US President-elect Donald Trump confirmed on Monday that he would be pulling the United States out of the Trans-Pacific Partnership (TPP) upon taking office, in a move that has left fellow Asia-Pacific trading partners considering how this will affect plans for deepening trade ties in the region.
The announcement was conveyed by a video message posted on YouTube, in which the incoming US leader outlined a series of executive actions which he intends to enact during his first 100 days in public office, based on what he termed “a simple core principle: putting America first.”
First among his list of actions was trade, with Trump then following with other items such as removing curbs on shale energy and coal production, as well as cutting back on business regulations and investigating “abuses of visa programmes that undercut the American worker.”
“On trade, I am going to issue a notification of intent to withdraw from the Trans-Pacific Partnership, a potential disaster for our country. Instead, we will negotiate fair, bilateral trade deals that bring jobs and industry back onto American shores,” said Trump.
The announcement was far from new, given Trump’s repeated promises on the campaign trail to rip up those trade accords that he finds are not sufficiently beneficial to the US.
Trump has not yet specified how he would approach new bilateral deals, neither in terms of their content nor in terms of their strategic positioning relative to the various other economic integration efforts underway around the world, including in the Asia-Pacific region. The president-elect also has not explained what aspects of the TPP he dislikes, besides the fact that it is a multi-country accord.
Congressional leaders in the committees that work on trade have said that they do have an interest in engaging with the Asia-Pacific region, and hope that Trump supports such a goal once taking office in January.
“That Asia-Pacific region will hold half of all the middle-class customers on the planet by the end of the decade. We want to be in there. And if we withdraw from that field, our economy suffers,” saidRepresentative Kevin Brady, the Texas Republican who chairs the House Ways and Means Committee.
Speaking to the Wall Street Journal after Trump’s announcement, Brady also warned against ignoring the potential of that particular market. “I’m hopeful the new president gives us a chance to make the case to keep what’s good in trade and creates jobs, and fix what’s perceived to be bad,” he said, according to an interview transcript provided by his office.
White House Press Secretary Josh Earnest told reporters in Washington on Tuesday that not moving forward on the TPP in the US would be “a significant missed opportunity for the American people,” allowing other major players in the region such as China to advance their own trade accords that would not necessarily be built around US interests.
TPP leaders debate next steps
The announcement of the US’ impending TPP exit has left the next steps for the accord – which took several years to negotiate – largely uncertain.
Some other TPP officials have suggested that perhaps Trump could change his mind, even at this stage, despite his multiple public pronouncements of wanting to leave the accord.
“Certainly the United States is a key anchor for all of the TPP countries,” said Australian Trade Minister Steven Ciobo in an interview with the Sydney-based 2GB radio station. “We are very keen, though, recognising that many benefits would flow from this deal, to push ahead. We need to give the US time.”
In a separate interview on 22 November, the Australian official said that his government intends to continue with TPP ratification, as are others.
“As I mentioned there is a substantial period of time that can elapse yet. And that gives the Americans time to remain abreast of the various developments with respect to ratification of the TPP,” said Ciobo.
Meanwhile, Mexican Economy Secretary Ildefonso Guajardo has suggested that there may be other ways to proceed, for instance to see if the TPP could be split into bilateral deals.
“To move ahead is to have it ready for whether countries decide to continue in this [current] process, or if not to do as other countries have done, analysing pathways to integration or converting the TPP negotiation into bilateral deals. These are options to analyse,” he told reporters in Mexico City.
Leaders from some fellow TPP countries have openly questioned whether there would be value in advancing a deal without the US. (See Bridges Weekly, 8 October 2015)
Japanese Prime Minister Shinzo Abe told reporters in Buenos Aires this week that a TPP deal without the US would effectively have “no meaning” given the balance of trade-offs struck between the 12 countries in the negotiations. Abe had met with Trump just last week in New York, with the TPP expected to be among the subjects discussed. (See Bridges Weekly, 17 November 2016)
Meanwhile, Singaporean Prime Minister Lee Hsien Loong said that a TPP without the US would essentially entail a new deal entirely, according to comments reported by Channel News Asia.
“That means the 12 [countries] minus one will have to get together and sign an agreement with a different coming-into-effect clause. And that is fresh negotiation, and that is not so easy to do,” said the Singaporean premier in Lima.
He added, however, that the group was not yet at that stage and suggested that it was still worth watching to see what the US president-elect does once actually in office.
Indeed, the news of Trump’s plans came just days after leaders from the 12 TPP countries met in Lima to take stock of any advances seen in their domestic ratification procedures, along with what may lie ahead for the mega-regional accord.
“President Obama conveyed that as we continue to engage globally, we must also continue to find ways to ensure that trade agreements contribute to our shared objective of reducing inequality,” said a White Housereadout of the discussions.
“Our partners made very clear during the meeting that they want to move forward with TPP; preferably, they’d like to move forward with the United States,” Obama told reporters in Peru last week.
The TPP currently includes 12 signatories: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam.
Eyes on RCEP, FTAAP
What the TPP developments could mean for other regional integration projects remains an open question, with some analysts suggesting that it could help inject these with additional momentum.
For example, a group of 16 Asia-Pacific countries – including all ten members of the Association of Southeast Asian Nations (ASEAN), as well as Australia, China, India, Japan, New Zealand, and South Korea – is in the process of negotiating a separate accord on trade and investment.
In other words, the accord involves ASEAN and its six FTA partners, aiming to deepen economic ties within the region.
That deal is known as the Regional Comprehensive Economic Partnership (RCEP), and is narrower than the TPP in scope. It covers nearly 30 percent of global GDP, though it does not include the US among its participants. Negotiators and ministers from the RCEP countries have both met over the past month to advance the talks, though a deal is no longer expected in 2016. (See Bridges Weekly, 10 November 2016)
RCEP officials are now planning a sixteenth round of talks next month in Indonesia, along with developing a provisional work programme and hosting schedule for the coming year.
Another project that would likely be affected is a planned “Free Trade Area of the Asia Pacific,” (FTAAP), a long-standing idea with backing by both the US and China which has seen renewed interest in recent years.
The FTAAP would potentially involve all members of the 21-country Asia-Pacific Economic Cooperation (APEC) group, which includes both the US and China, as well as all of the TPP’s signatories and several other countries from the region.
APEC ministers and leaders met this past weekend in Lima, Peru, with progress on the FTAAP plans one of the major topics on the agenda. On the FTAAP, leaders endorsed a “collective strategic study” which had been mandated by a 2014 “roadmap” endorsed in Beijing, and affirmed their commitment to continue with this project. (See Bridges Weekly, 6 November 2014)
“We reiterate our commitment to the eventual realisation of the FTAAP as a major instrument to further deepen APEC’s regional economic integration agenda,” said the group’s leaders in their closing declaration.
An annexed “Lima Declaration on FTAAP” provides a series of recommendations, confirming that the planned free trade deal would be conducted in parallel to APEC, but outside of it. It also refers to what overall goals and principles should guide the process, and says that the future deal should build on the various other trade initiatives already underway in the region – including TPP and RCEP.
“We reaffirm that the FTAAP should do more than achieve liberalisation in its narrow sense; it should be high quality and comprehensive, and incorporate and address ‘next generation’ trade and investment issues,” the annex says.
It also affirms that APEC economies will review by the end of the decade how “current pathways” are contributing to helping the FTAAP become a reality, in order to see what more work will be needed. Officials have also been directed to examine how so-called “next generation” trade and investment issues are being dealt with in regional trade deals and at the World Trade Organization, among various other instructions.
Officials are due to provide updates on FTAAP-related work in 2018 and 2020, in line with already scheduled updates on the implementation of the “Bogor Goals” adopted in 1994, which aim at slashing trade and investment barriers in the region.
Shifting trade landscape
Whatever the outcome on these multiple fronts, trade officials say that the various political shifts seen in major economies over the past year could potentially have long-term implications for the global trading scene, and are really driving home the need to make trade deals more responsive to the communities who have not experienced their potential benefits.
“Recent political developments could also have a significant effect on the trading landscape – from the Brexit referendum in the UK to the new administration in the US and upcoming elections in many big traders. It’s early to tell what those effects could look like, but we must be watchful,” said WTO Director-General Roberto Azevêdo during the APEC ministerial meeting which preceded the leaders’ summit.
ICTSD reporting; “TPP ‘has no meaning’ without US, says Shinzo Abe,” FINANCIAL TIMES, 22 November 2016; “TPP without the US would mean a new agreement, but would be a great loss: PM Lee,” CHANNEL NEWS ASIA, 21 November 2016; “Acuerdos bilaterales, opción a la salida de EU del TPP: Guajardo,” LA REDACCIÓN, 22 November 2016.
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