Trans-Pacific Partnership (TPP) member countries are hoping to salvage the deal, potentially involving China, after President Donald Trump signed an executive order withdrawing the US from the Pacific Rim trade and investment deal.
Leaders from Japan, Singapore, Australia and New Zealand held overnight discussions in a bid to rescue the TPP, the negotiations for which were long and draining. As well as continuing talks over the Regional Comprehensive Economic Partnership (RCEP), an Asean-led trade agreement that does include China, the past day has seen numerous leaders and trade ministers float the possibility of inviting China to the TPP too.
“The original architecture was to enable other countries to join. Certainly I know that Indonesia has expressed interest and there would be scope for China if we are able to reformulate it,” Steven Ciobo, Australia’s trade minister, told local media.
In a press conference, Australia’s prime minister Malcolm Turnbull added: “Losing the United States from the TPP is a big loss, there is no question about that. But we are not about to walk away… certainly there is potential for China to join the TPP.”
The New Zealand prime minister Bill English hinted at “slow burning” negotiations over RCEP, but said that with the US exiting the picture, the door to a deal with China is open. “We might find the political will for that to pick up if TPP isn’t going to proceed,” he said.
Meanwhile, the Malaysian trade minister Mustapa Mohamed issued a statement urging progression with the TPP, despite the US’ absence.
Trump’s decision to scrap US involvement in the world’s biggest trade pact is no surprise: he ran on this ticket, blaming globalisation for the hollowing out of US industry.
The withdrawal will severely alter the makeup and scope of the TPP, however, should the other 11 members choose to proceed. The agreement included countries owning 36% of global GDP – but 25.2% of that share is from the US (Japan is next on 6.4%, followed by Canada on 2.1%).
The TPP in its 12-state form would cover 26% of global trade, with 12.2% coming from the US. On these terms, an agreement that removes tariffs and barriers on 14% of global trade may still be worth pursuing, but the introduction of China would add great value.
However, professor Matthew Rimmer, a trade expert at the Queensland University of Technology, argues that the content of the agreement makes it void without US participation.
“The Turnbull government has said that it will explore the possibility of a TPP – without the participation of the United States. This would be a complex undertaking. Many of the key chapters of the TPP – focused on intellectual property, investment, and electronic commerce – were dictated by the United States trade representative. Such measures make little sense, without the countervailing access to United States markets,” he says.
Others are looking to alternative methods of boosting trade and investment in Asia Pacific. Mahamoud Islam, senior Asia economist at Euler Hermes, says that rising protectionism makes the need for RCEP and China’s One Belt One Road (OBOR) initiative greater than ever.
“Protectionism has been intensifying over the past years: 700-plus new restrictive measures were introduced each year between 2012 and 2015. 567 trade barriers were issued during the first nine months of 2016, while indirect protectionism is also on the rise, such as public procurement, subsidies, compensation,” he says.
OBOR, Islam says, will be a valuable source of infrastructure finance for TPP member states such as Singapore, Malaysia and Vietnam.
“Secondly, it would go through a gradual increase in demand from China for strategic natural resources. Another channel would be the rise in competitiveness as infrastructure for trade improves. Singapore could also leverage on its edge in financial services and logistics operations to advise and support companies expanding their business in the region,” he adds.