tv Key Capitol Hill Hearings CSPAN May 19, 2015 4:30am-6:31am EDT
>> all right. i would like to thank you all for being here. two excellent presentations. i would also like to thank our two questioners which sets the stage. it's 1st of them i i don't know that i could introduce you any better than the ambassador did. i will try to be brief. he can give more detail there. to my immediate left a resident scholar at the american enterprise institute where he studies asia economic institutes and trends and particularly focuses on the chinese economies and us economic relations. before before joining aei he was the senior research fellow in the asian studies center at the heritage foundation. senior fellow at the
brookings center for east asia policy studies. dr.'s. doctor sublease is an expert in japan's economic policies and analyzes. her analysis includes consideration of whether free trade agreements can be an effective tool template the domestic structure reforms needed to enhance the competitiveness of the japanese economy which is something briefly talked about in terms of efficiency next to her we have james foundry who is the executive vice president of us korea business council and senior director for japan and korea of the us chamber of commerce. in his role as senior dir. he also set the chambers priorities and policy positions for creative japan is one of the positions overall agenda programs. next to james we have edward alden who is the bernard l
schwartz senior fellow at the council on foreign relations where he specializes in us economic competitiveness us trade and international economic policy. previously the canadian borough chief for the financial times and also the managing editor of the newsletter inside us trade based here in washington dc 's. i guess where i would like to start off we have heard a good deal of discussion about the course fta this afternoon. i want to move from the course fta to much of the discussion we had here in dc on the transpacific partnership and in touch on one of the other significant agreements in asia the korea china fta and where that is and what it means for the region. first we heard the ambassador give a strong push. doctor lee talked about it as well. but it's something that the obama administration has indicated is the baseline
from the transpacific partnership negotiations. you know, if any of you remember when korea completed its fta with the united states the chinese immediately said there was like one as well. as for those talks along. the challenges we all know many critics in washington and said it has not necessarily been successful. so just to start off we are three years into the agreement. is it too early to reach a conclusion? how would you evaluated at this time? >> it is a pleasure to be here. too early to have a full assessment. and the discussion of implementation issues and discussion of the performance of exports and imports to my colleagues. i think we can make some statements regarding the implications of the course
you also have.korea taking on these rules going for a deep integration that marks the first wave of agreement so from the point of view of south korea as a steppingstone that allows korea to negotiate with negotiating trading partners like the european union as well. and i think it has left korea in a good position when it's considering now the potential for membership. the price of admission into the ttp should not be -- for south korea because it has that adjustment and it is negotiated ambitiously with united states. we know that the tpp is not a replica of the korea-u.s. free-trade agreement. there are him and the other issues that have been incorporated since that the most
important message out there is that south korea can muster their resolve their ambition to undertake an agreement as ambitious as the tpp so it gives south korea into the tpp. let me briefly regarding how it has helped the united states they think it's very clear that it has been a tremendous push for u.s. trade strategy in asia-pacific. the united states has long proclaimed its specific power specific economic and security stakes in asia and the united states cannot remain disconnected from the most vibrant region and the world and that is asia. we know that in order for the united states to engage with the region trade diplomacy is a main ingredient that i would argue it's been challenging for the united states to actually be a major player in the process of asia-pacific regional integration. let me give you some examples.
not many of you remember because i see relatively young faces that there was a time when the united states and many nation countries did not agree with aipac where they should be binding a not for example. we also know when the united states tried to negotiate bilaterally thailand malaysia those negotiations came to nothing. very importantly when the united states and south korea began to negotiate the broader blueprint for integration into the region did not include the united states. we are talking about asean plus three. to my mind free trade initiatives helped the united states gain traction in the region whereby the so-called free. agreement template of the united states acquired resonance. one is free-trade agreement. you have very important demonstrations for the united states could negotiate
successfully with a the large asian economy and then a few years later the united states seeking a tiny very obscure trade agreement the p4 that eventually became the ptt so i think when you look at the importance of the course for both countries to clear it has help the country sustain momentum in developing a far more ambitious trade strategy. >> clearly she is saying it supports north korea and their estates but part of this is because we have at the bait over tpa going on now. the criticism has been basically the deficit has grown so therefore the course does not work. is that the case or have there have been other factors that prohibited u.s. export? >> i want to pick up understatement. the fta was a real break and there's a before-and-after and if you look at the u.s. trade
debate that's not the case. basically they are saved both for and after nafta. better? the united states is a before-and-after nafta and so much of the u.s. debate is about trying to assess the. impacts of nafta and the subsequent agreements and most importantly china's entry into the wto. so i think unfortunately the question of the impact of fta you look it very much with respect to that trade agreement and look in each case there were a set of promises made to the american people about what happened in terms of it and it didn't play out quite the way the administration promised. >> is the green eyed on? >> is that better?
>> my green light is on and i've tried both different directions. so again as i was saying for the united states everything is very much a before-and-after nafta and it's about trying to assess the impact of those agreements on the u.s. economy and each of those cases what we saw fairly rapidly after the agreements was an increase in the u.s. trade deficit. the before and after the fourth china's entry into the wto those countries have higher trade barriers that we do therefore in the aftermath of these agreements we should expect u.s. exports to increase rapidly and the trade deficit to shrink and that did not prove to be the case in the short term. part of the problem is it's difficult to assess these agreements in the short-term. korea in three years does not begin to be inadequate time to do that because they're all
sorts of other forces that affect whether the trade deficit grows or shrinks i want to be clear it's not obviously a problem. the periods of strong this u.s. trade is the 1990s ones where trade deficit grew most significantly. if you look over time the tendency has been for a shrinking trade deficit. nafta for instance there is a slight surplus if you include canada and mexico. i think if you look over time we are likely to to begin to see the same trends taking place with china. if you look at the korea e.u. fta there was a great imbalance something you hear a lot about in the u.s. debate. most recently we have seen your pain neck sports increase quite dramatically so you have a european surplus. so i think one important things with all these agreements is you can't rush to quick judgments from the u.s. perspective particularly when we are in the middle of the congressional
debate over trade promotion authority there's an effort to try to reach these very quick conclusions based on what the most recent agreement was in this case that was fta so korea has found itself at the gun sights with respect to the u.s. regression. >> jim you work with the business community on a daily basis. from a perspective of u.s. business how has korea performed? >> first of all let me check my mic. as a working? i would underscore a couple of things that other people have alluded to. first the course agreement in principle and practice is the strongest and best agreement. it is the platform for much of what is being negotiated in tpp s.o.f.a. prospective perspective the u.s. business community has welcomed it not only for its commitment to a lemonade terrorist for more importantly to start to get beyond the border and tariff measures and standards and things that have been particularly troublesome in
korea and also other economies as well so that fundamentally is a very important point to underscore. korea is a big trading partner in the u.s. and the bigger trading partner now as a result. we have seen is other people have mentioned increases in our exports of manufacturing and exports of services and agricultural goods and you can look at specific line items were tears have been cut and exports have gone up and there's a direct correlation. i think the main problem that we see at this stage of the game is something that dr. lee and others have alluded to which is in its complexity and getting to the new kinds of areas it takes time for these things to be addressed and work through. so it's relatively easy for people to say we have to reduce a tariff over this period of time and we haven't yet eliminated all the tariffs and we haven't implemented all the tariff commitments yet.
we are 80% i thank and due to move to 95% tariff for lamination over the next couple of years. so we are still making progress there but these other things that requires new rules for things like cross-border movement for requires rules for transparency in areas like radical devices or patent linkage those are very technical complex issues. korea has got some room to go in terms of adopting best global practices and that is i think something i really noted. this is an important thing for korea because it will fully modernize and integrate its economy into the global system. so it's important to do that and it's important to do it sooner rather than later and that ultimately is the word we have seen the challenges. i would also echo what ted said you can't look at a single trade
deficit. that's just way too simplistic. so we say that it's a strong trade agreement establishes the platform to build an even bigger and more comprehensive economic relationship between the u.s. and korea but we need to work collectively through the course mechanisms and the committee structure which is a new feature which is quite significant to allow ongoing consultations to resolve issues before they have to be taken to dispute settlement procedures that are set up in the courts. >> i would just like to do one question which you alluded to which is you to talk about regulatory changes and the need for that but one of the things we haven't talked about much dr. lee brought it up in his presentation but as the services component. we hear a lot of criticisms that we don't hear much about bringing the services out so how does the services picture look?
>> in a word it looks better because there were commitments made to change things in fields like audiovisual, it digital trade on agile services insurance etc. so i think on the face of that things are significantly better. dr. lee and others have noted changes in the legal market. accounting is opening up so there are clearly no opportunities being created is korea and the services area. very important for u.s. companies because we are highly competitive globally in the services area senate does represent big opportunities for us. services though often evolve or revolve around technical nitty-gritty details and you have to get the details right and you have got to meet the commitments fully and faithfully in order to get these things done right. we have had some let's say difficulties in the cross-border data rules for example and that is taken some time for korean
officials to get comfortable with the idea that data moves across borders and can be moved in process. it does not have to preside in korea it in domestic way located servers in order to become more secure. that's a fallacy so we have had to work through those kinds of things. >> derek, i don't want to belabor the point of the deficit but there is data that suggests it be look and jim talked about 80% tariff at this point and if you look at the beneficiary items there has been growth and i thank the ambassador houng address that. let's for the sake of argument say the critics and arguments are correct our imports with korea bad for the u.s. economy? >> i think you know my answer to that is no.
i think there are two elements of the debate in washington. i've been getting these e-mail messages from the senate. apparently they republicans are fighting about -- one of them is imports are banned in this as a group of people in washington who don't like the conversation i would change dr. lee's point a little bit and say i don't want our efficient regulations. want more competition that's what drives economic prosperity so when people say i don't like competition and i'm not giving a percentage of and not saying everyone who opposes tpp in this group is a group in this country and there's a group in korea and they're certainly group in china that just don't like competition. they want to sacrifice national prosperity for their own gain and make arguments about how my sector is more important than everyone else should face competition but not me. that is a completely
economically illegitimate argument. there's nobody who supports that it's the people being paid dreck by these groups. and there's another group and this is the group of swings the vote. they will swing the vote in tba in tpp if we can get it finished and so on. it doesn't oppose the trade deficit. people who cite those they are literally against national prosperity for their own purposes but there are groups that have specific concerns. when you hear about a lot in tpp and i won't get off topic but is isd has. it's a different kind of concern that we have to see the terms to see if that's legitimate. trade enforcement which is a discussion in the courts that bears directly on tpp. if there is a provision in the courts that i hated bush wasn't there doesn't matter, still has to be followed by the partners. you are undermining support for trade and that's really shoes so they are two different things. people grab onto the trade deficit and say imports are bad for the country he just can't
have to ignore that. there are people who talk about trade issues that could affect imports that really do matter and thus have to be addressed and it has to be a good trading treating those regards and so does tpp. >> since republicans are apparently fighting with each other wide-awake away the move to the tba debate reflate. ted, last week the senate struck a deal to move tpa through the senate but the house ultimately could be the sticking point to perhaps derek might have more insight on this. let's start with you and derek can fill in on what you see for tpa going over it is. >> i would agree i think passages easier in the senate that i was surprised by how media colleagues treated it. it was a symbolic vote. the democrats had points they wanted to make to the present and the boat went through has most of us had anticipated.
i think your typical amendments and there is discussion about the discussion of currency issues. i think the amendment from senator portman arguing that currency manipulation ought to be the one negotiated on is going to be a difficult amendment and the administration is strongly opposed to that and i think it stands a reasonable chance of passage in the senate. the house probably not. in terms of the overall tpa vote i think people pass the senate relatively easy. the house is harder. they're going to need some democratic votes. there are a lot of republicans who was supported but there are some and derek probably has a better sense than i i do with the size of that but there's a group for republicans who will was supported simply because i don't want to give president obama this authority. interestingly that's a change. the last tpa vote you have to go back to 2002. at that time there was a significant group of republicans worried about specific
industries. there aren't many of those even roger milliken's company the rate -- late roger milliken. milliken is now in favor of the tpp and these to be the biggest funders of the anti-fast-track forces so i think that group is fairly small but some republicans will not vote for the end of course how many democrats have offset that? the number now is probably in the neighborhood of 20 and some people say they make it to 30. >> anything you would like to add derek? >> third two threats. one is something that the senate sense that the house can't swallow. that is what the argument is about now what the house will bias the senators or give up a facile beinecke can they will tell you. so that's one possibility. i don't think it will go that far. i do think there's a possibility
of a conference which would delay tpa which would delay the best offers from the tpp partners which puts us in danger of being subject to the political calendar. if senator clinton ever takes a stand or secretary clinton i guess so for ever takes a a stand on this vector is another wrench in. the big issue is not any of those. if i could control one thing i would say tpas going to pass and it will pass fairly soon. congressional republicans and the white house have to not fight about a trade issue. the key is the relationship between the congressional republicans and the white house and e-packets messed up by something that doesn't have to do with trade than the 3-1 odds that tpa will pass fairly soon drop way down. >> if derek is right in tpas going to pass that means at some point we will move towards a
partnership locally but right now korea is not a member and expressing interest but what would be from the korean perspective perhaps their motivation for joining and what are the cause potentially staying out? >> while i think there are a number of factors that weigh heavily on the mind of south korean policymakers that encourage them to seek partnership entry. i think it has taken too long but i think it's easy to understand the rationale for wanting in. one is that there are estimates about investment. it's not a major issue but it's significant and it has to do mostly with the fact that you have to plan tpp. it says it important partner in south korea in terms of having access to the best terms does -- on the korean country so
obviously avoiding that exclusion is important. i think that membership in the tpp would give south korea the opportunity of updates, the trade agreements that it has established for some tpp countries. earlier generation trade agreements were not as ambitious and didn't offer the best access to modernize these trade agreements and they think the big prize for south korea's dimension before these preferential access markets vis-à-vis japan and that would be a very important game. these are very complete benefits that i think they are more diffuse benefits as well. one is membership benefits if you will. if you think about tpp is a pioneer. agreement if and when it happens it does come into fruition it's going to be the most efficient and covering asia and i think for a country like south korea that is trade dependent that is made the emergence as a trade
hub a central priority in its policy to be on the sidelines is costly and their foreign-policy considerations. to the extent of the tpp is an element of the rebalancing strategy it makes all the difference and is very important ally of united states. it's a combination of very complete economic benefits of larger foreign-policy benefits as well. >> jim what would it mean for a business if korea were to join? >> i think i would echo a lot of what she has said they that from a business community's perspective first of all there would be an important signal for these competing architectures are in agreement with china. i think of korea fully committed to joining tpp they could talk about the timing and the dynamics.
clearly we are at the end of the first time so the second tranche but i think it's an important signaling effect to say we are ready to commit to the highest possible standards that are in existence in bilateral trade agreements so that would resonate with people and then i think it's an opportunity for them to take the time to get the details right on these technical issues getting the transparency getting their business practices and regulatory practices in line with things that are going to be expected in the tpp because there are some higher standards in some areas of the tpp than there are in korea because we have evolved this landed -- indicated earlier. so i think it is a good opportunity to continue to move korean right direction towards market openness and transparency etc. and all of that is important you know as its policy
interest in u.s. companies that are exporting to businesses in korea. >> i'm interested in this question of should korea, forward and want to join what is the optimal time? >> of a series of first actions in terms of notification negotiations and other things so ted, is there perhaps a better time to push forward for korea? >> i think it's clear korea has indicated it would like to. i think united states very much at this point does not want to complicate the negotiations. it doesn't want to make the domestic political situation more complicated than that already is. the currency issue is very hard and the last treasury report singled out korea for interventions in the foreign exchange market and i will leave open the legitimacy of treasury but adding career at this point is too complex. i don't think that's going to
happen so the question is then when is the next opportunity? korea's very much first in line there. i do think that there will be a significant opportunity before the end of the obama administration so let's imagine the tpp gets concluded this year. there may be some window in 2016 and approves the obama administration to move quickly to send out a clear message to other countries in the region that this is indeed an open agreement. that has been the rhetoric and that is what they have said but it will be important to show that in practice. this will be a new departure for the united states. nafta really never had any document revisions and after nafta was negotiated the clinton administration talked about creating a free trade area with americans and it would be expansion of nafta into the region but for a variety of reasons that ever happen so i don't think we have an example of a big regional agreement that is a living agreement so i do
think it would be very much in the u.s. interest and then korea's interest to move as quickly as possible after tpp has been concluded to take that and i would like it to be done before this administration. >> i just want to add a little bit of that because it's hard for me to imagine happening next year but i totally agree with ted that is then korea's interest to move quickly. what i mean by that is if korea gets put into a second round with a bunch of countries that have made changes and are going to be resistant to some of them including some competitors in korea. i won't name them but one begins with t you know much less other countries that have farther to go that prays to them want to aspire to a high standard agreement but it's going to be harder for them to conduct negotiations in korea. if korea doesn't try to get itself in with the right group or maybe a group of one, just korea there could be a significant delay and if we
don't have the tpp terms i'm not sitting here trying to wave the flag like this is a disaster but i can imagine certain positions where korea being as maria talked about access market in japan today fists take several more years where korean business is managed even if korea is ready the other partners trying to join at the same time that could be harmed so there's a cost and that delay could potentially be harmful to them. >> before we move on from the tpp i have one last question. we started off talking about chorus and the idea idea that coors is the baseline for this and i would be interested and we will start with ted but anyone else please feel free to chime in. are there any lessons that we should be applying to tpp either in terms of the way the dash or
the things that are in agreement? >> i do think talking more from the u.s. perspective and what is in the u.s. interest i do think the most important this is not always true for course but i think it's true for all other. at -- check -- trade agreements. enforcement and implementation are crucially important. one of the reasons that you have so much opposition to the tpp and some of it i agree with and some sectors just don't want competition but there are many cases where the belief is we didn't really enforce the rules of our past agreements and i think that is particularly a concern with asia. there's a perspective in the united states that japan china, korea and others are quite clever at using regulatory tools to undermine the purported benefits of the agreements. i think united states has had trouble responding quickly and effectively to those. we have party scene of writing things crop up regulatory
concerns and so i think it's really crucially important that we don't see these agreements as the end of something. they are really the beginning of something which is the need to ensure that the rules aren't here to end the benefits of the agreements come through fully to all the parties involved. again that's not just a chorus lesson but it's certainly there are very much. >> i couldn't agree more. one of the things that has been clear as we have negotiated and there are certain passages that are ambiguous. you have to get an agreement on the text and i think that lends itself to these implementation challenges in some sense but i think you have to have the right attitude about implementing fully and faithfully in line with what has been negotiated in you have to under land -- understand the underlying spirit of the agreement. you alluded to the problems in
the auto sector. they are ever to reduce tariffs in the auto market in korea and to reduce the tariffs here but we see continually things crop up with regard to deficiency standards and the like that have posed problems so it's taken negotiators are the people charged with implementing this a lot of time and effort in order to make sure this stuff gets done in a way that it was intended to. so that's an important lesson going forward. i think we have to be mindful of that. we have to be careful not only in negotiating things that the other thing i would say is it's important in these new rules for us and where we have this highly involved economy and we get things like digital trade rules. when you are working with countries some of the tpp at the low work and you have to take the time and figure out ways to explain why it's in their interest to do it in a way that moved to the highest standard
rather than trying to strike compromises that then get problematic and their implications. >> well i want to bring china into the discussion. korea derek has a tear with states for european union and china. how would you have got a late in terms of how compares with korus and the usda? >> i did not read the korea ftap as i spent yesterday reading the entire korea china ftn and its 1152 pages. i did skip most of the tariff schedules but i read all the rules for china. probably everyone has heard this joke but i will use it already we need a snappy slogan for china and korea like korus so i decided to do china rok or crock
for short. no hidden meaning intended. if you look at korus versus crock, it's obvious that the china korea agreement is intended to skip over things. it's not to say it doesn't do anything. it does do some things. a concrete example is china and korea are more positively oriented toward trade and ended is to what it was difficult for the wto to agree on habla seemed easy the language in the china korea agreement is much more positive and we just got the agreement but that should make trade process much easier between china and korea that the wto level unless we get past this indian objection. there are interesting things that go on and let me also say you are dealing in china over the country with no rule of law so when you are asking for some sort of enforcement process
there is not a lot of enforcement mechanism in the subbot -- krok agreement and it's very glaring but it's also technical barriers to trade. and there was another major one that i wrote down here. there's no dispute settlement in either of those. competition rules are almost nonexistent because you were not going to get chinese to be bound by this so what created with a look let's not waste their time putting that on paper because nothing's going to happen. that wasn't the case in the korus agreement. there were explicit compromises made but there was never i give up procurement doesn't -- the chinese are going to do that with korea so it's sort of what you would expect. korea doesn't have the leverage to open up the chinese trade so it will make an agreement that
is feasible. the u.s. china agreement that was my concern. we were trying to open up a giant market. so it's beyond in the list of issues involved however culture is treated and so on very controversial and the korea china agreement is not doing anything in agriculture that is controversial so those are the differences. i don't mean to say it's a waste of time because there are some issues in which china and korea agreed and if they can make advances beyond wto level positions but on all the things you would think safeguard etc. it's just a punt. the u.s. could korea agreement is not perfect but they try to take on the harder issues. >> i have another suggestion which the koreans might prefer which is the rok which beat rok fta. >> i like mine better. >> but so i guess my follow-up
question to you would be when korea and china announce this fta last fall the narrative at the time was china's increased in the region and this was a loss for the u.s. and i will redo the headline in "the wall street journal." south korea china agree on outliner for free treatment to seen as a challenge for economic influence. there were various quotes that they put in, some perhaps more silly than others but so does this fta shift china toward the region and of what not what is agreement itself? >> the united states has this thing of thinking we have increasing chinese influence the region. we had a hiccup obviously with korus which took a long time from being agreed upon to be passed in the u.s. but nonetheless we have a strong agreement passed between korea and the united united states in the meta-considerably weaker agreement passed between china and korea.
the u.s. was first with a better agreement and china trailed along by korean design and they wouldn't sign in wouldn't sign until they had agreement with u.s. because they wanted to sign an agreement with the u.s. first. so this is just silly. what should we do now what should the u.s. do to match china? maybe we should sign a weaker agreement with korea and say we have one upped china and we can make an agreement. i would say the same thing with our step. i have a lot of smog -- snide comments but it would take us off comment. if the u.s. gets tpp done adds an agreement dpp will outweigh rsep. if we fail there's an opening for the only negotiations getting anywhere even if they are very low ambition is a china led negotiation but what is not
going to be is -- a prefinished tpp and rsep comes along later that means u.s. influence has declined in that silly. >> what we need is a therapy session. >> a lot of this impacts japan as well and so looking at this from the perspective of japan are there any challenges and opportunities and doesn't spur an activist for the trilateral agreement with north korea? >> to some extent they have one of the bilateral to move faster than the trilateral. it puts pressure on japan and you know there is no prospect of fast movement through the trilateral. they have met now i think seven times and they can agree on the basics of the negotiation.
there is no time for completions of the idea you would have it counterveiling fta that provides access into the china south korea zone is not any time in the horizon and we do not see it coming. but i think this is an agreement with what derek was saying. i don't anticipate major pressure from the bilateral south korea -- because there are two mitigating factors. first confession i did not spend my entire day reading the agreement. i just went with the summary and looked for example adds the targets. they are incredibly incremental so i think in the first 10 years i think it's going to be something like 79%, 86% and 20 years down the road it's going to reach a more respectable but certainly not eye-opening 91%.
we are talking about is derek was saying a very guarded process. had china and south korea negotiated faster and broader elimination of buyers and their economic transactions than japan might be but that is not happen. second we now have this 20 year timeline for the 90 percentile information and that gives plenty of time obviously for the tpp to come into force. i think if it does that's going to give japan a tremendous leverage over china and south korea and give a shot in the arm to the trilateral tbk. we have seen how responsive china is to membership. china and major ways accelerated the trilateral fta by year and
agreed to the japanese proposal and thinking about a 16 nation membership group for what is today the -- so i would anticipate china and south korea would be more eager to negotiated trilateral once the tp'd a. is in place. >> maybe since we are getting close to the end of the program i have something that mireya said. we have talked about the course of tpa and we have talked about tpp. mireya u.n. derek both mentioned rsep. what do these these agreements have anything tell us more broadly about the future trade in east asia and for that matter what this means for the united states? >> that's a really big question and he wants a really short answer so we can take openly
more specific questions from the audience. i always go to the negative which is we have one really powerful trade initiative on the table now. it's not the china korea trade agreement as we just discussed. certainly in not -- it's just tpp. what i would say about this is way to recognize we have too many eggs in this basket in the u.s. needs to have different options either bilateral in nature or some sort of fallback multilateral option because i don't know if tpp passes it's an easy story to tell. everyone is under pressure from tpp along the same lines as cj k. discussions mireya was talking about. we have the trade bicycles moving forward and the other bikers fall in line. the speed and the details are
unclear. no tpp and i don't know what we get. the way i would answer your question because it's so broad is the u.s. needs to think strategically about what happens if tpp doesn't work. tpp came out of the failure of the doha round and it was kind of lucky that it did. if tpp fails i don't see what's out there for us now so that's the big challenge for the united states. >> if i can add the way i see things moving as we have effectively the system of decentralized competition and by this i mean the stagnation of the negotiation process. countries have resorted to the trade agreements and now we are in the megatrade agreements. this means if you are not at the table you are negotiating. i think that the meaning of the obama phrase behind this.
it has obscured the true value of the tpp something that was alluded to in that is it's an inclusive process. the biggest pan am to tpp has been a structure whereby china will be willing to play by these rules. the idea is to try to move in that direction. having a documented mechanism in trying to increase all their trade agreements. the problem i think for the united states which goes back to derek's point is i cannot think of policy tool that you can think big and you can think about statecraft and think about breeding so many economies. adult boils down at the end of the day in this country to local
economies and that is the critical potential weakness of united states that we may not come through and that would mean for our credibility. my last word on this if so we have time it's important that we get with what china's doing and shift the discussion on the tpp. trade thomas a. i am of the firm opinion that china does not have an alternative if you want trade rules to put forward. the big item announced at the aipac meeting was a free trade with the pacific which by definition endorses a central security concern for the united states. the concept launched by the united states which would welcome china's initiative. >> nobody on the panel uttered afraid wto and we didn't even
mention wto which was of course the engine of the trade localization in the old system. one of the real challenges going forward is to figure out whether there's any way we can put all these eggs back in the same basket and talk about somehow integrating different trade agreements back into the mull the lateral system. i don't think anybody is a sense of what that means. i do think that's important because i think the creation of the dispute settlement system and council on foreign relations, it was really absolutely a critical moment in the development. no other set of organizations in the economic space or others that is created that kind of binding system for resolving rules disputes. it was a tremendously important important advance by where the longer the wto negotiating process languishes the less relevant those rules become so i do think the longer-term challenge and i don't know exactly what longer-term means here is to -- but i don't think
anyone has figured that out. >> i would like to go to q&a. >> a to get please give your name and affiliation. the gentleman right there. >> dana marshall of transnational strategy group. a couple of quick observations and maybe some comments on those. derek i don't want to overinterpret what derek was saying. my question was the issue to what extent the tpp advances u.s. foreign-policy interests. i felt derek and again i don't want to overinterpret your worse words but it seems to be what you were saying is you are undermining that argument by saying there's really no foreign-policy argument for tpp. if it's not the west it's not going to be china so why are we
worried about china if they are not doing anything? that's observation number one and the second observation is the question of the negotiation of tpp. we have discussed korea coming in a lot easier than china coming in but we all know once there is a fixed text on tpp to adopt into it's going to be devilishly hard once china starts to knock on the door and who knows when that will be whether it will be and what arguments there will be to bring the men are not bring them in. it's likely going to knock on the door and the observation has are the negotiators negotiating the current tpp understanding we are going to have a very unusual country that is not a market-based country whether it is an ally for the west i don't know.
that's another question. it's certainly the largest economy that would comment outside the united states but is that negotiation being conducted? with that in mind though they are not sitting at the table? >> i have a comment on both. i wrote a short piece a couple of weeks ago about the one i know most about in tpp warning deliberately shot at certain negotiations that you can't get what you want done, or you are really disrupting any future negotiation with china. i think that's absolutely true. congress has put -- and let the singaporeans want want from a race that understands completely outrageous and make it extremely difficult to talk to the chinese so they can't negotiate with the countries at the table including china korea and where growth korea and where growth but there are bound tome can be allowed to
tpp if you are looking to the future. some incredibly difficult task and i got nasty e-mails back like how would you like to do it by the? all right, that's fair but that is why we are going to be violating tpp looking down the road and seeing there's a document but do we want anyone to talk so that's my answer to that. my response to your first question is i'm not a foreign-policy person. to me, we get a bad tpp that doesn't fan civilization and someone says when someone says we need for diplomacy in east asia to tell them to get lost. we cannot have a bad trade agreement on commercial grounds. commercial grounds to me business has a short-term perspective on these business agreements. one of the guiding trade principles for the u.s. which is more competition less government intervention across-the-board. that is how i'm going to buy a wait it and every time someone comes up with apollo -- foreign-policy agreement. if we have a bad agreement i hate them because they won't now
be used to justify a bad agreement and tpa has to justify that. >> quickly in the foreign policy we this often. i think the tpp in and of itself in the natural world probably is not that important for u.s. foreign policy. the problem we have now is the agreement is almost completed and if the congress turns it down that sends a signal to the whole region. it's a kind of rejection by the u.s. congress a closer relations with some of her key allies with asia so what i really worry about is the foreign-policy impat of know. not because i believe tpp is crucial to advancing u.s. diplomatic interests in asia but i do think they rejection would have significant negative impacts. that's my concern.
>> may be a question back to ted ted, if there was a rejection of the agreement again like all of us who follow this closely i'm not an adviser and i haven't seen the text but if there is a rejection why would it necessarily be the case that it's the u.s. is fault that was rejected? without the faulty weight that our negotiating partners did not produce enough of an agreement? in other words why do we take the position ted that it's our fault and everything is the fact that we have an enormous trade relationship with many of these countries. plus the security guarantees. i mean i wonder how much we would break your heart. i agree with derek to me and economic agreement has to be an economic agreement. there are axillary things but i really wonder and i'm sensitive
to those arguments, but i just wonder if you can elaborate a little bit. >> we are getting into a lot of counterfactual tears elicited the congress rejected trade authority and was reviewed of the administration there were moves that could be made to make congress happy and that involved some of the tpp partners and st. francis could we live with currency language and there will renegotiation of the provisions set derek talked about typesetting is quite possible that would be the end of the road that they would be other discussions but i do think it's that the negotiating process dies because congress won't give the administration trade to go shooting authority of think the u.s. will be blamed for that and i think it will be seen in the region as a negative in terms of relations with the u.s.. so i think the u.s. role here is very key.
>> i think one of the big problems with tpp moving to the house is the issue of vietnam. it's unspoken but many members look upon the united states is entering into free trade agreement. vietnam which is still an evolving communist country is very difficult. i find it very hard to see how vietnam fits into that whole package. notwithstanding that if congress does not approve of tpp than the u.s. would be looked upon not as a first trade partner but second rated in a country that can't agree with itself to take a leadership position. that is what is at stake. it's the leadership position of the u.s.. the third thing i wanted to add goes back to korus fta.
but i have seen happening is items that are not able to -- by korus fta in terms of ran a relationship between the u.s. and korea korea has a 5% market share of world production of machine tools. they are number five in production and the united states is number seven if you look at it in terms of what is korea doing? ac manufacturing is taking a look at korean machine tools. they didn't look at them before but korus fta does not have much to do with it but they see korea in a new light in a higher perspective than they looked at before. i think this is to me is extraordinary that we could have these beneficiaries that are not even listed within the agreement itself. lastly the overall relationship between the u.s. and korea is
enhanced obviously by the fta itself but just as importantly people look upon free trade agreement is bringing people closer together. i don't want to say it's a peaceful gesture because obviously we are a close ally with korea but in terms of peak become to terms on a free trade agreement he would have some basis of talking to each other. the united states is looking at korea now is a very interesting country but what a lot of people a lot of people in united states don't realize is the wealth that has been produced for example by korea for direct investment. if you go to places in alabama and georgia that are the beneficiaries of these giant kia and hyundai plans to wealth is
estimated as a result of these automobiles so people look favorably upon kia and hyundai and favorably upon other things that are manufactured in korea. that helps in my mind both economies and that is quite fta don't think it's too early to say it's beneficial. i think it is beneficial. we just have to work on the areas that need improvement to make it more beneficial to both countries. >> one thing occurred to me listening to ted and the congressmen today think there's a different impact on leadership when tpa is rejected ntpp is rejected. tpa of the project it looks like like -- is complicated by the fact that tpa is coming up so late that we are to have people saying the president congress can get along and republicans and democrats can't get along. via an alliance between republicans and the president
and we have a democratic president but still can't get tpa informed observers of the political scene are like what political consolation is going to work your? on the other hand if tpa passes in tpp doesn't presumably tpp fails because a specific economic issues and that may be back to your point dana because we don't like the terms of tpp. it may be because china's looming in the background or the japanese can't make their own political decision so i think tpa is a very important hurdle for u.s. leadership in tpp remains to be seen because we have to see the text of course that we all have to see why it might fail. >> stanley in the very back. >> stanley kober. on the last point it does have to clarify something. it was a republicans in the senate who supported the president on the tpa. only one democratic senator voted with the president on that boat that went down.
that's about as bipartisan as you can get. >> it depends on what you mean by partisan but my point was we have had president versus congress and democratic versus republican. if we now can't get something done even when congressional republicans agree with the democratic resident there really looks dysfunctional. >> it was the president's own part. >> as just another sign of u.s. dysfunction if it were to occur. >> i do have a question here but i'm wondering if this isn't sort of like nero fiddling while rome burns. what i'm seeing is a collapse in demand in all countries pretty much as a result of that we have sequestration. government spending has got to go down. spending has to go down. private spending will go down. investment spending where will
that come from the people don't see -- for the goods? plus you have the asian crisis. in my mind, that is the major problem now for the global economy. where will the demand come from? ttip, will they help address that problem of increasing global demand? >> to take a shot at this and the answer is probably not. the direct economic data fits to u.s. for ttp for example even in the best possible term that the man isn't going to be that large. we have very sizable trade with canada and mexico. u.s. agricultural exports and japan will increase and it will increase japanese demand because it will save the japanese money but i don't think that's going to transform the world.