Think Tank Explores What Changes to TPP Could Get US Back in Deal

Two former government officials, one a leader at a think tank, the other a lawyer at Akin Gump, acknowledge that even as businesses continue to believe quitting the Trans-Pacific Partnership was a tactical error, "there is no conceivable scenario in which the United States could sign onto the [Comprehensive and Progressive Agreement for] TPP as it exists today. Strong opposition from both sides of the political spectrum to key elements of the deal would prevent congressional approval."

But Wendy Cutler, vice president at the Asia Society Policy Institute, and Clete Willems, a former Trump administration official now at Akin Gump, have a list of proposals that they think could remove opposition to the trade deal and could be acceptable to countries in Asia that are part of the CPTPP.

The report, released Dec. 12, is called "Reimagining the TPP: Revisions That Could Facilitate U.S. Re-entry." Cutler was not a political appointee when she was the Office of the U.S. Trade Representative's top negotiator for the TPP, but the two describe the report as bipartisan. They also discussed their recommendations in an online program hosted by the Asia Society.

Willems said he first got interested in thinking about what changes the TPP needed to become politically palatable when he testified before Congress last year. Willems had said it wasn't realistic to get back into the trade agreement, and a Democrat asked him: Why not?

The authors say returning to the TPP "would provide an immediate boost to U.S. economic competitiveness and geopolitical influence. It would also help ensure that the United States features prominently in regional supply chain decisions."

They also argue that chemical exporters and medical equipment exporters are being disadvantaged as CPTPP members align their regulatory standards, and said that if the U.S. were in the deal, it would be benefiting from "18,000 tariff cuts on exports of U.S. goods and agriculture products, including on duties as high as 59 percent for American machinery and 30 percent for pork."

Willems said those benefits could be achieved, though it would not be easy to get the other countries to agree to changes. But he said it's possible USTR could build on the Indo-Pacific Economic Forum initiatives in the supply chain and digital areas.

And, at home, he said, "We could do to TPP what we did to NAFTA, and I hope this report really starts that conversation."

One of the biggest criticisms of the TPP -- from both the left and from former USTR Robert Lighthizer, who represents a right-of-center "America First" perspective -- was the removal of tariffs on imported cars and trucks if those vehicles had 45% regional content.

That would have to change, they say, and the non-regional content would need to have a low ceiling for content from China. Japan likes the rules of origin as they are, as it helps with its Asian supply chain that stretches into Thailand, which is not a member of the CPTPP. The authors say this could be solved in a number of ways:

• The U.S. could opt out entirely of the car and truck plank of the CPTPP.
• Japan, Canada and other CPTPP countries could keep the 45% rule of origin when trading with each other, but would agree in side letters that for exports going to the U.S., only vehicles that meet USMCA-level rules of origin would get a tariff break.
• Countries in the trade deal could review all rules of origin, with an emphasis on limiting non-market economy content from countries not in the agreement.

The authors also suggested strengthening the state-owned enterprises chapter, including provisions that address excess capacity, especially in steel and aluminum.

Also with regard to excess capacity, Willems said during the webinar that U.S. implementing legislation could embed something like the Level the Playing Field 2.0, legislation introduced by Sen. Rob Portman, R-Ohio, that would remake antidumping and circumvention laws more favorable toward domestic industries.

In a proposed new supply chain chapter, the authors suggest there should be accelerated tariff reductions, harmonized standards and trade facilitation. They say there should be cooperation on critical mineral resiliency in that chapter.

Because, as Cutler said, the current administration seems "allergic" to traditional trade deals, they don't think negotiations of this kind are coming next year, or even in 2024.

In response to questions from International Trade Today, Cutler said it takes time for politicians to come around. "IPEF is underway now. Hopefully, we’ll see some concrete results coming out of this initiative within the year. If we successfully start a conversation [on revising TPP], it is going to take time for these issues to percolate. I think we are talking about the medium term, and 2025 doesn't seem that far off, frankly."

Willems, who had noted that Republicans in Congress often complain that the Biden administration has no strategy to lower tariffs for U.S. exports, answered an ITT question about whether a President Ron DeSantis would be open to revisiting TPP. "If we could be successful, and if we could do a lot of what we’re trying to do in this report, I think everyone across the political spectrum could support this," he said. He said he'd love to talk to DeSantis if the Florida governor runs for president.

In addition to the fact that U.S. exporters become less competitive as tariffs drop between CPTPP countries year after year, Willems and Cutler talked about how China's application to join creates risks for the U.S., both economically and geostrategically.

While it's hard to see how China could meet the disciplines in the CPTPP, they both said the application is a serious one, and even if China was not yet in CPTPP, just being in an accession process could help China shape the deal as it evolves over the years. "Our friends are helping us slow that process down," Willems said. "We need to get in there before China can."

If the U.S. were in the CPTPP, it could veto China's admission.