The 11 remaining member nations of the Trans-Pacific Partnership (TPP) have pledged to complete the deal without the US.
At a meeting in Hanoi, Vietnam, trade ministers from the Pacific Rim nations vowed to complete a deal by November, despite the absence of the largest member.
In one of his early acts as president, Donald Trump signed an executive order removing the US from the TPP, saying that it was a threat to jobs. While the text of the Hanoi declaration leaves the door to US re-entry open, the new US trade representative Robert Lightizer said the US “pulled out of the TPP and it’s not going to change that decision”.
Australia, Brunei, Canada, Chile, Japan, Mexico, New Zealand, Malaysia, Peru, Singapore and Vietnam are the remaining members of an agreement which looks considerably flimsier without the US on board. It begs the question: is the TPP really worth pursuing without US participation? The answer is, seemingly, yes.
“The US accounted for around 65% of the total GDP of the original 12 TPP member countries. The total size of GDP of the 12 TPP negotiating countries with the US included would have been US$29tn, or around 38% of world GDP, while TPP ex-US would be US$10tn, or 13.5% of world GDP. Consequently the TPP agreement without the US would have significantly less economic benefits for the remaining 11 members,” Rajiv Biswas, Asia Pacific chief economist at IHS Markit tells GTR.
Vietnam was expected to be the biggest beneficiary of the TPP in its earlier format. Reduced barriers to entry to the US textiles market would have been a huge boon to its economy, while manufacturers in Malaysia were also expected to do well. Entry to markets in Japan, Canada and Mexico will still be welcomed, but enthusiasm has, unsurprisingly, dampened among those countries.
“They’re not happy, you can say there’s some unhappiness,” says Deborah Elms, the CEO of the Asian Trade Centre, a Singapore-based consultancy.
However, the fact that the members have made a firm commitment to completing the deal this year was unexpected and reflects the fact that a trade deal covering 13.5% of global GDP is still one worth pursuing.
There was no suggestion at the meeting that China would join the TPP, as has been previously mooted. However, the view from analysts is that once the deal is over the line, then it becomes easier to add participants. As well as China, you might, at this stage, have the likes of South Korea and Indonesia looking to join TPP as well. Looked at through this lens, the 11-nation TPP could be viewed as the first stone laid, upon which a larger agreement can be built.
Counter to US policy
Elms is also encouraged by the text of the meeting’s readout, which says the TPP will “address our concern about protectionism, contribute to maintaining open markets, strengthening the rules-based international trading system, increasing world trade, and raising living standards”.
Such rhetoric is counter to the “America first” stance of Donald Trump. The respective trade ministers met on the sidelines of an Asia Pacific Economic Co-operation (APEC) summit, also attended by the US. After such meetings, it is customary for members to issue a joint statement, but none was forthcoming after Hanoi, with the US unwilling to agree to text which discouraged protectionism.
There is also the possibility that some previously opposed parties may be more willing to support a TPP without the US’ involvement. In New Zealand, for instance, the dairy industry has been a vocal critic of the TPP. With the US’ removal, there might be some scope to broaden the deal.
Speaking to GTR recently, Philip Turner, director of stakeholder affairs at Fonterra, New Zealand’s dairy co-operative and the world’s largest dairy exporter, said: “It’s a poor deal for dairy in the region. New Zealand would have access to 3 to 4% maximum of the dairy consumption, at the end of the 35 years of full implementation, of Canada, US and Japan. It’s very hard to see that as anything approaching free trade.
“In our view, it’s a massive lost opportunity, not just for New Zealand but for dairy exporters around the region, to grow our markets, particularly in places like Japan and Canada which remain extremely protected markets. We were very disappointed that the US in particular didn’t seem to push as hard as we would have liked to open those markets for a fairly low value outcome.”
With just six months until the deadline, however, it is unlikely that sweeping changes will be made. Experts expect the text to be tweaked slightly to account for the US’ absence, with the door being left open for future administrations in Washington DC to come back in.
Also in Hanoi, the 16 member states of the Asean-led Regional Comprehensive Economic Partnership (RCEP) reaffirmed their plan to complete negotiations this year. RCEP also includes Australia, New Zealand, China, Japan, India and South Korea. While it is economically smaller than TPP, the deal would cover more than half of the world’s population.
“The ministerial meeting is to provide political guidance to the negotiators on key outstanding areas, namely goods, services and investments with a view to push for a timely conclusion of RCEP negotiations. The negotiations are progressing at a moderate pace and a number of challenges were addressed at the Hanoi meeting,” a joint statement of RCEP members reads.