint for pro-growth progressives: Unleashing Innovation and Growth: A Progressive Alternative to Populism.






Both documents reject populist claims that the U.S. economy is a “disaster” or a game hopelessly rigged by Wall Street or billionaires and focus instead on the main driver of meager wage gains and growing inequality – slumping productivity growth. As the President notes, one reason for the slowdown is lagging private investment – a problem PPI also has been highlighting in multiple studies of the nation’s “investment drought.”






We also agree with many of the President’s key prescriptions for putting America back on a high-growth path. To highlight just a few:


    

  • Pro-growth tax reform, including lowering business taxes and closing special interest loopholes.
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  • Expanding U.S. exports and passing the Trans-Pacific Partnership to strengthen global trade rules.
    • 

  • Lowering college costs, not just expanding education subsidies.
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  • Making work pay by expanding tax credits for low-income workers.
    • 

    



Why is all this important? Because despite all the rhetoric about “inclusive growth,” in this election, we’re hearing a lot more about distributing existing wealth than creating new wealth. To speak to the hopes and aspirations of working families, Democrats need to balance that equation.




			


	

			




			
				


	

		
Press Release: New PPI Report Highlights TPP’s Many Practical Benefits for U.S. Small Exporters

				

			Posted on  by The Progressive Policy Institute		

			


	

		
FOR IMMEDIATE RELEASE

September 26, 2016


Contact: Cody Tucker, ctucker@ppionline.org or 202-775-0106


New PPI Report Highlights TPP’s Many Practical Benefits for U.S. Small Exporters


Secretary Penny Pritzker


 


WASHINGTON—The Progressive Policy Institute (PPI) today released a new policy memo highlighting the many practical ways in which the Trans-Pacific Partnership (TPP) agreement will make exporting faster, easier, cheaper, and more certain for U.S. small exporters, and how growing small business trade would help spread trade’s benefits to more Americans. The report was released at a public event on Capitol Hill that featured opening remarks from Rep. Don Beyer (D-VA) and a keynote address from Secretary of Commerce Penny Pritzker.


Authored by Ed Gerwin, senior fellow for trade and global opportunity at PPI, “A Big Deal for Small Business: How the Trans-Pacific Partnership Would Boost America’s Small Exporters” profiles seven small and mid-sized American exporters—representing different business sectors and regions—and explains the real-world ways in which the TPP’s reforms would help these smaller businesses prosper through global commerce.


“These stories show that—from the perspectives of these American small businesses—the TPP is much more than an academic exercise or a political debate,” writes Gerwin. “Instead, it’s a vital, practical tool for eliminating foreign trade barriers and for opening up significant new opportunities for U.S. small businesses to grow by selling goods and services to key markets around the Pacific Rim.”


    

  • For Halosil International, a Delaware- based small manufacturer of disinfecting chemicals and systems, the TPP would reduce regulatory confusion, duplicative testing requirements, foreign duties, and customs red tape.
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  • For Wente Vineyards, a family-owned winery in California’s Livermore Valley and Arroyo Seco regions, the TPP would phase out high foreign duties in countries including Japan and Vietnam, while promoting global best practices in wine regulation and labeling.
    • 

  • For SheerID, a Eugene, Oregon-based small business that provides customer verification solutions for e-commerce, mobile, and in- person eligibility, the TPP’s reforms would provide new business opportunities in growing regional e-commerce and help protect the firm’s vital intellectual property.
    • 

  • For Aladdin Light Lift, Inc., a small Huntsville, Alabama-based manufacturer of lift systems for raised lighting, the TPP would eliminate duties, increase the transparency of regulations, and reduce the need for multiple tests.
    • 

  • For Cask, LLC, a Stafford, Virginia-based, woman-owned provider of business consulting services, the TPP would support new business opportunities in Vietnam and reduce foreign barriers to providing professional services.
    • 

  • For The Pro’s Closet, a Boulder, Colorado- based online reseller of used cycling gear, the TPP would assure international flows of commercial data, promote more efficient and reliable e-commerce, and eliminate foreign shipping and customs delays.
    • 

  • For Pacific Valley Foods, a family-run Bellevue, Washington-based exporter of frozen, canned, and prepared foods, the TPP would reduce high duties in key TPP markets like Japan and level the playing field against competing suppliers from other countries.
    • 



 


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A Big Deal for Small Business: Seven Stories of How the Trans-Pacific Partnership Would Boost America’s Small Exporters

				

			Posted on  by The Progressive Policy Institute		

			


	

		
When Americans think of trade, we tend to focus on large, world-leading multinationals. We usually don’t think of a small food exporter like Pacific Valley Foods, which started in a couple’s home office, or of The Pro’s Closet, an online global reseller of used biking gear founded by a pro cyclist. But, like these businesses, 98 percent of U.S. exporters are actually small and medium-sized enterprises (SMEs), and these smaller traders account for over one-third of U.S. exports.


SMEs that export are also economic powerhouses—they hire more employees, pay higher wages, and are more resilient and productive than their non-exporting counterparts. And, since only about five percent of American SMEs currently export, the United States has significant untapped potential to drive growth and support good jobs by increasing small business trade.


In a previous issue brief, we explained how the Trans-Pacific Partnership agreement (TPP) would boost U.S. small business exports by clearing away significant foreign trade barriers and by mandating reforms that would make exporting fairer, faster, cheaper, and more certain for America’s smaller firms.


 




 


			


	

			




			
				


	

		
Marshall & Gerwin for The Hill, “Facing the future on trade: Democrats must reject anti-trade obstructionism”

				

			Posted on  by The Progressive Policy Institute		

			


	

		
Anti-trade populists are hell-bent on locking Democrats into a future of rigid opposition to trade deals like the Trans-Pacific Partnership. They recently failed in efforts to include a plank in the Democratic Party Platform that would have committed Democrats to the decidedly undemocratic principle of never, ever agreeing even to bring TPP to a vote—either in this Congress or any future one. Now, they are back, pressuring Democratic candidates and Members to go on record against TPP—a key priority for President Obama—and any vote on TPP in the lame duck session of Congress.


Pro-growth progressives should stand up and fight this ill-conceived attempt to make dogmatic opposition to trade agreements a new political loyalty test. The last thing America needs is a Democratic version of the Republicans’ infamous Norquist Pledge on taxes, which has paralyzed Washington’s ability to compromise and make sound fiscal policy.




 


Killing TPP would deprive policy makers of a potent tool for stimulating jobs and growth, and for augmenting American influence and leadership in the Pacific East. Make no mistake: blanket hostility to trade agreements is a formula for slow growth, lagging innovation and a fatal loss of U.S. economic dynamism.




 


Continue Reading at The Hill.


			


	

			




			
				


	

		
NY Daily News: A counterproductive new trade consensus: Democrats need to get responsible on the TPP and other economic pacts

				

			Posted on  by The Progressive Policy Institute		

			


	

		
After the Republican fear-fest in Cleveland, watching the Democrats in Philadelphia last week was like stepping out of the Dark Ages into the Enlightenment. Donald Trump may have no use for facts, civility or rational argument, but these things still seem to matter to Democrats.


There was, however, a big exception to the rule: trade. Riding a wave of populist wrath, Democrats demonized President Obama’s Trans-Pacific Partnership (TPP) as a gift to the 1% and mortal threat to U.S. workers. It’s a bogus claim, and one that has them sounding a lot like, well, Trump.


TPP is a linchpin of Obama’s strategic goal of “rebalancing” U.S. power and diplomacy. It would combine the U.S. and 11 Pacific nations in a vast free-trade zone that would act as a counterweight to China’s enormous economic might. If the pact goes down, so will our influence in the region, leaving Beijing to call the shots.


Continue reading at New York Daily News.


			


	

			




			
				


	

		
Why America Needs A Competitiveness Audit

				

			Posted on  by The Progressive Policy Institute		

			


	

		
The division between the trade skeptics and the trade supporters in the Democratic Party is on stark display at this week’s convention in Philadelphia. The Progressive Policy Institute favors smart, high-standard  trade agreements, as PPI president Will Marshall  and senior fellow Ed Gerwin recently wrote.


Yet both trade skeptics and supporters can agree on one critical point: The government must do more, much more, to provide American manufacturers, especially small ones, with the tools they need to compete successfully against foreign rivals on global and domestic markets.  If American manufacturers can compete more successfully, that will lead to more jobs for Americans.


A good first step: The International Trade Commission, the Bureau of Labor Statistics, and the Department of Commerce should jointly lead a government-wide project to do a “competitiveness audit“ of the U.S. economy, as PPI wrote in a previous policy brief, “How a Competitiveness Audit Can Create Jobs”.  This competitiveness audit would compare the price of a wide variety of US-made products with the price of similar imported products, based on functionality and quality.  The audit would cover the full range of manufacturing industries, from communications equipment to furniture to chemicals to machinery. So, for example, the audit would compare the producer price of a piece of household furniture produced in the United States versus the import price of a similar piece produced in China.


The competitiveness audit is likely to show a big gap between US-made and import prices for some products. But other products are likely to have a small and perhaps shrinking gap, making them prime targets for expansion of US production.


Armed with this information, American manufacturers will be able to target markets where the United States has a competitive advantage.  Small companies, especially, will benefit from information produced by the competitiveness audit, since they don’t have access to the global networks that their bigger counterparts do.


The competitiveness audit can also stimulate the formation of new manufacturing businesses by pointing out market opportunities to potential entrepreneurs.  People who want to start a new manufacturing business in Ohio, say, will be able to use the competitiveness audit to attract funding.


In addition, mayors and other local officials would be able to use the results of the national competitiveness audit to help direct their economic development efforts. Right now, they are simply shooting blind, without adequate information about where the US has a competitive edge.


Surprisingly, the government currently does not collect or publish data comparing prices of domestic and imported products. That’s an egregious hole. Filling that hole would not only help manufacturers, but would also help economists resolve some big issues about the impact of trade on the economy.


No matter where you fall on the trade question, a competitiveness audit makes sense: If we want to see a revival of manufacturing employment, we have to provide small manufacturers and local officials with the information they need to make good decisions.


Reference


Michael Mandel and Diana Carew , “How a Competitiveness Audit Can Help Create Jobs,” Progressive Policy Institute, November 2011.  https://progressivefix.com/wp-content/uploads/2011/11/11.2011-Mandel-Carew_How-A-Competitiveness-Audit-Can-Help-Create-Jobs.pdf


 


			


	

			




			
				


	

		
New Ruling Makes Waves in South China Sea

				

			Posted on  by The Progressive Policy Institute		

			


	

		
An international court ruled today on a challenge to China’s controversial bid to extend its sovereignty over vast swaths of the South China Sea. The Philippines brought the case to the Permanent Court of Arbitration in The Hague in June 2013, but multi-national disputes over the island chains and surrounding waters date back centuries. In recent years, China has been building islands within an area it’s defined as the “nine-dash line,” and has been claiming control over a 12-mile radius surrounding each of the new landmasses.


The much anticipated ruling, however, may be moot, since China already has declared that it will not adhere to any ruling by the tribunal. Beijing’s truculence underscores the necessity of President Obama’s attempts to “rebalance” U.S. foreign and security policy toward the Asia Pacific. Moreover, the United States is obligated through defense pacts with both the Philippines and Japan to provide military assistance in the region. To vindicate the right of all nations to navigate these waters, the United States sent a missile destroyer last October within the 12-nautical mile zone China has claimed as sovereign waters. The U.S. Navy has continued to sail within the disputed waters, and it recently concluded a major exercise consisting of two carrier strike groups near the Philippines.


The islands themselves appear to be heavily militarized with ports capable of servicing naval vessels and runways long enough to support advanced military aircraft. This militarization has encouraged several countries to seek strategic partnerships with the U.S. This includes Vietnam, which has allowed U.S. naval forces increased access to its deep water ports. The Philippines has invited the U.S. forces back into several military bases for the first time since giving them the boot in the early 1990s. In addition to joint military aid, Washington is seeking to organize a vast free trade bloc that pointedly excludes China. The Trans-Pacific Partnership (TPP) would lower trade barriers while raising labor and environmental standards throughout the region.


Defense Secretary Ashton Carter has strongly supported TPP as a vital soft power complement to America’s military presence in the Pacific. “In fact, you may not expect to hear this from a Secretary of Defense, but in terms of our rebalance in the broadest sense, passing TPP is as important to me as another aircraft carrier,” Carter said. With China already refusing to adhere to any ruling made by the tribunal, the TPP is a potent tool Washington can use to assemble a regional coalition of nations to balance China’s economic and military clout.


While all the TPP countries have a common interest in unfettered access to the South China Sea’s shipping lanes, Brunei, Malaysia and Vietnam, in particular, have competing claims on islands in the region. Additionally, the Philippines has expressed strong interest in joining the trade agreement. If Congress fails to approve the TPP, it would undermine America’s influence in the Asia Pacific and ability to act as a counterweight to China.


With more than half the world’s merchant ships passing through the disputed area, the United States and its Asian allies must not acquiesce in China’s aggressive bid to control the South China Sea. But our security strategy also needs a strong economic component. President Obama rightly envisions the TPP as a way to forge closer commercial and trade relationships with key regional partners and emerging markets like Vietnam. Not only will that make China’s anxious neighbors less susceptible to economic reprisals from Beijing, it will also give Americans access to the world’s fastest growing markets.