Free trade under threat
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.
These policy steps to retreat from trade liberalization would have a negative impact on global trade flows .” Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight
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.