In Asia, Obama faces trade pact test amid U.S. opposition

[August 30, 2016]  By Roberta Rampton and David Brunnstrom

WASHINGTON (Reuters) - When President Barack Obama travels to Asia next week, he will try to reassure leaders in the region that he still has the clout to deliver U.S. approval for the sweeping Trans-Pacific Partnership, even though the two candidates vying to succeed him and a congressional leader have said the 12-nation trade deal should not move forward.

The trade pact is the economic pillar of Obama's broader plan to shift U.S. foreign policy toward Asia and counter the rising economic and military might of China.

"It would be a real setback for Obama's legacy and for the rebalance strategy if TPP were not to be ratified," said Matthew Goodman, a former Obama foreign policy adviser now at the CSIS think-tank in Washington.

Domestic politics have put the deal's future in doubt. U.S. Senate Majority Leader Mitch McConnell said on Thursday the Senate would not vote on the pact this year, punting it to the next president, who will take office on Jan. 20.

Both Republican Donald Trump and Democrat Hillary Clinton have said they oppose the TPP, citing past trade deals that have cost Americans jobs. As Obama's Secretary of State, Clinton backed the Pacific trade deal.

Obama has said the TPP will boost labor and environmental standards - fixing some of the problems seen in past trade deals like the North American Free Trade Agreement - and give both large and small U.S. companies access to the world's fastest-growing markets.

The White House said failure to approve the TPP would hurt U.S. interests in Asia, where some leaders made politically tough decisions to advance the deal.

"In this part of the world, which is the largest emerging market in the world, TPP is seen as a litmus test for U.S. leadership," Ben Rhodes, Obama's deputy national security adviser, told reporters on Monday.

"We would be stepping back from that leadership role, we would be ceding the region to countries like China who do not set the same types of high standards for trade agreements were we to not follow through with TPP," Rhodes said.

Estimates of the potential economic impact of TPP vary, but most show little meaningful growth for the U.S. economy. Estimates from the Peterson Institute, an economic think-tank in Washington, suggest that TPP would raise growth by 0.5 percent after 15 years.

President Barack Obama pauses while hosting a conversation on community policing and criminal justice at the White House in Washington July 13, 2016. REUTERS/Kevin Lamarque

Even those estimates, which amount to a rounding error in U.S. economic output, have been criticized as being too optimistic due to their treatment of so-called non-trade measures that are included in the analysis.

But White House spokesman Josh Earnest said polls shows most Americans support the deal, creating "a path for us to get this done" before Jan. 20.

In an interview, Former U.S. Trade Representative Susan Schwab described the odds of the TPP passing as slim, but not impossible.

"There’s history of candidates criticizing previous administrations’ policies on trade and then having to figure out how to live with them in office, and they include presidents Obama and (former Democratic president Bill) Clinton,” said Schwab, who served as trade representative under former Republican President George W. Bush.

Obama arrives in China on Saturday where he will meet President Xi Jinping and attend the G20, and then travel to Laos for two additional regional summits, returning to Washington on Sept. 9.

(Additional reporting by Timothy Gardner, Alana Wise and Timothy Ahmann; Editing by Andrew Hay)

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