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World China will have to play by TPP rules to join world’s biggest free-trade league

Japan has been grappling with a severe butter shortage that critics say highlights a bigger problem with the country’s protected agricultural sector, a key sticking point in high-profile trade talks this week in Hawaii.

YOSHIKAZU TSUNO/AFP/Getty Images

It's the new Great Game at the dawn of the 21st century.

Just as Britain and Russia, when they were 19th-century great powers, jockeyed for influence in central Asia, the world's biggest-ever trade deal – the Trans-Pacific Partnership, which will perhaps be finalized this week in Maui – is about over-arching strategy. It's about whether the United States or China emerges as the primary power in the Pacific and whether they are constructive rivals or adversaries.

Singapore's Foreign Minister Kasiviswanathan Shanmugam put it bluntly. "Trade is strategy and you're either in or out." The choice for the United States is stark, he told Washington's Center for Strategic and International Studies last month. "If you don't do this deal … your only lever to shape the architecture, to influence events, is the Seventh Fleet and that's not the lever you want to use."

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The TPP would create a 12-nation grouping including five countries in the Americas (Canada, the U.S., Chile, Mexico, Peru); five in Asia (Brunei, Japan, Malaysia, Singapore, Vietnam); and Australia and New Zealand.

Japan, by far the biggest on the Asian side, also sees the huge trade pact in terms of geo-political outcomes. "TPP goes far beyond just economic benefits. It is also about our security" says Prime Minister Shinzo Abe. Coping with a burgeoning China remains Japan's greatest security challenge. Leaving China out, looking in, has strategic purpose. TPP "should be a model for China in that it's an ambitious attempt to create a new economic sphere in which people, goods and money will flow freely within the Asia Pacific region. It's a new economic region of freedom, democracy, basic human rights and rule of law," Mr. Abe said in Washington earlier this spring.

The message is simple. If the Chinese Communists, now running the world's biggest economy, want to play in the world's biggest free-trade league, the rules are being drawn up without them. Getting in later will mean accepting the game as it is played.

President Barack Obama, to the dismay of many Democrats who fear another "great sucking sound" as U.S. jobs flush to lower-wage locations as many claim they did after NAFTA, also paints TPP in geo-strategic terms.

"If we don't write the rules for free trade around the world, guess what, China will," Mr. Obama said. "And they'll write those rules in a way that gives Chinese workers and Chinese businesses the upper hand."

No one in the Obama administration explicitly says "containing China," at least not out loud.

But TPP is part of a three-pronged political, economic and military strategic shift. It includes Mr. Obama's "pivot" to the Pacific, which involves shifting U.S. troops and warships to the region; closer security agreements with Japan, South Korea, Australia and the Philippines; and the assertion of "freedom of navigation" in the disputed South and East China Seas where Beijing has been shouldering smaller nations aside.

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"The Obama administration's policy of 'rebalance' toward Asia has been designed to achieve two objectives: to embed the United States more deeply in the world's most dynamic economic region, and to prevent a regional vacuum to be filled predominantly by China as it continues its rise," Jeffrey Bader, a former senior adviser to President Obama, and David Dollar, a leading expert on U.S.-China relations, wrote Wednesday. Both are now with the Brookings Institution, a Washington think tank. "To impress a region that prizes economic growth and openness, the stakes in TPP therefore are high for the administration," they added.

It seems to be working. Even before the TPP pact is concluded, South Korea, the Philippines and Taiwan have voiced interest in joining.

Most of the Asian TPP nations hope China will eventually seek entry. If so, Beijing will face the reality of joining a game where the rules have already been established.

Meanwhile, the Obama administration, keenly aware of the need for TPP approval from key Southeast Asian states – the ones with most to lose if China dominates the region with rules that Beijing might impose – has been clearing away obstacles.

Earlier this week, the U.S. State Department upgraded Malaysia's bottom-tier ranking on human trafficking, igniting accusations from rights groups. "This upgrade is more about the TPP and U.S. trade politics than anything Malaysia did to combat human trafficking," Human Rights Watch warned.

But Malaysia, along with Vietnam and Brunei, are vital states with stakes in the South China Sea and fearful of Beijing. All three are among the 12 TPP nations.

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The trade pact's domestic opponents denounced the State Department's move as crude politics. AFL-CIO President Richard Trumka said the Obama administration's "cynical upgrade of a nation where forced labour, human trafficking and exploitation remain pervasive, undermines its promises on labour rights, human rights and anti-corruption in trade deals."

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