Free trade un­der threat

China Daily (Canada) - - ANALYSIS - By KARL WIL­SON

With the future of the United States-led Trans Pa­cific Part­ner­ship trade agree­ment now in doubt, China is ex­pected to fill the void and push for an Asia-Pa­cific trade pact.

An­a­lysts say is the coun­try mak­ing ef­forts to pro­mote the Free Trade Area of the Asia-Pa­cific. The con­cept was first for­mally dis­cussed by lead­ers of the Asia-Pa­cific Economic Co­op­er­a­tion fo­rum at their 2006 meet­ing in Hanoi, Viet­nam.

China is also ex­pected to put greater em­pha­sis on a speedy res­o­lu­tion to the Re­gional Com­pre­hen­sive Economic Part­ner­ship, which ex­cludes the US.

Dar­ren Lim, lec­turer in in­ter­na­tional re­la­tions at the Aus­tralian National Univer­sity in Can­berra, said the future of trade in the Asi­aPa­cific re­gion un­der a Trump pres­i­dency can be de­fined in one word — “un­cer­tain”.

Lim said this now places China in a po­si­tion to dis­play lead­er­ship in the area of free trade in the Asia Pa­cific re­gion. “Af­ter all, China owes its success to free trade.

“No one knows what the future of the TPP will be but the US has ceded the ground to China to bring coun­tries in the re­gion to­gether into a new trade deals with the RCEP and FTAAP,” he said.

Ra­jiv Biswas, Asia-Pa­cific chief econ­o­mist at IHS Global In­sight, said that if the US does walk away from the TPP, and also the Paris cli­mate change agree­ment signed in De­cem­ber last year, it will most likely result in greater re­gional Asian co­op­er­a­tion on these is­sues.

“China may take a greater lead­er­ship role in Asia on is­sues such as re­gional trade co­op­er­a­tion and tack­ling cli­mate change,” Biswas said.

He added that Trump’s for­eign pol­icy is guided by an “Amer­ica first” prin­ci­ple, em­pha­siz­ing strength­en­ing the US do­mes­tic econ­omy.

Trump in­tends to push for stronger trade pro­tec­tion­ism. Be­sides aban­don­ing the TPP, he has said he would rene­go­ti­ate the North Amer­i­can Free Trade Agree­ment.

He has said he plans to use “de­fen­sive and coun­ter­vail­ing tar­iffs” against any coun­try that has been us­ing un­fair trade prac­tices.

“These pol­icy steps to re­treat from trade lib­er­al­iza­tion would have a neg­a­tive impact on global trade flows and would mean that the slow­down in growth of world trade vol­umes that has al­ready been ev­i­dent in re­cent years could weaken fur­ther,” Biswas told China Daily.

ANU’s Lim pointed out, how­ever, that there are sig­nif­i­cant busi­ness in­ter­ests in the US who un­der­stand the value of Asia-Pa­cific trade, and they have al­lies in the Repub­li­can­led US Congress.

“There will be pres­sure from the pro-trade wing of the Repub­li­can Party for Trump to ex­er­cise re­straint and cau­tion, at least in the early months of his pres­i­dency,” Lim said.

While the RCEP is in­tended to be a trade agree­ment, the TPP was a much more am­bi­tious trade deal.

“The TPP was in­tended to ‘re­write’ some of the ba­sic tenets of in­ter­na­tional trade, in­cor­po­rat­ing IP (in­tel­lec­tual prop­erty) pro­tec­tion along­side en­vi­ron­men­tal and labor stan­dards,” ac­cord­ing to HSBC econ­o­mist Joseph In­cal­caterra.

“Af­ter all, the TPP goes far be­yond goods and ser­vices lib­er­al­iza­tion and em­pha­sizes ar­eas im­por­tant for de­vel­oped coun­tries, such as busi­ness con­di­tions, stan­dards, reg­u­la­tions, and IP pro­tec­tion,” he said in a note on Nov 11.

How­ever, the TPP has its crit­ics who saw it as a deal con­ducted in secrecy, driven by big busi­ness and, for many Amer­i­cans, harm­ing the US econ­omy. It in­volves 12 coun­tries — the US, Ja­pan, Malaysia, Viet­nam, Sin­ga­pore, Brunei, Aus­tralia, New Zealand, Canada, Mex­ico, Chile and Peru — but ex­cludes China, the world’s sec­ond-largest econ­omy.

Al­though all 12 na­tions have agreed on the TPP, it still needs to be rat­i­fied by all 12 gov­ern­ments, which is now highly un­likely if the US, its big­gest ben­e­fi­ciary, pulls out.

Lim said the US “foot­print” was all over the deal, adding: “The US would not have signed off on it if it was not in their national and strate­gic in­ter­ests.

“The point is the US al­ways ne­go­ti­ates from a po­si­tion of strength and there was bi­par­ti­san sup­port to see ar­eas of trade broad­ened. But I can’t see him (Trump) re­vers­ing it un­less he can spin it in some other way.”

Ac­cord­ing to the Of­fice of the United States Trade Rep­re­sen­ta­tive, the TPP “writes the rules for global trade — rules that will help in­crease Made-in-Amer­ica ex­ports, grow the Amer­i­can econ­omy, sup­port well­pay­ing Amer­i­can jobs, and strengthen the Amer­i­can mid­dle class”.

The TPP would make it eas­ier for Amer­i­can en­trepreneurs, farm­ers, and small busi­ness own­ers to sell Made-in-Amer­ica prod­ucts abroad, by elim­i­nat­ing more than 18,000 taxes and other trade bar­ri­ers on Amer­i­can prod­ucts across the 11 other coun­tries in the TPP.


Pro­test­ers demon­strate against the Trans-Pa­cific Part­ner­ship in the United States on Nov 14.

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