Commentary: Who will write trade rules? The U.S. or China?

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Leaders of the BRICS countries - Brazil, Russia, India, China, and South Africa - meet this week in India to discuss trade and other issues.

By Michael Froman

This political season has revived a debate about our engagement with the global economy, about whether to lead or withdraw, to shape or be isolated.

As Congress considers the Trans-Pacific Partnership, it faces a choice that will define that debate for decades to come. By passing TPP, Congress would ensure U.S. leadership in making the global economy work for all Americans. By failing to act this year, Congress would undermine U.S. leadership and cede the role of establishing the rules for global trade to China.

This decision comes at an important economic and political moment. Even with the economic progress we've made over the past eight years, the anxiety many workers feel is real and the underlying concern about whether the economy is working for all is legitimate.

While incomes grew at their fastest rate on record last year and poverty declined more than in any year since the 1960s, we've got more work to do to following decades of wage stagnation and rising inequality.

The rise of emerging economies like China has changed the global landscape. The rapid pace of technological innovation is transforming the American workplace.

Yet, despite the changes these forces have ushered in, Congress doesn't get to vote to stop automation or globalization, so it is tempting to make trade agreements the scapegoat for all our economic ills. But the truth is - that done right - high-standard trade agreements like TPP are actually one of the only tools we have to shape globalization in a way that reflects our values and levels the playing field for our workers, farmers, and businesses.

The United States is among the most open economies in the world - we have an average applied tariff of just 1.5 percent - but our exports face high barriers across the globe. If we don't eliminate them, as TPP does, our companies will feel the pull to move their operations to other countries in order to serve the 95 percent of the world's customers who live abroad.

TPP preserves and expands well-paying jobs here at home by lowering barriers abroad. Major studies from the Peterson Institute and the International Trade Commission show that TPP would deliver hundreds of billions of dollars in yearly export and income gains. And despite what many might think, they show that two-thirds of the agreement's benefits will go to American workers in the form of higher wages and job opportunities.

But those benefits will vanish if we don't act. According to the Peterson Institute, delaying TPP just a single year will cost our economy $94 billion in lost income. Our competitors know this and they aren't waiting.

As we speak, China is executing on its regional strategy: its launch of the One Belt-One Road Initiative, the Silk Road Fund, the Asia Infrastructure Investment Bank, as well as its push to conclude its own mega-regional trade agreement, the Regional Comprehensive Economic Partnership or RCEP. RCEP covers 16 countries, from India to Japan, and unlike TPP, it doesn't raise labor and environmental standards, impose disciplines on government-owned corporations, strengthen intellectual property rights enforcement, or maintain a free and open internet.

If China moves forward and we don't, our products will be deeply disadvantaged in some of the largest and fastest-growing markets in the world, and our businesses and workers will find themselves competing under rules that do not align with our interests and values.

The strategic implications are as significant as are the economic implications.

As Prime Minister Lee Hsien Loong of Singapore said of TPP, if the United States is "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?"

Defense Secretary Ash Carter argued that "passing TPP is as important to me as another aircraft carrier." And Admiral Harry Harris, commander of the U.S. Pacific Command, said that "TPP would strengthen stability and security by deepening our relationships throughout the region and raising the bar to protect the things that matter."

It all comes down to this: Either we write the rules of the road or China does.

At a time when so much of our political debate is focused on the importance of standing up to China, why are the critics of TPP so eager to hand them the keys to the castle?

The stakes could not be higher. The choice could not be clearer. Congress must act to approve TPP this year.

Ambassador Michael Froman is the U.S. trade representative. correspondence@ustr.eop.gov

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