The economic importance of the Asia-Pacific region cannot be overstated. The region accounts for nearly 60 percent of global gross domestic product, and roughly 50 percent of international trade. Forecasts expect approximately half of the world’s $22 trillion in economic growth over the next five years to be in Asia.
Unless the United States acts, however, U.S. workers face the prospect of being locked-out of this dynamic region. In the late 1980s, then-Secretary of State James Baker warned not to allow a “line to be drawn down the middle of the Pacific.” Recently, as Asian countries have aggressively pursued trade agreements among themselves, that line is being drawn. By one estimate, 180 of these agreements are currently in force, 20 are awaiting implementation, and 70 are being negotiated. It's no coincidence that U.S. share of exports to Asia has declined by over 10 percent in the last decade. Indeed, the U.S. is party to only three free trade agreements in Asia.
Faced with a lock out, the Bush and Obama Administrations have backed the TPP. Taken together, TPP countries represent our fifth-largest trading partner. If Japan were added, the bloc would represent over one-third of global GDP. Other countries want in. The preeminent trading bloc in the world’s fastest growing region offers the United States considerable economic benefits, but diplomatic and strategic benefits too.
TPP is ambitious in content. The TPP would contain provisions that go beyond traditional tariff reductions – covering issues of cross-border services, labor, and intellectual property. TPP's diverse countries will have to tackle other issues, such as supply chain management, government procurement and state-owned enterprises. It is tough to see Vietnam’s SOE’s – representing 40 percent of output – being acceptable.
TPP countries aim to reach a final text by year's end. This would require strong White House leadership. To date, this Administration has not requested trade promotion authority, a problem several of our witnesses raise.
The U.S. has placed great importance on TPP. In many respects, it has become more than a trade agreement, being linked to our security and diplomatic goals and prestige in Asia.
Ninety-five percent of the world’s customers live outside the United States. But according to a study on global competitiveness, America ranked a disastrous 121st out of 125 economies in terms of “tariffs faced” by our products overseas. We need to be doing all we can to hammer away at these barriers. TPP must help.