Richard Cunningham is the Senior International Trade Partner at Steptoe & Johnson.  Today's quote is from the pre-hearing statement he prepared for last month's International Trade Commission hearing on the likely impact of TPP - the Trans-Pacific Partnership Agreement - on the U.S. economy. 

Mr. Cunningham is a strong supporter of TPP.  As he explained in his January 13 statement, TPP "achieves trade and investment liberalization far beyond what was feasible in Doha, [and] it addresses issues central to the new ways in which trade is being conducted today."

But TPP is a major initiative.  It will have consequences for those who do not participate as well as those who do.  And those consequences in turn will have ramifications and implications for the United States.  Mr. Cunningham's principal recommendation to the International Trade Commission was that they should consider TPP's effects on non-participants in preparing their legally mandated report on the likely effects of TPP on the U.S. economy.

He zeroed in particularly on investment. TPP, he said, will have the effect of making countries in the TPP area a more favorable destination for U.S. investment than others.  Mr. Cunningham does not expect TPP to diminish U.S. corporate investment in the United States but inevitably it will undercut the investment prospects of some non-TPP countries.  As he put it: 

That investment diversion, if it occurs, may harm some non-TPP members significantly, including their purchases of U.S. goods and services.

Won't They All Just Join TPP?  No.   Some will - South Korea and Indonesia and Thailand are all likely candidates - but many will not.  Mr. Cunningham explained:

They are unlikely to join, Mr. Cunningham said, because many of them are quite hostile to TPP and the TTIP, resenting the behind-the-border provisions of those undertakings, the perceived usurpations of their own governmental authority, the intrusion into their "policy space."  But that is only half of the story.  There is also the question of whether the current TPP members - especially the United States - would really welcome them.

Consider China, the first country in Richard Cunningham's list of countries that are not likely to join TPP.  Certainly no non-TPP country has been referenced more in the discussion of TPP than China.  President Obama, for example, has talked about the importance of the United States writing the rules of trade through TPP rather than having China do so.  At the same time the Administration has expressed a willingness to welcome China into the TPP fold at some future time.

 In his statement, Mr. Cunningham asked the ITC Commissioners to consider carefully and honestly the likelihood of any such eventuality, bearing in mind that, when a country joins TPP, it will in effect be entering into a free-trade agreement with each TPP member.  "The Commission must realize that ratification by the U.S. Congress of a U.S. FTA with China - or India or Russia, for that matter - is simply not in the cards for the foreseeable future."

Against that background, Mr. Cunningham asked the ITC to consider not only the effects of TPP per se on the U.S. economy but also the effects that TPP will have on the evolution of trade outside of TPP, both for those countries who do not join TPP and for United States.  In addition, Mr. Cunningham urged the Commission to consider the likely effect of the Trans-Pacific Partnership Agreement on the World Trade Organization.

We tend to be fairly sparing in the introductory paragraphs of these entries.  The idea is to offer only the briefest comment about the speaker so that we can move quickly to what he or she said.  But we should have said a bit more about Dick Cunningham.  He actually wears a number of hats.  He is, for example, a member of the Board of Advisers of the Global Business Dialogue, which is a great benefit to us. 

The association that is particularly relevant here, however, is his chairmanship of the Cordell Hull Institute. In that capacity that Mr. Cunningham helped organize, and participated in, a series of World Bank-financed conferences in developing countries over the last two years.  The purpose of those conferences was "to analyze the effect on developing countries of the shift from multilateral trade negotiations to plurilateral and ... Mega-Regional trade negotiations," such as TPP and TTIP.

Against that background, we would offer three observations of our own and one very strong recommendation.

First, the debate among economists over the economic significance of TPP is likely to continue for some time.  For our part, we are already convinced: it's a big deal.  And, as Mr. Cunningham has argued, it will have significant effects on investment flows.  We believe he is right about that, but those effects can be overstated.  Countries that implement and live by pro-investment policies are likely to see more investment regardless of the trade grouping they are in. 

Second, Doha and Disappointments.  It is true that many developing countries feel a sense of profound disappointment if not betrayal over the failures of the Doha Round.  It is also true that developing countries are now not simply a numerical majority but a stronger force in the WTO than they have ever been. 

Negotiations are a courtship, not an engagement, much less a marriage.  The logical irony of developing country strength in the WTO is that they must now be the suitors, the ones who have the responsibility for making the WTO the most attractive negotiating forum.  At the moment, that is not a role they seem inclined to play.

Third, the deal is done.  This entry may be dated February 3, but it is already February 4 in New Zealand.  So today is the day that the 12 TPP members sign the deal.   From this point on, no TPP analysis would be complete without some mention of the cost of failure:  What would it mean for the United States if it did not implement TPP, after a negotiation that has for several years now been the flagship of U.S. leadership on trade?

Finally, our recommendation.  Richard Cunningham's statement for the January 13 ITC hearing is short, clear, and important.  Moreover, it deals with a topic - TPP's effects on non-TPP members and U.S. relations with those countries - that are likely to get short shrift in this year's otherwise extensive TPP debate.

Richard Cunningham on TPP is a link to the Pre-Hearing Statement Submitted to the International Trade Commission by Richard O. Cunningham of Steptoe & Johnson.  This was the source for today's featured quote, and for ease of reference, we have made it available on the GBD website.  It can also be found on the website of the International Trade Commission.