The future of the Asia-Pacific trade architecture, as well as the US "rebalance" to Asia, remains uncertain after the July 31 failure of negotiators from 12 nations to finalize the Trans-Pacific Partnership (TPP).
Although negotiators say that the TPP is 90 percent complete, it is stuck on some politically difficult issues, as Canada holds elections in October and the US protracted election season begins.
Ironically, while the TPP sets path-breaking trade standards for Internet access, advanced pharmaceuticals and other intellectual property rights (IPR) as well as fisheries, wildlife and forests, it is stuck on old fashioned protectionist issues: dairy exports, sugar (the US), rice (Japan) and autos.
Facing a difficult election, Prime Minister Stephen Harper has refused to open Canada's dairy markets, irking New Zealand and others. The US is trying to protect its sugar farmers, and is pushing to extend IPR patents on biologic drugs for 12 years. Mexico is demanding 65 percent local content for Japan's auto exports.
US officials had sought to complete negotiations by August. Their hope has been that the US Congress would ratify the TPP by the end of the year, so it would not get caught up in US election-year politics.
But in trade negotiations, nothing is fully agreed until everything is agreed. So there is more give-and-take that must occur. Yet no further TPP talks are expected before mid-September at the earliest.
The stakes are high. President Barack Obama has made the TPP a centerpiece of the US "rebalance" to Asia. For Japan's Prime Minister Shinzo Abe, the TPP is key to his "third arrow" of economic growth.
The TPP countries comprise 40 percent of the world economy, and some economists project that it would add nearly $300 billion to the global economy over a decade.
Moreover, the TPP is adhesive and open to new members of APEC joining as long as they commit to its provisions. South Korea, which already has a free trade agreement with the US, is widely considered to be the most likely new addition, with Indonesia, Thailand and the Philippines to follow.
As China implements its economic reforms, it may consider joining the TPP, as it would benefit from TPP standards.
In the 1990s, China's accession to the WTO helped Beijing implement its market reforms, and the TPP could play a similar role in helping Chinese President Xi Jinping implement very difficult market-based reforms.
But many think that the TPP is competing with the Regional Comprehensive Economic Partnership (RCEP), an Asia-centered trade accord China, ASEAN and several other nations are negotiating. The US is not in the RCEP, but six of the 12 TPP nations are also in the RCEP.
Trade is not a zero-sum game. With the failure of the WTO Doha Global Trade round after 12 years of talks, regional multilateral trade arrangements are shaping the future of global trade. Eventually, the TPP and the RCEP will need to be reconciled.
In addition to the TPP and the RCEP, other major trade talks include the US-negotiating the Transatlantic Trade and Investment Partnership (TTIP) with the EU, and Japan is close to finalizing a Japan-EU trade deal.
If TPP talks founder, the RCEP may advance and play a larger role in shaping regional trade arrangements. But given the slow pace of ASEAN negotiations, the RCEP is unlikely to be realized before 2017.
If trade talks among the major economies - the TPP, EU-Japan, the TTIP - go forward before the RCEP is realized, there will be pressure to meld the RCEP with the TPP based on its high standards rather than ones the RCEP is currently considering.
However, if the TPP fails, US policy toward the Asia-Pacific will lose much credibility, as will Japan's hopes for a new dynamism. But in trade, unlike geopolitics, failure to liberalize trade would hinder economic growth for all in the region - it can be a win-win, but also a lose-lose if talks fail.
The author is a senior fellow of the Brent Scowcroft Center for International Security at the Atlantic Council. opinion@globaltimes.com.cn Follow him on Twitter @RManning4.