1. Transpacific Partnership minus the US: March of the middle in offing

Transpacific Partnership minus the US: March of the middle in offing

Many had given up on the Transpacific Partnership after Donald Trump pulled the US out of the deal right after assuming office in January earlier this year.

By: | Published: September 9, 2017 3:49 AM
Transpacific Partnership, Transpacific Partnership news, Transpacific Partnership latest news, Transpacific Partnership us, Transpacific Partnership donald trump, donald trump The fact that all eleven members are discussing ways and means of reworking the deal indicates that they no longer feel ‘orphaned’ by the absence of the US and are determined to move ahead. (Reuters)

Many had given up on the Transpacific Partnership (TPP) after Donald Trump pulled the US out of the deal right after assuming office in January earlier this year. Without the US, the TPP was not only ‘leaderless’, but also a much less formidable economic and strategic group. The economic impact of the loss of the US market, and the geopolitical effect of the American withdrawal from being a prominent actor in regional affairs as symbolised by the TPP architecture, were assumed to be strong disincentives for the rest of the TPP members in trying to revive the deal.

Some of the scepticism is gradually dissipating with the rest of the TPP members getting active in taking the deal forward. There have been repeated meetings over the last few months in searching solutions for reviving the TPP including the latest in Sydney a few days ago. Led by Japan and Australia, these efforts have reached a stage where the other members agree on the importance of implementing the deal notwithstanding the US. The fact that all eleven members are discussing ways and means of reworking the deal indicates that they no longer feel ‘orphaned’ by the absence of the US and are determined to move ahead.

A clear indication of where the TPP is headed should be available by the end of this year. But the efforts to resurrect it contain some long-term messages. An important takeaway is the belief among the rest of the members that the TPP is too important to be abandoned. The absence of the US changes projected economic gains and losses from the TPP for various members. These are particularly significant for members like Vietnam and Malaysia, who were the biggest projected beneficiaries of the TPP due to the preferential access they would have obtained in the US and other North American markets. The prospects of such gains made them enthusiastic participants in the TPP talks. The fact that they still want to go along with the TPP reflects their faith in the deal generating economic benefits even without the US. Such faith, arguably, is a due combination of factors. These include access to markets like Canada and Mexico and also the assumption that over time TPP’s rules and regulations would become templates for many future trade agreements so the quicker they get familiar with these rules the better.

For those members of TPP that don’t have bilateral FTAs with the US—Brunei, Japan, Malaysia and Vietnam—TPP negotiations proved additionally tough due to US demands on sensitive issues like intellectual property, investor-state-dispute-rules, state-owned enterprises and labour standards. Negotiators of these countries crossed ‘red lines’ on many occasions given the lure of the US market and the non-negotiable value of being part of a group of countries bonded by the common glue of being geopolitical allies of the US. The US withdrawal, while being disappointing in these respects, has nonetheless been a source of some relief for these countries. New talks on taking the TPP forward can give them the opportunity of revisiting some of the ‘bitter’ pills they swallowed under US pressure. The result could be revisions in some chapters of the TPP agreement granting greater flexibilities to members. There’s of course the possibility of too much discussion on what is to be ‘undone’ delaying the TPP further. It is therefore important to focus on basics—issues that all members feel are must to revisit—and leave the rest unchanged.

There’s hardly any doubt over ‘Asia’ becoming a more prominent actor in the new TPP construct after the exit of the US. In its current composition, Japan and Australia are expected to lead the charge to the finishing line. Canada and Mexico, while continuing to rally around the rest, are more preoccupied with revisions in the North American Free Trade Agreement (NAFTA). While continuing to remain an APEC grouping, the balance of power within the TPP-11, if it succeeds, would shift more decisively to the Asian segment of the APEC. Japan and Australia have been the traditional ‘movers and shakers’ of APEC. The TPP-11 gives them the occasion to reclaim the prominence. Japan’s enthusiastic leadership reflects the relish with which it has taken to the task.

The TPP-11 would be the first example of a modern new-generation trade agreement formalized by ‘middle’ powers from Asia and America. While the US imprint on the agreement would be undeniable, the fact that the US would not be there to steer it would make a great difference to its economic and strategic implications. It would be a deal that would be going ahead without the US and the EU—the traditional leaders of regional trade deals. It would also be charting course without China—the country that the US had hoped to ‘counterbalance’ in Asia-Pacific through the TPP by not allowing it to write the regional rules of trade. The TPP-11 might begin a new phase of alignments in global trade engineered by middle powers.

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