America May Have Ditched TPP, But It Hasn't Ditched Asia
President Trump’s decision to withdraw from the Trans-Pacific Partnership (TPP) trade deal was thought to have killed the Asia-Pacific trade pact. But the region is refusing to let the pact die, even leaving the door open for a change of heart by Washington, while an alternative pact pushed by China builds momentum.
Trump’s January 23 executive order to withdraw the United States from the twelve-nation free-trade pact was one of his first acts as president, fulfilling a campaign promise.
“We’re going to stop the ridiculous trade deals that have taken everybody out of our country and taken companies out of our country,” Trump said at an Oval Office ceremony attended by union leaders.
Comprising Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam—and previously the United States—the TPP aimed to create the world’s biggest free-trade zone, with a collective population of eight hundred million people. The free-trade zone would have accounted for 40 percent of global economic output.
The accord had been viewed as part of the Obama administration’s “pivot” to Asia, helping to maintain U.S. economic influence over the region in the wake of China’s emergence as Asia’s biggest economy. It also contrasted with the sixteen-nation Regional Economic Comprehensive Partnership, which includes China but excludes the United States.
However, with Democrats—including former presidential candidate Hillary Clinton—also opposed to the TPP, Trump’s withdrawal was potentially a formality since it was unlikely to win passage through Congress.
The initial reaction from the rest of the TPP was mixed, with Japanese prime minister Shinzo Abe describing the pact as “meaningless” without U.S. participation. Yet Japan, Australia and New Zealand have slowly worked to build consensus around a so-called “TPP eleven,” minus the world’s biggest economy.
During an Asia-Pacific Economic Cooperation ministerial meeting in Hanoi, New Zealand hosted a meeting of the TPP eleven that pledged to push forward with the pact. Only Japan and New Zealand have ratified the trade agreement, which followed five years of negotiations.
While at different stages in their considerations, the TPP eleven members “are united in the process and want to get to a place where there is something we can agree to collectively, for leaders then to agree,” New Zealand trade minister Todd McClay told the New Zealand Herald.
Japan’s economic and fiscal policy minister, Nobuteru Ishihara, told reporters that “the eleven countries’ commitment has been explicitly affirmed. I don’t expect the U.S. will rejoin the deal so easily, but Japan will continue to work…to return it to TPP membership.”
In a statement, the TPP eleven ministers opened the door to Washington’s eventual reentry, pledging to “launch a process to assess options to bring the comprehensive, high quality agreement into force expeditiously, including how to facilitate membership for the original signatories.”
The grouping also offered the prospect of new members, such as China, saying they “underlined their vision for the TPP to expand to include other economies that can accept the high standards of the TPP.”
“These efforts would address our concern about protectionism, contribute to maintaining open markets, strengthening the rules-based international trading system, increasing world trade, and raising living standards,” the ministers stated.
Japan plans to host a meeting of TPP eleven negotiators in July, with an agreement eyed for the Asia-Pacific Economic Cooperation Economic leaders’ summit planned for Vietnam in November. The Regional Economic Comprehensive Partnership members also plan on announcing a deal at the same conference.
Pros and Cons
However, not all TPP eleven members are convinced that the pact has a future without the United States. While Australia, Chile, Japan, New Zealand and Peru are seen favoring a new deal, other members such as Malaysia, Singapore and Vietnam have expressed doubts about its value minus its largest potential economy.
“We will need to ensure that our interests remain protected and the benefits derived from it still outweigh the costs,” Malaysian trade minister Mustapa Mohamed said.
Mexico and Japan are also both under pressure to do bilateral deals with the United States, under Trump’s “America First” trade agenda.
Yet even without U.S. involvement, the TPP is still seen offering significant benefits. For example, New Zealand expects annual tariff savings of NZ$220 million (US$155 million), compared to its original estimate of NZ$270 million.
“It is still significant savings for us—and that it is the first free-trade agreement for us with Japan, Mexico, Peru and Canada,” McClay said.