Let Obama Close the TPP Deal

What Obama needs to do on the TPP.

Photographer: ROBERTO SCHMIDT/AFP/Getty Images

The fate of the most ambitious trade agreement ever attempted is in doubt. Talks on the Trans-Pacific Partnership, which would bind the U.S. and 11 other countries to new commitments across a wide range of contentious trade issues, have been going on for years. The effort could come to nothing if Congress denies President Barack Obama the authority he needs to close the deal.

Letting this effort collapse would be a grave mistake. This isn't because the prospective agreement looks flawless. Its final form is still unclear, though it's a certainty that an agreement of this scope and complexity won't be perfect. The main harm, if the talks fall apart, is the damage this would cause to the larger process of global economic integration.

Fading confidence in that process is the root of the political problem, in the U.S. and elsewhere. Anti-trade and anti-business sentiment is surging, thanks partly to the global financial crisis and its aftermath. In the U.S., Democrats who believe that trade kills jobs are making common cause against the TPP with Republicans who just want to deny Obama anything he can call a success.

In a way, critics of the agreement are right: Lowering barriers to trade is disruptive. Jobs get destroyed and new ones take their place. But this is a criticism of capitalism itself, and of economic growth. And it ignores the central fact about open markets: Globalization has transformed living standards everywhere and, in the developing world, is lifting hundreds of millions of people out of poverty.

To its great credit, the U.S. has for decades led the effort to build an orderly system of international trade. The traditional multilateral approach, proceeding by consensus, worked well for years. Sadly, it has all but come to a stop.

The TPP is a chance to move forward with a smaller number of willing partners and design a more ambitious template for the next stage of trade liberalization. It's an explicitly open agreement, to new members and to new trade issues as they present themselves -- a platform for ongoing liberalization. If this effort also founders, the chances for significant further progress on trade would be slim.

To see why that matters, consider the goals of the TPP. It aims for "comprehensive" removal of tariff and nontariff barriers. It covers not just manufacturing but also services and agriculture, intellectual property, state-owned enterprises, dispute settlement, foreign investment and regulatory cooperation. It's a complex and far-reaching agenda -- proof that creating a truly open trading system is unfinished work.

Granted, the U.S. is already a relatively open economy, so its direct gains (and the disruption that comes with them) wouldn’t be dramatic. Making assumptions about how the deal could turn out, one study puts the net benefit at about $80 billion a year. Still, that's $80 billion a year better than nothing, and the gain would rise to more than $250 billion a year if the agreement eventually took in China and others. And these figures don't capture the (potentially much larger) intangible benefits of further global integration, including faster productivity growth and innovation -- to say nothing of the geopolitical benefits of deeper economic ties.

The final details will need to be carefully picked over. For instance, will the intellectual-property provisions discourage creativity or unfairly burden poor countries? Will the new dispute-settlement procedures make it too easy for big corporations to bully governments? The list of concerns is long, and the administration should attend to them carefully. 

Nonetheless, the president should be granted negotiating authority to bring the talks to a conclusion. The whole effort is doomed otherwise. Then, when Congress sees the details, it can decide whether it wants the TPP or not. With so much at stake, letting the talks fold at this stage would be an unforgivable abdication of U.S. leadership.

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.