The US government’s pursuit of bilateral trade agreements could be hamstrung by the excessive demands of Donald Trump’s trade negotiators.
One of the US President’s first actions upon assuming power was to withdraw from the Trans-Pacific Partnership (TPP), while his administration has also threatened to ignore WTO rulings that it views as “anti-US”.
However, the US’ preferred strategy of pursuing bilateral deals that better represent American interests are unlikely to take flight in parts of Asia, on the terms that are currently being suggested, according to the former deputy US Trade Representative, who served during TPP negotiations under President Barack Obama and who was responsible for bilateral negotiations with Japan.
Wendy Cutler, who now works as vice-president and managing director of the Asia Society Policy Institute (ASPI) think tank, tells GTR: “I think it will depend on what exactly the US would be seeking on a bilateral agreement with the TPP [countries] and other countries. Some of the ideas that are being floated, I think our trading partners would have difficulty in accepting them. For example, it’s been put forward that through these trade agreements we should agree to reduce or eliminate our trade deficit with our trading partners. I am very sceptical about whether our trading partners would be interested in this.”
Cutler was speaking on the launch of an ASPI-authored report that urges the other members of the TPP to pursue negotiations without the US. The key message of the report is: “Just because the US is now less supportive of trade and globalisation does not mean that the rest of the world will follow suit.”
She says that while there is a chance that under a new administration, the US may revisit TPP membership, “as each month goes by and other countries in the region turn to other countries, it’s going to be more difficult to revive”.
The TPP was one of Obama’s flagship foreign policies and the cornerstone of his “pivot to Asia”. The 12-nation deal appeared to be dead and buried when Trump signed an executive order which effected the US exit during his first days in office, however other members have also spoken of their desire to resume discussions.
RCEP needs improving
Furthermore, negotiations over the other regional mega-deal, the Regional Comprehensive Economic Partnership (RCEP) continue. While the latest round of talks reached a deadlock earlier this month, negotiators are hopeful of sealing a deal by the end of 2016.
ASPI’s report, entitled Charting a Course for Trade and Economic Integration in the Asia Pacific, reflects the commonly-held view that Asia Pacific has been one of the great beneficiaries of trade agreements and globalisation in general.
It notes that the number of trade agreements in the region since 2000 has quadrupled. At that starting point, the region accounted for 30% of global GDP. Today, it accounts for more than 40%
While RCEP has been dismissed as “TPP-lite” in some quarters, its scale is undeniably huge. RCEP represents about 30% of global GDP and almost half the world’s population. It includes India and China plus Asean, Australia, New Zealand, Japan and South Korea, but excludes the US.
“Asia’s remarkable rise is not an accident,” the authors write, “but the direct consequence of market-opening policies and other economic reforms, some as a result of unilateral action, others as part of commitments under trade agreements. Key among them is a greater openness to trade.”
However, Cutler and her colleagues at ASPI’s independent commission on trade, among whom are the former trade ministers of the Philippines and Indonesia, the former Korean ambassador to the WTO, the former ambassador of Australia to Japan, the EU and the WTO, and the former Japanese ambassador to the WTO, urge RCEP nations not to settle for a watered-down deal.
The TPP had been hailed in some quarters as the “gold standard” of trade agreements (although derided in others as a corporate land grab). ASPI, for its part, recommends that the RCEP countries use the TPP’s template as a means of raising its standards. It claims, for instance, that the TPP’s guidelines on the digital economy and representing SMEs are superior to RCEP’s, and should be considered for adoption.
However, Cutler refutes the common suggestion that the US’ absence from both agreements allows China free reign in Asia Pacific.
“I don’t see it as a race between the US and China. I believe it’s a loss for the regional trading system. Twelve countries representing 40% of GDP worked hard and came up with modern rules addressing emerging problems, updating old rules, and it’s a loss for the system if we don’t keep the TPP standards alive in other avenues,” she says.