No real fu­ture for a TPP with­out US

China Daily (Canada) - - VIEWS -

With theUnited States hav­ing with­drawn from the Trans-Pa­cific Part­ner­ship agree­ment, trade of­fi­cials from the re­main­ing mem­bers gath­ered in Canada on Tues­day andWed­nes­day seek­ing ways to keep it alive. But can they re­ally make any break­through?

TheUS ac­counted for about 24 per­cent of the world’s to­tal GDP last year ac­cord­ing to the World Bank. Thus, a TPP with­out theUS is sim­ply not fea­si­ble. With theUS hav­ing a cen­tral role, the economies of the mem­ber coun­tries were com­ple­men­tary to it. Af­ter the US’ with­drawal from the deal, the to­tal share of the re­main­ing TPP mem­bers has de­creased to 13 per­cent of the world’s to­tal GDP and the com­pe­ti­tion among them has in­creased while the com­ple­men­tary na­ture of their economies has de­creased.

For in­stance, Ja­pan and Aus­tralia both want to ex­port their agri­cul­ture prod­ucts. Aus­tralia and Canada both want to in­crease their ex­ports of min­er­als. Thus, the real eco­nomic value of any TPP with­out theUS is lim­ited. Con­sid­er­ing the business community is more sen­si­tive to the eco­nomic ben­e­fits than its po­lit­i­cal pur­poses, the strate­gic ad­van­tages calculated by politi­cians may not be enough to win the sup­port of the business com­mu­ni­ties in the var­i­ous coun­tries.

If a deal was rat­i­fied with­out theUS, it would send a very strong sig­nal that theUS has lost di­rect con­trol of it. Then US Pres­i­dent Don­ald Trump’s de­ci­sion to quit would be harshly criticized as a pol­icy mis­take, theUS’ cred­i­bil­ity would be doubted by its al­lies, and, should theUS want to join some­day, it would have lost the ini­tial ad­van­tages it had.

For the Barack Obama ad­min­is­tra­tion, the TPP had dual val­ues. One was its eco­nomic value, the other its strate­gic value.

The Peter­son In­sti­tute for International Eco­nom­ics es­ti­mated in Jan­uary 2016 that the TPP would in­crease an­nual real in­comes in theUS by $131 bil­lion, 0.5 per­cent of its GDP, by 2030, and its an­nual ex­ports by $357 bil­lion, 9.1 per­cent of its GDP, by the same year.

But on Jan 23, Trump, the newly in­stalledUS pres­i­dent, signed an ex­ec­u­tive or­der to quit the TPP.

He had a num­ber of jus­ti­fi­ca­tions for this.

First, although join­ing the TPP would have been lu­cra­tive for theUS as a whole, many of his sup­port­ers, es­pe­cially blue-col­lar work­ers dis­liked the TPP and claimed it would hurt them. Ful­fill­ing his cam­paign prom­ise to these vot­ers was nec­es­sary to le­git­imize Trump’s pres­i­dency.

Sec­ond, Trump’s with­drawal from the TPP doesn’t mean it has died. The agree­ment is still there and can be res­ur­rected if de­sired.

Third, Trump was not sat­is­fied with some of the clauses in the TPP. He wants to use with­drawal from the deal as a way to shift from the mul­ti­lat­eral mech­a­nism to bi­lat­eral mech­a­nisms, and then use the ef­fi­ciency of bi­lat­eral ne­go­ti­a­tions to “fix” the clauses in the TPP he is not happy with, and push theUS’ al­lies to take more re­spon­si­bil­ity.

Fourth, even though the TPP would still have a strate­gic func­tion, with­out theUS as a mem­ber its hedg­ing func­tion has been weak­ened dra­mat­i­cally, since most of the re­main­ing mem­bers have strong eco­nomic and trade re­la­tions with China.

Trump has thus con­cluded that is it not a good deal for theUS to sac­ri­fice its market op­por­tu­ni­ties for such a lim­ited strate­gic pur­pose. For Trump, an un­grat­i­fied and stag­nat­ing TPP that can be res­ur­rected when needed is in the best in­ter­ests of theUS.

The au­thor is a re­search fel­low and direc­tor of the divi­sion of Amer­i­can Eco­nomic Stud­ies at the In­sti­tute of Amer­i­can Stud­ies of the China In­sti­tutes of Con­tem­po­rary International Re­la­tions.

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