TTIP: The Waning Illusion of Leadership

The possible failure to build a universal world order through TPP and TTIP would push Washington to come up with a new plan.

In late April 2016, US President Barack Obama toured Great Britain and Germany, campaigning in Britain against the Brexit and trying to persuade the leaders of the largest EU economies – Germany, France, Great Britain and Italy – to increase defense spending and expedite talks on the Transatlantic Trade and Investment Partnership (TTIP). With the NATO Summit scheduled to take place in Warsaw in early July, this is not Obama’s last visit to Europe as US President. Nevertheless, the visit was still considered a necessity, and was held in such a strange format.

The reason for it seems to be the growing concern within the US foreign policy establishment about the prospects for US global leadership in a multipolar world in a situation where a number of global players are challenging US leadership and are committed to an independent foreign policy. In recent years the aspirations of the US to revive and strengthen its leadership have been inseparable from economic, military and political consolidation of its allies and the creation of two gigantic political and economic communities in the Atlantic and Asia-Pacific, each based on rules and norms written by and benefiting Washington. TTIP and the Trans-Pacific Partnership (TPP) are expected to provide an economic foundation for these communities, while beefed-up NATO and Asian alliances involving the US would provide a political framework. However, recently there has been mounting evidence that these hopes could turn out to be in vain.

Faced with the impossibility of shaping a world order to its liking, be it in economic or political terms, as experiments with the Russia-US reset, US-China relations, and WTO Doha round have shown, the US decided to focus on the regional level. Instead of accepting trade and economic rules dictated by Washington and recognizing US-led military and political alliances as the foundation of the Euro-Atlantic and Asia-Pacific security frameworks, non-Western centers of power want to take part in shaping new and more balanced global economic rules, play a bigger role in global governance institutions and contribute to developing inclusive regional security frameworks, which take into account their interests. The WTO has long been regarded by Washington as one of the central pillars of the so-called US-led liberal world order, but its deadlock now clearly illustrates the refusal by non-western players to play by the American rules on a global scale.

While replacing global regimes that no longer work for the US as they used to with regional frameworks, Washington clearly does not intend to let key non-western players exist outside the regional systems the US is about to create, thereby preserving the global economic and political divide and making it permanent. This de-facto would mean that the US would be giving up on its global leadership and aspiration to create a world order under the US rules and guidance. The objective pursued by the US seems to be the opposite. In fact, it expects the new frameworks to be so powerful and dominating in terms of setting the rules of global trade and economic relations, and also so appealing that all outsiders, including China and Russia, will face a choice of either accepting the rules and joining US-centered communities without changing their regulatory framework, which means accepting the role as a junior partner, or becoming marginalized. The same goes for security frameworks.

It is true that the TTIP, if and when created, would be the biggest and most ambitious trade agreement in history, covering 33 percent of the global trade of goods, 42 percent of services, and over 50 percent of foreign direct investment in the world, bringing together countries that together account for 46 percent of the global GDP. In its official documents the European Commission already calls on third countries to accept TTIP rules in the future, arguing that “the large economic size of the EU and the US means that partner countries will themselves have an incentive to move towards any new transatlantic standards that the TTIP creates.”

By the same token, TPP is presented as a trade and economic framework spanning across almost 40 percent of the global economy, one third of global trade and dominating the APR economy. In his statement of October 5, 2015 in Atlanta on the success of the Trans-Pacific Partnership talks, Barack Obama said: “we can’t let countries like China write the rules of the global economy. We should write those rules… That’s what the agreement reached today in Atlanta will do.” In other words, the US assumes that Russia, China and other non-western players can and should accept rules developed by and favorable to the US as they are. It is not a coincidence that right after the talks were completed in Atlanta, US Secretary of State John Kerry invited Moscow and Beijing to join the TPP.

The US has adopted a similar approach regarding the role and positioning of non-western players with respect to US-led security communities. The effort to strengthen at the same time NATO and its Asian alliances (for the first time, Washington engaged in a systemic effort to strengthen horizontal ties between its Asian allies with a view to consolidating the security community) is intended to persuade both US allies and non-western players that US-led alliances will remain the backbone of the security system in the key regions of the world, and that Russia and China better accept this reality and build partnership ties with these frameworks. As in the previous case, isolation is being presented as the only alternative. This notion has been forced upon Moscow, although without any success, for the last 20 years as NATO expanded its membership and created a NATO-centric security system in Europe. Today, China is being subjected to the same message in terms of both security and economics.

However, behind Washington’s celebratory rhetoric a growing sense of anxiety is becoming increasingly apparent. With the end of the Obama presidency looming on the horizon, it is becoming less and less likely that the US would recover its global leadership by creating two giant economic communities and security frameworks. These initiatives could either die out or, even if implemented, fail to attract non-western players into their ranks.

Of course, this issue does not boil down to changes in the US administration. Hillary Clinton, who it seems is most likely to be the next US President, would probably carry on with the current strategy, and possibly with even more zeal. The problem rests with the US partners who are less disciplined even against the backdrop of a continuing confrontation with Russia and growing competition with China. The fact that non-western players are not willing to give up on their independence and want to participate in writing security and economic cooperation rules on equal terms is also important.

This uncertainty is mostly related to TTIP. It is already increasingly apparent that the parties would not be able to reach agreement on it by the end of 2016, a setback which is attributable to numerous contradictions between the US and the EU on issues like sanitary and phytosanitary standards, agriculture, dispute resolution between investors and government, etc. The negotiations on these and other issues are top secret, and the leaks that occur every now and then result in serious scandals, undermining the ability of the parties to make concessions.

TTIP is even less likely to be approved after the inevitable pause as the new US administration gets down to work. First, political leadership is expected to change in a number of key EU countries. With the right-wing gaining momentum, protectionist aspirations could prevent the European Union from giving the green light to a massive trade and economic expansion of the US into the EU, including in the most sensitive segments. Second, there is growing discontent within the EU regarding Germany’s unilateral leadership, since the latter is interested in TTIP more than any other European nation. The emergence of a new political landscape in the EU could tilt the balance of power away from becoming more open toward the US economy. Third, there is a growing awareness in EU countries that TTIP would cut off countries that do not have an association agreement with the EU, thus killing the idea of a common economic space with Russia “from Lisbon to Vladivostok.” At the same time, the key Western European countries increasingly aspire to normalize trade and economic relations with Russia, support the removal of sanctions and the idea of creating a unified Greater Europe.

Forth, tension between the US and the EU is likely to rise on the back of Washington’s policy towards Russia and Ukraine. Some fear that if the Minsk Agreements are not implemented by the end of 2016, the new US administration could start supplying Kiev with lethal weapons and step up anti-Russian rhetoric, a development that would in turn again escalate the situation in Donbass. (Kiev seems to be expecting just that, hoping that this new escalation would cancel out its commitments under the Minsk Agreements and enable it to negotiate new, more favorable terms). However, major EU countries would not benefit from military escalation in Donbass or new sanctions against Russia that would follow. On the contrary, they would like to avoid it. For that reason, they would oppose both lethal arms supplies to Kiev and new sanctions against Russia, should the current truce in Donbass fall into pieces. It is obvious that the growing tensions between Western Europe and the US would do nothing to promote the adoption of a trade pact with Europe that was so controversial to begin with.

These considerations made the US President pay a surprise visit to Europe in April. The fact that it is unlikely to change anything is another issue. A telling example in this respect is the recent TTIP-related scandal that erupted just one week after the Hannover summit when Greenpeace released excerpts from classified documents on the EU-US TTIP negotiations.

It could seem that the creation of the economic order desired by Washington in Asia-Pacific is more feasible, since the TPP talks were completed in October 2015 and the relevant pact signed by twelve countries (the US, Canada, Mexico, Japan, Malaysia, Vietnam, Australia, New Zealand, Singapore, Brunei, Peru and Chile) on February 4, 2016 in Auckland. It is true that the signing of the TPP agreement is regarded as one of the main foreign policy achievements of the Obama administration. But there are issues in this area as well.

The fact that not all is well for the US in this part of the world was spotlighted at the Asan Plenum 2016 conference held by the Asan Institute for Policy Studies on April 26-27 in Seoul under the title “The New Normal.” The US was represented by a 25-strong “expeditionary force” of prominent diplomats, experts and journalists. Asan Plenum is the most high-profile annual conference on the US role in Asia and APR processes. On the one hand, US representatives made banal statements of the attractiveness of a US-led order in Asia and across the world, and how TPP reinforced it. On the other hand, presentations by US speakers all mentioned external, as well as internal stress factors for this world order.

First, neither China, nor India is so far eager to join TPP or the US-led order in general. On the contrary, Beijing is accelerating talks to create an alternative economic framework in the region, the Regional Comprehensive Economic Partnership (RCEP), and wants to complete them by the end of this year. This initiative is about creating a China-centered economic order in Asia based on rules favorable to Beijing and its main partners among the emerging Asian economies, and there is no place for the US, let alone a leading place, in this economic order. India’s representative (ambassador to the Republic of Korea) also criticized TPP, accusing it of replacing universal rules and institutions with regional arrangements. He went on to say that India does not intend to join this project so far. India has taken part in the RCEP talks, and has recently joined the SCO. During the Asan Plenum, the Indian ambassador praised and welcomed China’s Silk Road Economic Belt project, saying that India is eager to join it.

US representatives at the conference said that all these initiatives are challenges for the US economic order in Asia, adding that Beijing’s and New Delhi’s approach is a matter of grave concern for them. In this context, the publication by the Washington Post of an alarmist and anti-China article by Barack Obama with a flashy title “The TPP would let America, not China, lead the way on global trade” did not come as a surprise. In it, the US President unequivocally labels China as a competitor and harshly criticizes RCEP, calling it a “trade deal that would carve up some of the fastest-growing markets in the world at our expense, putting American jobs, businesses and goods at risk.” He went on to point out that if the TPP doesn’t become a reality, the Asia-Pacific region will continue its economic integration, with or without the United States. The US “can lead that process” or “we can sit on the sidelines and watch prosperity pass us by.”

Second, the rising tensions within the US order were on display at the Asan Plenum. All South Korean speakers questioned the ability and commitment of the US to defend Seoul from the North Korean threat, saying that South Korea should give a serious thought to developing its own nuclear arsenal. The US participants naturally were quick to respond that this decision would be a severe blow for the defense alliance between the US and South Korea, but the latter responded that if Seoul takes this decision it would be implemented no matter the cost and in full awareness that it would spell the end of the US-led alliance framework in Northeast Asia.

The fact that these scenarios are even discussed shows the growing awareness in South Korea that the US uses the “North Korean threat” in order to better contain China and strengthen its own regional standing, and that the US has no intention to bring about a solution to the DPRK nuclear problem, let alone facilitate the reunification of the Korean peninsula. The South Koreans no longer want to be a platform for efforts to contain China.

Consequently, relying on anti-China fears in Asia-Pacific no longer works, at least not all the time. The same goes for the anti-Russia phobias that are no longer supported in Western Europe. Further steps by Washington to step up its containment policies against Russia and China would do nothing but increase tensions with its European and Asian allies, while attempts to draw Moscow and Beijing into US-oriented Trans-Atlantic and Asia-Pacific frameworks would likely fail.

So far, the US has been talking about “specific problems” and challenges to the US-centered world order, and still believes in making it universal. The possible failure to build a universal world order through TPP and TTIP would push Washington to come up with a new plan, just as the strategy to promote global leadership through regional communities replaced in 2012 the failed attempt to secure global leadership by drawing non-western players directly into the US-oriented framework. However, sooner or later the US establishment would have to understand that the objective, not methods, is the problem. In a multipolar world, the global leadership of the US is impossible.
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.