Business | Thu Mar 11, 2010 9:07am IST

In Pacific pact, Obama aims to shape 21st century trade

WASHINGTON (Reuters) - President Barack Obama, facing a revolt among Democrats to past trade agreements, aims to reshape the rules for international trade and shore up the U.S economic position in Asia with talks starting on Monday on a Pacific trade pact.

The Trans-Pacific Partnership "presents the United States with a concrete vehicle to harness's Asia growth potential," said Singapore's Ambassador to the United States Chan Heng Chee at a U.S. International Trade Commission hearing last week.

"By 2030, Asia's share of world GDP will reach 45 percent, up from 27 percent in 2005 and 16 percent in 1980," Chee said. Without the agreement, the United States could be at a severe disadvantage in the region as China, South Korea and Japan and the 10 countries of the Association of Southeast Asian Nations move toward economic integration, he said.

Obama is giving a speech on Thursday on the role he wants trade to play in future U.S. economic growth. On Monday, the first round of TPP talks begins in Melbourne with four countries with which the United States already has free trade agreements -- Australia, Chile, Singapore and Peru -- and three it does not -- Brunei Darussalam, New Zealand and Vietnam.

Saddled with three unpopular trade agreements the Bush administration negotiated with Colombia, Panama and South Korea, Obama says the TPP will be a high-standard "21st century" trade agreement with stronger protections for workers and the environment than previous pacts.

That's important to many Democrats in the House of Representative who think trade deals are to blame for millions of lost U.S. manufacturing jobs.

CONGRESS CONCERNED

U.S. Trade Representative Ron Kirk met on Wednesday with members of the House Trade Working Group, the driving force behind a bill with 133 co-sponsors that would require Obama to submit plans for renegotiating existing U.S. free trade agreements before embarking on new talks.

"We believe it is critical to approach these negotiations as an opportunity to redefine and redirect U.S. trade policy. We must reject the failed policies of the past with those that deliver good paying jobs," Representative Mike Michaud, a Maine Democrat, said after meeting with Kirk.

Representative Louise Slaughter, a member of the House Democratic leadership, said the meeting with Kirk was "very positive. But a lot more is needed than words."

"If other countries are going to try and get their foot in the door for expanded trade here than these nations must respond by opening their markets to the United States," said Slaughter, who chairs the powerful House Rules Committee.

With the TPP, the idea is to expand an agreement between New Zealand, Singapore, Brunei and Chile into a broader regional pact that advocates hope one day could also include China, Japan, South Korea, Taiwan and other major economies on both sides of the Asia Pacific.

U.S. priorities include promoting clean energy and other emerging economic sectors, gaining new exports for its manufacturers, farmers and service providers and boosting protections for U.S. intellectual property rights.

NAFTA PARTNERS

The Peterson Institute for International Economics, a Washington think tank, has urged the initial negotiating group be quickly expanded to include the United States' two partners in the North American Free Trade Agreement, Canada and Mexico.

Canadian Trade Minister Peter Van Loan told reporters on Tuesday that Ottawa was "in discussions with the member nations within the Trans-Pacific Partnership and assessing right now how Canada can best contribute to and support the advancement of that movement towards freer trade."

Washington should also try to bring Japan, South Korea and Malaysia into the negotiations "as soon as possible" to ensure the United States does not end up on the wrong side of other regional integration efforts, the Peterson Institute said.

It estimates that an East Asia Free Trade Area without the United States could cost U.S. companies at least $25 billion in annual exports, or about 200,000 high-paying jobs.

Kirk said on Tuesday he believed the United States made the right decision by starting with a small but economically diverse group of "like-minded" countries to forge a high-standard agreement.

"But ultimately our hope is we get in on the ground level and start to craft what can become ... a free agreement of the APEC economies," Kirk said, referring the 21 members of the Asia Pacific Economic Cooperation forum.

Now that talks are finally set to begin, there's still some jitters because the stakes are so high for the future of the world's fastest growing region, Australia's ambassador to the United States Kim Beazley said.

"We enter these discussions with a certain apprehension in our minds because we feel that the United States needs to play a more extensive role in the economic affairs of the Asia Pacific, and we fear the consequences of it not doing so," Beazley told the U.S. ITC.

(Additional reporting by Louise Egan in Ottawa; Editing by Jackie Frank)

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