TPP 11 offers way for smaller Pacific economies to influence global trade rules
The Trans-Pacific Partnership (TPP) has reportedly been revived, with 11 countries expected to sign an agreement for the new version of the trade pact in Chile on March 8.
Since the US pulled out of the deal, observers have been skeptical about whether the remaining countries of the TPP could overcome that major setback and reach agreement to move ahead with a revised version. Yet, the potential impact of the new pact, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or TPP 11, should in no way be underestimated even without the benefits of US participation.
Although none of the 11 countries is a major trading power in the world, these farflung Pacific Rim economies are now playing an increasingly important role in setting standards for the rules of trade and investment.
This may explain why Japan was at the forefront of lobbying and saving the revised pact in the absence of the US.
Compared with the original plan, the new version’s economic benefits and combined GDP have shrunk considerably. The old version would have accounted for about 40 percent of global GDP, while the revised deal only covers 14 percent. Also, some terms in the original plan were temporarily frozen as a necessary compromise for the 11 countries to stay on the same page.
But still the new agreement is a big win for these Pacific Rim countries, which share common interests in the reform and adjustment of the global trade order.
It was those common interests that brought them together to demand the future rules of global trade be set in their favor. The combined power and capabilities of these smaller economies should not be underestimated, as they will put more emphasis on solidarity and coordination.
Trade friction and confrontations have caused a rise in tensions among the world’s three major economies, the EU, the US and China in terms of trade and investment. Inevitably, these tensions have had serious impacts on the trade of the 11 smaller nations in the TPP, which need a way to counterbalance the headwinds. That is the main reason why the pact survived.
Smaller nations, however, are still expected to face increasing difficulties in the restructuring and competition of global value chains even under the new TPP 11.