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December 18, 2009

The Building Blocks of Trade Blocs

On Monday the Office of the U.S. Trade Representative (USTR) notified Congress that it would initiate negotiations with New Zealand, Chile, Brunei, Singapore, Peru, Vietnam, and Australia to form a Trans-Pacific Partnership (TPP).  This is the first time that the Obama administration has formally initiated trade negotiations. 

Back in 2006, New Zealand, Chile, Singapore, and Brunei implemented the Trans-Pacific Strategic Economic Partnership Agreement (commonly referred to as the P4), which was originally designed to welcome new nations into the pact, gradually expanding a wider low tariff zone.  After the Bush administration expressed interest in joining the pact in February of 2008, Peru, Vietnam, and Australia moved toward jumping on the P4 bandwagon.

This is something of a new model for negotiating trade agreements, in terms of the U.S. experience.  After the total collapse of the Free Trade Area of the Americas proposal, the USTR shifted to a bilateral trade agreement strategy where it could exert maximum pressure in the one-on-one negotiations.  Instead of biting off more than it can chew, this time the USTR seems intent on taking small bites to create the same failed mega-FTAs.  Inside US Trade explains:

A statement by the U.S. Chamber of Commerce said it hopes the U.S. will join P4 and this would possibly lead, through a process known as “docking and merging,” to a version of the much-discussed Free Trade Area of the Asia Pacific. 

Negotiations begin in March of next year.


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