Economy
12:27 pm
Mon April 21, 2014

President Obama Will Skip China, But Asia Trip Sends A Message

Transcript

CELESTE HEADLEE, HOST:

I'm Celeste Headlee and this is TELL ME MORE from NPR News. Michel Martin is away. President Obama heads overseas this week to Asia. He hopes to strengthen U.S. economic ties with that region.

Part of his agenda is a new trade agreement. It's called the Trans-Pacific Partnership, and it involves the U.S. and 11 other countries, notably, not China. We're joined now by two experts to tell us what this means for American interests and American workers. Our guests are Sudeep Reddy, economics editor at the Wall Street Journal, and Roben Farzad host of the forthcoming business podcast "Full Disclosure." Welcome, both of you.

SUDEEP REDDY: Hi, Celeste.

ROBEN FARZAD: Thank you.

HEADLEE: Sudeep, first, give us the basics. What are the basics of this particular trade deal?

REDDY: For several years, the Obama administration has been working with these countries that border the Pacific in trying to create greater trade ties. A dozen countries - Australia, Singapore, the United States, Chile, Japan - the goal is to create links between these countries to bring down tariffs, to bring down what it costs to get products into some of these countries and to forge stronger trade ties.

So products are moving back and forth in a freer fashion. And as you noted, one of the big goals in this is to create ties in a place where there is already a big powerhouse. China is the second-largest economy in the world after the United States, and it is showing its might in a lots of ways. And a lot of smaller countries in the - around Asia are concerned about China's strength. And this is one way, by creating economic ties between the United States and some of these countries, to serve as a counterweight to China's big force in that region.

HEADLEE: So, Roben, who are the fors and againsts? Oftentimes, in trade deals, we see big business pitted against workers and labor unions, right? Is that the case in the Trans-Pacific Partnership?

FARZAD: No, in this case, these are really de minimis agreements in the grand scheme of things. As Sudeep said, the big player there is China...

HEADLEE: Did you say de minimist (ph)?

FARZAD: De minimis - I always wanted to use that term on public radio, too. I mean...

HEADLEE: Well, you just did.

FARZAD: Thank you. Thank you for the privilege.

HEADLEE: Bucket list, OK.

FARZAD: Yeah, it's on my bucket list. You're talking about Japan, South Korea, Malaysia and Philippines, and they're by no means monolithic. But again, what is in common here is the way they're looking at China, especially in the lens of what's gone on recently with Russia and the Ukraine. And the U.S. - the White House - is hard-pressed to transmit to effect the fact that it's still strong and important, regionally.

So it's looking around the world and saying, well, we're not being looked at as being very efficacious now in Europe, so let's go to Asia, especially where there's this possibility that China might be emboldened to rough up the likes of South Korea, Malaysia and the Philippines, and reassert the fact that we are preeminently important to these countries in terms of the economic ties. So it's a delicate balancing act for our trade representatives and for the White House. At the same time, they kind of thumb our noses at China and reassert our kind of geostrategic and trade importance to these smaller countries.

HEADLEE: Well, you are efficacious at using sophisticated words like de minimis there, Roben.

FARZAD: I'm still - look, I'm still bitter over the SAT verbal. And I remember the six words that I missed. So of course I'm going - I haven't gotten over it.

HEADLEE: He's trying to get them all in in this segment.

FARZAD: Yes.

HEADLEE: So, Sudeep, if I'm an average auto parts manufacturer or line worker, right, do I have something to fear from this Trans-Pacific Partnership? Is it going to cost the United States jobs?

REDDY: We don't even know how this agreement is going to end up, and that's one of the concerns that's coming up among workers, among businesses, among lawmakers in all of this. The goal in this kind of a trade agreement is to create more open trade so that an auto worker here can get his or her parts to be sold all over the world and maybe free that up a little bit. But anyone who has watched the last two decades of global trade since NAFTA in the early 1990s, it's obviously been a big political issue.

But you can see the benefits and the drawbacks of all of these trade agreements. And they are going to be benefits and drawbacks on both of them where, in some cases, you've seen a lot of the benefits accrue to regular people being able to access products that are cheaper, access services that are cheaper. It's a much different world than it was two decades ago in terms of technology and communications.

All of that is changing, and we have a system right now that is stuck in a different era. And that's what people are looking at and wondering if we go forward with this, is it going to be lost to - a loss to me and my company and my neighborhood, or is it going to be some kind of a benefit in ways that I'm not imagining right now?

HEADLEE: If you're just joining us, we're talking about the economic agenda of President Obama's trip to Asia. And our guests are Sudeep Reddy, who you just heard, of the Wall Street Journal and business journalist Roben Farzad. A few Democrats are opposed to the Trans-Pacific Partnership, this trade agreement. Take a listen to Rep. Rosa DeLauro last week.

(SOUNDBITE OF INTERVIEW)

REPRESENTATIVE ROSA DELAURO: It threatens to roll back financial regulations, environmental standards and U.S. laws that protect the safety of drugs and food and the toys that we give to our kids.

HEADLEE: Roben, what do we know about things that she just mentioned, whether or not it holds nations that are in this trade agreement to certain economic standards, financial standards, environmental standards?

FARZAD: These are evergreen concerns. You had them with NAFTA. You had them with China over its ascension to the WTO, for example. Colombia's Free Trade Agreement with the United States ran afoul of labor unions here. There are always things that you could bring up. In this case, this is much more to my mind about the signaling of what this sends to China really at the nexus of national security and economic relations than it is about the fine details of, well, what are tariffs X, Y and Z.

I mean, the press really isn't even focusing on that. In each case here, each of these countries - Japan, Malaysia, the Philippines and South Korea - each has a dispute with China over at least one island. And the Chinese Coast Guard recently harassed Filipino ships. And the idea here is that if China is emboldened by the state of affairs from the Kremlin vis-a-vis the Ukraine, that it can get more aggressive with these countries.

And they just want to be assured. It's more about photo op diplomacy and Obama going there and shaking hands, that they have a foil to China, that Washington and Wall Street and the United States has their back if China were to get more aggressive.

REDDY: There are some real concerns here about the underlying provisions, the regulations that lawmakers are talking about. And these come up in...

HEADLEE: Especially considering some of the product problems and recalls that we've had, and safety concerns.

REDDY: Exactly. And you've seen these in markets all over the world. And if these trade deals end up being lowest common denominator approaches, you might end up reducing some of the requirements that you have for American products - that's the fear. The goal of a trade deal is to bring up all these other countries and force them...

HEADLEE: Right.

REDDY: ...To use higher environmental regulations, better labor standards, better product standards...

FARZAD: Sure.

REDDY: ...For food, for prescriptions, for all these things. And that's the goal of the negotiation. But other countries, particularly these countries, aren't there yet in terms of their own markets. And so they don't want to lose out by coming together in this way. And that's the tension you have here.

It's the tension you have in any trade agreement around the world - is who's going to come up and who's going to come down in their standards and in their requirements, and are they going to lose out on some of what they have right now in terms of product services?

FARZAD: I'm just convinced that the ancillary goals here are actually very important, especially in the context of - and I don't want to beat on the Ukraine drum too much - but it's really what everybody is talking about here. And each of these countries has their peculiar concerns, peculiar vested interest with the United States and individual details to hammer out. Japan and South Korea, for example, are not considered emerging markets.

South Korea has ascended - I mean, it's totally turned its act around in the past 17 years. Malaysia and the Philippines are kind of more on the frontier. Malaysia has issues with democracy. There are people here in the United States that are saying we should not legitimize the regime so much by having Obama be the first president in decades to visit over there. So there are all sorts of things...

HEADLEE: Yeah.

FARZAD: ...That are going into this.

HEADLEE: That's Roben Farzad there. Sudeep, you mentioned NAFTA earlier and certainly - that was the trade deal signed under the Clinton administration - and there were many things unintended, unforeseen things, that sort of trickled down from that trade agreement. What do you think we've learned from NAFTA and is any of that going to translate into this trade deal?

REDDY: We've certainly learned that people generally are not in love with trade deals. When you talk to Americans, they understand a lot of the benefits that you get from trade deals because you can see people down the street, you can see your coworkers, you can see your neighbors, people in your communities going and selling their products to other countries and that can be a benefit.

But you also see the famous Ross Perot suck - giant sucking sound, jobs leaving the country. You have to question, though, in this era of technology, a lot of these jobs would have left anyway. There are always opportunities for companies around the world.

HEADLEE: Right, but would we have lost the manufacturing sector to the extent that we did?

REDDY: Would we have lost it at the pace we lost it...

HEADLEE: Yeah.

REDDY: ...And the way we did exactly is the question. But we are always going to be dealing with that, particularly when we're getting better and better products being built and we demand, as consumers, we demand that they're cheaper products whenever possible. And so there's a tension here in what Americans want from their products and what they want in terms of prices and when you go to the store you're typically going for the cheaper priced products.

HEADLEE: Yeah.

REDDY: But you also want the jobs. And the administration - every administration - wants to figure out how to not only preserve jobs, but more importantly, figure out what the next set of jobs will be.

And that's what the goal of these trade agreements really is, is to expand the opportunity for businesses because if you look at figures right now - about 1 percent of American companies actually export anything. And there's a huge gap between what the American economy gets from exports and what our big competitors like China and Germany get from exports.

HEADLEE: So, Roben, NAFTA obviously took a very, very long time to be finalized. What about this particular trade pact? What's the chances it'll actually go through and what's our timeline?

FARZAD: The administration doesn't have many friends who are in control of Congress right now, but it has people who want to be friends with it. You know, friends in need in a moment of potential China being able to puff its chest more. So this could theoretically be fast tracked. Japan and South Korea are most critical here in terms of key exports that come to the United States. If you think about all the products that you have - Samsung TVs, LG phones...

HEADLEE: Right.

REDDY: ...From South Korea - it's really arrived as a major economic powerhouse. So if this is focused - if he could get some unanimity among these very different economies, than it doesn't have to take that long.

But I question this idea that this would really accelerate these countries espousing full democracy through free trade, especially in the case of Malaysia. If you look at China since the WTO in 2001, 2002 it has not been the case.

HEADLEE: OK, that's Roben Farzad. Sorry, I have to leave that debate for another time. He's host of the upcoming business podcast "Full Disclosure," joined us from Richmond, Virginia. And Sudeep Reddy is an economics editor at the Wall Street Journal. He was here with me in our Washington, D.C. studio. Thanks guys.

REDDY: Thanks, Celeste.

FARZAD: Thank you. Transcript provided by NPR, Copyright NPR.