HK should seize the day if Trump opts out of TPP

Wang Sheng­wei writes that China is well placed to ben­e­fit from the demise of TPP — a boon for the SAR as the coun­try’s en­tre­pot for trade with the world

China Daily (Hong Kong) - - COMMENT - WA N G S H E N G W E I

On Nov 21, US Pres­i­dent-elect Don­ald Trump said in a short video mes­sage that he would move to with­draw “on day one” from the Trans-Pa­cific Partn­er­ship (TPP), the US-led 12-mem­ber deal that ex­cludes China and cov­ers 40 per­cent of world GDP and one-third of world trade. He con­sid­ers TPP a potential dis­as­ter and said: “In­stead, we will ne­go­ti­ate fair, bi­lat­eral trade deals that bring jobs and in­dus­try back onto Amer­i­can shores.” Trump’s position con­firms his cen­tral cam­paign pledge of fo­cus­ing on “Amer­ica First”, which may im­ply that the US-estab­lished world or­der is close to its end af­ter 70 years.

How­ever, China is in a dif­fer­ent position. China be­came a mem­ber of the World Trade Or­ga­ni­za­tion in 2001 and since then has deeply in­te­grated it­self into the world econ­omy. In 15 years, China’s to­tal GDP grew nearly ten­fold and jumped from the world’s sixth rank to No 2. The stalled TPP puts China in the free-trade pole position and opens op­por­tu­ni­ties for writ­ing new rules for in­ter­na­tional trade.

Ear­lier, speak­ing at the APEC CEO Sum­mit in Lima, Peru, Pres­i­dent Xi Jin­ping called on coun­tries to speed up the ne­go­ti­a­tion of the Re­gional Com­pre­hen­sive Eco­nomic Partn­er­ship (RCEP) as the ba­sis for build­ing the broader Free Trade Area of the Asi­aPa­cific (FTAAP) to pave the way for a more in­clu­sive global econ­omy. RCEP ex­cludes the US but in­cludes 10 ASEAN coun­tries plus Aus­tralia, China, In­dia, Ja­pan, New Zealand and South Korea; it cov­ers 32 per­cent of world GDP and 30 per­cent of world trade. FTAAP in­cludes the US and China and 19 other world economies; it cov­ers 55 per­cent of world GDP and 44 per­cent of world trade.

How will all this af­fect Hong Kong? We en­joy a strate­gic ge­o­graph­i­cal ad­van­tage, a well-de­vel­oped in­fra­struc­ture and a su­perb in­ter­na­tional com­mu­ni­ca­tion net­work. Plus we play an im­por­tant role as en­tre­pot for trade be­tween the Chi­nese main­land and the world. In 2015 Hong Kong was the world’s eighth-largest trad­ing econ­omy in goods and the sev­enth-largest ex­porter and im­porter.

Due to our close trade links with the main­land, any main­land trade growth or de­cline would in­evitably af­fect Hong Kong. For ex­am­ple, in 2015 we were the sec­ond-largest trad­ing part­ner of the main­land (af­ter the US), with a trade value ac­count­ing for 8.7 per­cent of its to­tal trade; also we were the main­land’s sec­ond-largest ex­port mar­ket, tak­ing up 14.6 per­cent ($331.6 bil­lion) of its to­tal ex­ports. In the same year, the value of goods re-ex­ported through Hong Kong from and to the main­land was $410.3 bil­lion, com­pris­ing 89.4 per­cent of our to­tal re-ex­port trade value.

Such a strong main­land-HK trade re­la­tion­ship would en­sure that if the main­land could ben­e­fit from the demise of TPP, such benefits would also ac­crue to Hong Kong.

The US-based Peter­son In­sti­tute for In­ter­na­tional Eco­nom­ics es­ti­mates that TPP would in­crease trade ac­tiv­ity be­tween its mem­ber coun­tries, while China’s an­nual ex­port loss would be about $100 bil­lion. But this gloomy sce­nario pre­sum­ably will no longer hap­pen. The like­li­hood is that if TPP fails and RCEP comes into ef­fect, China would ben­e­fit by $88 bil­lion, ac­cord­ing to the US-China Eco­nomic and Se­cu­rity Re­view Com­mis­sion’s lat­est an­nual re­port, and Hong Kong would ben­e­fit ac­cord­ingly.

So, can Hong Kong af­ford to stay com­pla­cent? An­swer: “No.”

We know that while the US eco­nomic loss presents op­por­tu­ni­ties for China as a whole, Hong Kong must also be­ware the eco­nomic dif­fi­cul­ties that may re­sult from a more pro­tec­tion­ist en­vi­ron­ment.

There­fore the SAR should ride the post-TPP tide and ag­gres­sively ex­pand its bi­lat­eral and mul­ti­lat­eral trade agree­ments.

First, Hong Kong must com­plete its ne­go­ti­a­tions with the ASEAN coun­tries for a free-trade agree­ment. ASEAN is eco­nom­i­cally the fastest grow­ing group glob­ally, and is our fourth-largest ex­port mar­ket and sec­ond-largest trad­ing part­ner. The Hong Kong-ASEAN Free Trade Agree­ment, cou­pled with the main­land and Hong Kong Closer The au­thor is an in­de­pen­dent scholar and free­lance writer. She is also the founder and pres­i­dent of the China-US Friend­ship Ex­change Inc.

The like­li­hood is that if TPP fails and RCEP comes into ef­fect, China would ben­e­fit by $88 bil­lion ac­cord­ing to the US-China Eco­nomic and Se­cu­rity Re­view Com­mis­sion’s lat­est an­nual re­port, and Hong Kong would ben­e­fit ac­cord­ingly.”

Eco­nomic Partn­er­ship Ar­range­ment (CEPA), would pro­vide a solid plat­form to fa­cil­i­tate trade and in­vest­ment among Hong Kong and ASEAN coun­tries and en­hance our role as a re­gional trad­ing hub. This would also fa­cil­i­tate Hong Kong’s part­ner­ing with ASEAN coun­tries and com­pa­nies par­tic­i­pat­ing in the Belt and Road (B&R) Ini­tia­tive which en­com­passes about 60 coun­tries and cov­ers 40 per­cent of world GDP and over 60 per­cent of world pop­u­la­tion.

Hong Kong’s next ma­jor task is to work closely with the Beijing-led Asian In­fra­struc­ture In­vest­ment Bank (AIIB), a fi­nan­cial ve­hi­cle closely con­nected with the B&R.

Af­ter the AIIB was estab­lished at the end of 2015, 57 coun­tries had signed its in­ter-govern­men­tal agree­ments. As China’s first mul­ti­lat­eral fi­nan­cial in­sti­tu­tion, AIIB will pro­vide new op­por­tu­ni­ties for coun­tries both inside and out­side Asia.

James Woolsey, a Trump se­nior ad­viser on na­tional se­cu­rity, de­fense and in­tel­li­gence, has said that the Obama ad­min­is­tra­tion’s op­po­si­tion to AIIB is a “strate­gic er­ror”. He hoped Trump would be more en­thu­si­as­tic about China’s B&R Ini­tia­tive. Per­haps we can hope that when Trump takes of­fice in Jan­uary 2017, there may be a US pol­icy change fa­vor­ing more USChina co­op­er­a­tion.

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