It seems likely that President Obama's flagship Asian free-trade deal, the Trans Pacific Partnership (TPP), will sink in the US Congress. Those who worry about its implications in specific sectors like pharmaceuticals might think this is a good thing. But what would be the broader implications? That depends on what difference TPP would make if it floats. The answer comes in two parts.
On the economic side, the answer is probably 'not much' overall. The TPP would not work like a classic free trade agreement, boosting trade by lowering protection, because as Lawrence Summers pointed out the other day, protection is now so low that there is not much to be gained by lowering it further.
Perhaps the trade-promotion effects would be bigger for some more protected economies like Vietnam, but even here some elements of the TPP might have the opposite consequences. To many Americans, the best parts of the TPP are those setting new environmental and labour standards that countries like Vietnam would find hard to meet.
The TPP is also intended to boost investment, yet here too the long-term impact on economic growth seems likely to be small. So, like other FTAs, the overall economic impact of the TPP will be modest at best.
But as everyone knows, the TPP is not really about economics, at least for the Obama Administration. Since 2011 the TPP has been seen, and sold, primarily as an element of the Administration's 'pivot' to Asia. The idea is that the TPP will help protect US political and strategic primacy in Asia by restoring the regional economic leadership which America had enjoyed for so long, and which China has been so successfully taking over in recent years.
Washington is right to think this matters. The more important China becomes to its Asian neighbours economically, the harder it will be for America to persuade them to reject Beijing's claims for a 'new model of great power relations' in Asia, and the further US leadership will erode. Anyone listening to Tony Abbott's fulsome remarks about President Xi Jinping this week at the signing of the new China-Australia FTA will understand America's problem.
But it seems a fantasy to imagine that the TPP can solve this problem. That would require a fundamental restructuring of the Asian regional economy. The TPP would have to displace China from the central position which it has built over the last two decades, and create a new regional economic order re-centred on America.
That means counteracting the immense gravitational pull of China's economy. To see how hard that would be, just look at Australia's trade. These days we export more than six times as much to China as we do to America ($108 billion vs $17 billion). Of course, trade isn't everything – the investment numbers still go America's way – but the trends are clear and the TPP has no chance of offsetting them.
Even at relatively sluggish levels of growth, China's economy will remain a much richer source of new economic opportunities for the rest of Asia than America has any hope of being, with or without the TPP. It would make at most a marginal difference to America's relative economic weight in Asia. It would make no difference to the essential reality that China is far more important to Asia's economic future.
And that means that even if the TPP floats, the countries of Asia will remain cautious about risking their economic prospects with China in order to preserve American regional primacy. It would do very little to help America resist China's challenge to US primacy in Asia.
But that doesn't mean America's debate over the TPP makes no difference to its future standing in Asia. On the contrary, it might make quite a big difference, because the Obama Administration has itself made TPP a test of US resolve in Asia. So while a successful TPP campaign would do little if anything to solve Washington's strategic problems in Asia, a failed campaign would make those problems worse.
What we might call 'the balance of resolve' is central to the contest between America and China for leadership in Asia today, and it already leans China's way. As they become more evenly matched in other forms of power, China's most important asset in that contest is the perception — in China itself, in the region and in America — that it is more committed to overturning Asia's US-led status quo than America is to preserving it.
That perception will grow stronger if Congress wrecks the TPP, pushing the balance of resolve further in China's favour, and further weakening US leadership in Asia. If that happens Obama himself will be in large measure to blame, because he is the one who has turned the TPP into a test which will not help America if it is passed, but will hurt it badly if it is failed.