January 8, 2014
Host: Woodrow Wilson Center
Mr. William Krist, Senior Policy Scholar, Woodrow Wilson Center
Dr. Fred Bergsten, Senior Fellow and Director Emeritus, Peterson Institute
The world today is more integrated physically, socially, and economically, than at any other time in history. Free trade agreements (FTA’s) and “most favored nation” statuses (MFN’s) have contributed to this process by promoting economic unity and openness between different countries, thus boosting market competition and enhancing the exchange of ideas between innovators. At a time when the United States is suffering a massive trade deficit and new markets are quickly rising in East Asia, it is important that the President and Congress forge new trade pacts that are advantageous to the country and propel future growth.
To mark the release of his new book, Globalization and America’s Trade Agreements, the Woodrow Wilson Center Invited William Krist to discuss the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). These two trade deals, if fully enacted, would greatly expand global free trade by establishing a free trade zone encompassing the world’s three major economic bodies, with the U.S. and other NAFTA countries serving as the middle pivot between East Asia and the EU. The two deals would unite five of the six largest economies in the world (the U.S., Japan, Germany, France, and the UK) and put economic pressure on China to eventually enact reforms and join the deal. Due to their massive convening powers, Mr. Krist refers to the proposed deals as an expansion of the current World Trade Organization, calling the TPP and TTIP, “the pinnacle of trade policy” or “WTO+.” It is his view that these two deals can create new opportunities for U.S. businesses and ensure equal and fair trade for a majority of the developed world.
In fact, the real benefit of these two deals, according to Mr. Krist and Dr. Fred Bergsten, are the safety measures they enforce on behalf of the U.S. Though the TPP would open markets to U.S. businesses, Mr. Krist and Dr. Bergstein both see its ability to establish near global trade standards as the true benefit of the trade deals. As the world’s largest economy, and home to the world’s reserve currency, the U.S. has for years been the victim of currency manipulation. Through his studies, Dr. Bergsten estimates that about half of the U.S.’ trade deficit can be attributed to a variety of manipulators, with China being the largest. Through the TPP, the U.S. can limit currency manipulation in smaller markets like Singapore and Malaysia while establishing favorable standards, should China seek admission to the TPP at a later date.
Incorporating currency oversight and regulations will likely be the hardest and most important aspect of these free trade deals, according to both Mr. Krist and Dr. Bergsten. Without addressing these issues, which are typically framed as matters of national security, it is unlikely that Congress would approve either deal. For that reason, and to promote real progress, the TTP and TTIP should aim to establish global standards and regulations. These trade pacts are the first multilateral agreements of their kind. With the ability to create jobs, generate exchange, and ensure fair practice, the TTP and TTIP have the potential to unite and enrich the world while setting the standard for a better future.