The latest round of Asia-Pacific trade talks among the U.S. and 11 other countries ended Tuesday in Singapore without an agreement, dashing the administration's hopes of closing a deal this year.
The lack of a deal also is a setback for what is seen as the centerpiece of Obama's strategy to exert greater influence in an economically and militarily crucial region where China has become dominant.
But the administration is finding it frustratingly slow and difficult to come to terms on complex barriers to unfettered trade among the nations, particularly Japan.
They appear to be divided on rules and standards related to intellectual property, state subsidies and patents involving medicines and other products, as well as on important sectors such as autos and farm goods.
Moreover, administration officials are confronting growing criticism at home — from labor unions, car manufacturers and lawmakers, many from their own Democratic party — that the trade negotiations are not transparent and have failed to address the important matter of alleged currency manipulation.
Analysts said the trade talks probably would now last at least several more months, but then Obama would face the additional challenge of securing congressional approval in a mid-term election year.
Although some polls suggest that most Americans would welcome expanded trade relations with Asia, trade remains a politically touchy subject because of the loss of millions of U.S. manufacturing jobs over the years.
Trade deals must be approved by
Michael Froman, Obama's chief trade negotiator, joined with officials of the other 11 nations in declaring Tuesday that "substantial progress" was made during the four-day talks in Singapore and that they intended to meet again next month. But their joint statement gave no specifics, and the parties did not release a working text of the issues and discussions.
Before leaving Singapore, Froman said there was "great momentum" in the negotiations, but also noted that there was not enough progress in the U.S. parallel talks with Japan. Japanese Prime Minister
Japan's trade delegation leader, Yasutoshi Nishimura, acknowledged that "there is still some distance between the two sides." Without mentioning any specifics, he said, "I have told the U.S. side that more flexibility is needed."
One potentially explosive issue that wasn't discussed in Singapore is exchange rates.
A bipartisan majority in the
And there has been an outcry in congressional and business circles, particularly the auto industry, over Japan's weakened currency. The yen has fallen about 25% against the dollar in the last year, helping boost that country's exports and profits by making its goods cheaper in foreign markets.
"Currency manipulation can negate or greatly reduce the benefits of a free-trade agreement and may have a devastating impact on American companies and workers," said the Senate letter, signed by 60 members and led by
Froman said in a conference call with reporters Tuesday that the currency issue has yet to be discussed in the talks. Asked whether he planned to bring it up in the future, Froman said he would consult with lawmakers and other stakeholders.
Japanese officials have insisted that they are not controlling the currency, saying that the yen is freely traded in international markets. And Japanese auto officials point out that most of their cars sold in the U.S. are made in America.
Trade deals have typically divided Democrats, and there are strong divisions in the business community as well.
Some manufacturers, such as apparel and footwear makers, are worried about further foreign competition, while groups representing many corporations, such as the Business Roundtable, see long-term gains to be had for their members.
For Obama, trade has been become an increasingly important part of his agenda, as the U.S. economy has had to adjust to slower domestic consumer activity and he has had little ability to stimulate growth with fiscal policies. He also is working on a trade deal with the European Union.
Obama had hoped to push the Trans-Pacific Partnership deal forward in a visit to Asia in October, but that trip was canceled because of the
"A modest delay in concluding the TPP negotiations beyond the end of 2013 is not fatal," said Scott Miller and Matthew Goodman, analysts at the Center for Strategic and International Studies.
"But failure to reach an eventual deal would be a serious blow to the [Asia] re-balancing strategy," they wrote in a commentary Tuesday. "It would also raise questions about the U.S. ability to champion the rules of the road in economic affairs."